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Monday February 6th, 2023

Sri Lankans migrant workers urged register to reduce trafficking risks

ECONOMYNEXT – Migrant workers who are leaving for foreign jobs without registering or on visit visas are at higher risk of getting into trouble officials said, as sex-trafficking ring in Oman involving young women from Sri Lanka was uncovered.

D D P Senanayaka, General Manager of the Foreign Employment Bureau (SLBEF) said, the authorities can track the wellbeing of the locals going for foreign employment who registered with the bureau.

“We have observed that these people who are in trouble have gone to these countries through informal ways rather than following the legal procedures, which could have given them the protection,” Senanayaka told reporters on Monday.

“These people have no assurance of a job when they go.”

Locals that go abroad by registering with the SLBEF, can be monitored throughout their contract period, but there are no records to track down the Sri Lankans going through informal methods.

Since early 2022, as the country fell into the worst currency crisis in the history of the island’s intermediate regime central bank, many are trying to leave the country for foreign jobs.

Sri Lanka is also encouraging state sector employees and the general public to acquire skills to get qualified for foreign jobs, in hopes of increasing the foreign remittances.

Senanayaka said they have now identified thousands of Sri Lankans who have left on visit visas in the hope of getting jobs.

A minister recently said about 5,000 persons had travelled to Dubai on visit visas.

“We identified 13,231 who went abroad with tourist visas this year and from that more than 700 were prevented from going after identifying they have given false information,” Senananyaka
said.

“We have taken information’s from these people, and we are monitoring them collaborating with immigration department.”

It is not clear how authorities can stop a person from leaving on a visit visa as Sri Lanka is signatory to UN conventions on free movement of people and there is no requirement for an exit visa unlike some ‘iron curtain’ nations in the past.

Meanwhile, complaints have received from Sri Lankans in Oman, sex trafficking of young women.

An employee of the SLBEF was also arrested in Muscat, Oman accused of mis-treating or abusing women in a shelter that is being maintained under the embassy.

Senananyaka said, currently 77 women are in this facility under the protection of the embassy.

“Normally this is for the employees that registered with the SLBEF, however 12 of the 77 people that is currently in the facility has gone illegally, however since they are Sri Lankans we have taken them in until the matters are being solved,” Senanayaka said.

According to authorities 19,000 Sri Lankans are currently working in Oman. (Colombo/ Nov 21/2022)

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Sri Lanka’s banks may have to re-structure loans caught in progressive tax

ECONOMYNEXT – Sri Lanka’s banks should explore restructuring loans of salaried employees hit by progressive tax, Central Bank Governor Nandalal Weerasinghe said as progressive income taxes were imposed at lower thresholds amid high inflation following a sovereign default.

There have been complaints mainly by picketing state enterprise executives and also other workers of such agencies such Sri Lanka Port Authority that high progressive taxes were putting their bank accounts into overdraft after loan installments were cut.

“Yes, they have mentioned that,” Governor Weerasinghe said responding to questions from reporters.

“We have told the banks earlier as well. Because the interest rates are high and their business being reduced, the SME sector, the repaying capability has reduced.

“We have told them to explore their repaying capabilities and restructure their loans in order to safe guard both sides. At this time also we are asking the banks to do that.”

In the case of some state enterprises, the Pay-As-You-Earn tax, through which income tax is deducted from salaried employees in the past was not paid by the employee but the SOE.

Bad loans of the banking system overall had risen after the rupee collapsed, reducing the spending power in the economy, while rates also went up as money printing was scaled back, foreign funding stopped and the budget deficit widened.

The rate hike has prevented possible hyperinflation and a bigger implosion of the economy by stabilizing the external sector in the wake of previous mis-targeting of interest rates.

In the current currency crisis a delay in an IMF program due to China not giving debt assurances as well as fears of domestic debt re-structure has kept interest rates elevated.

Sri Lanka’s economic bureaucrats in 2020 cut taxes and also printed money, in a classic ‘Barber Boom’ style tactic implemented by UK economists and Chancellor Anthony Barber in 1971 to boost growth and employment.

The ‘Barber Boom’ ended in a currency crisis (at the time the UK did not have a floating rate and the Bretton Woods system was just starting to collapse under policies of Fed economists) and inflation of around 25 percent in the UK.

The UK implemented a three-day working week to conserve energy after stimulus while Sri Lanka saw widespread power cuts as forex shortages hit.

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Anthony Barber budget of 1971

Anthony Barber budget of 1972

Similar policies saw a worldwide revival as the US Fed economists injected money during the Covid crisis mis-using monetary policy to counter a real economic shock and boost employment while the government gave stimulus checques.

Now the world is facing an output shock as a hangover the Covid pandemic recedes.

The re-introduction of progressive tax at a maximum rate of 36 percent while tax brackets high jumped with the rupee collapsing from 200 to 360 to the US dollar had reduced disposable incomes further.

Salaries employees were encouraged to get loans in 2020 with the central bank mandating a 7 percent ceiling rate for five years.

However, any borrower who got loans on floating rates long before the scheme are now facing higher rates. (Colombo/Feb06/2023)

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Sri Lanka to address SME tax problems at first opportunity: State Minister

ECONOMYNEXT – Problems faced by Sri Lanka’s small and medium enterprises from recent tax changes will be addressed at the first opportunity, State Minister for Finance Ranjith Siyambalapitiya said.

Business chambers had raised questions about hikes in Value Added Tax, Corporate Income Tax and the Social Security Contribution Levy (SSCL) that’s been imposed.

It should be explored on how to amend the Inland Revenue Act, Siyamabalapitiya said, adding that the future months should be considered as a period where the country is being stabilized.

Both the VAT and SSCL are effectively paid by customers, but the SSCL is a cascading tax that makes running businesses difficult.

In Sri Lanka SMEs make up a large part of the economy, accounting for 80 per cent of all businesses according to according to the island’s National Human Resources and Employment Policy.

(Colombo/ Feb 05/2023)

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Sri Lanka revenues Rs158.7bn in Jan 2023 up 51-pct

ECONOMYNEXT – Sri Lanka’s government revenues were 158.7 billion rupees in January 2023 but expenditure and debt service remained high, Cabinet spokesman Minister Bandula Gunawardana said.

In January 2022 total revenues were Rs104.5 billion according to central bank data.

Sri Lanka’s tax revenues have risen sharply amid an inflationary blow off which had boosted nominal GDP while President Ranil Wickremesinghe has also raised taxes.

Departing from a previous strategy advocated by the IMF expanding the state and not cutting expenses, called revenue based fiscal consolidation, he is attempting to do classical fiscal consolidation with spending restraint.

President Ranil Wickremesinghe has presented a note to cabinet requesting state expenditure to be controlled, Gunawardana told reporters.

State Salaries cost 87.4 billion rupees.

Pensions and income supplements (Samurdhi program) were29.5 billion rupees.

Other expenses were 10.8 billion rupees.

Capital spending was   21 billion rupees.

Debt service was 377.6 billion rupees for January which has to be done with borrowings from Treasury bills, bonds and a central bank provisional advance of 100 billion rupees, Gunawardana said.

Interest costs were not separately given. (Colombo/Feb05/2023)

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