- If the IMF bailout and debt restructuring initiatives falter, the entire country will face another collapse
- Vigilance across the nation is paramount to discern the political narratives spun by various leaders, aimed at securing power
- The infusion of US $ 150 million from the WB, designated for deposit insurance, ensures the absolute security of the banking and financial sector
- The restoration of international acceptance of LoCs within the country presents an invaluable opportunity for market expansion
- As the economic landscape strengthens, there exists the capacity to enact policies that provide greater relief to the public
- A paradigm shift is underway, to transitioning from a tax system that burdens citizens to one that respects and facilitates them
- The emphasis lies on safeguarding the taxpayer while ensuring the just prosecution of those evading taxes
- Those advocating for higher wages today are, regrettably, jeopardizing the prospects of the country’s future generations
– The President
In a special statement to Parliament today (13), President Ranil Wickremesinghe emphasized the critical role of the government’s program, backed by assistance from the International Monetary Fund (IMF) and debt restructuring, in rebuilding the collapsed Sri Lankan economy. The President warned that deviating from this path could lead to another economic collapse, urging caution against the allure of political fairy tales.
President Wickremesinghe highlighted the success achieved through the proper handling of two fundamental factors: securing the support of the IMF and implementing debt restructuring. He asserted that by continuing this program, Sri Lanka has the potential to evolve into a developed nation.
The President announced that the approval of the second tranche of the IMF would result in the World Bank (WB) providing Sri Lanka with US $150 million for deposit insurance. This injection of funds is expected to significantly fortify the Sri Lankan financial sector.
Acknowledging the challenges posed by various taxes, including the Value Added Tax (VAT), President Wickremesinghe clarified that these decisions were made not out of choice but as necessary steps for the country’s future. He assured that as the economy strengthens, the government will implement measures to bring relief to the people.
Calling on the nation to remember the progress made so far, President Wickremesinghe cautioned against the influence of mere speeches and criticisms. He asserted that, despite facing limitations, his leadership has steered the country towards victory by gathering support both domestically and internationally.
As the President emphasized the importance of staying on the current path, he urged citizens not to lose sight of the substantial achievements and advancements that have been realized. The President’s statement outlined a strategic approach to economic recovery, emphasizing the symbiotic relationship between the government’s program, international assistance and responsible financial decisions.
Following is full statement made by the President;
“It is indeed an honour to address you today. I am pleased to share the news that the International Monetary Fund (IMF) has officially endorsed the second tranche of the Extended Credit Facility for our country’s reconstruction. This marks a pivotal moment in our journey, as we decisively shed the label of a financially bankrupted state.
The International Monetary Fund has recognized our collective efforts and acknowledged the significance of the crossroads we have reached. Leading this challenging yet successful expedition is a humble pleasure for me.
Upon assuming leadership last year, I inherited a country struggling with financial distress. Remarkably, no political leader in our nation was willing to step forward and undertake the responsibility of steering the course of a financially ailing state. None of the heroes and leaders currently addressing this esteemed Parliament possessed the courage to step forward during the critical juncture when I assumed the responsibility of leading our nation
However, I embraced the challenge with unwavering resolve. On that pivotal day, I declared my dedication to navigate the precarious path akin to crossing a perilous vine bridge. Armed solely with determination and meticulously crafted plans, I embarked on this formidable journey.
During those initial stages, not a single Member of Parliament representing my party was present in the hallowed halls of Parliament. The journey faced ridicule and insults, particularly in the context of traversing the metaphorical vine bridge. Despite the challenges, a significant majority of members in this esteemed Parliament stood in solidarity with me, enduring scorn and mockery.
The journey encountered skepticism, and those who supported it faced various insults. The people of our nation, however, demonstrated their steadfast support, enduring hardships for the greater good of our beloved Mother Lanka. Businessmen grappled with challenges, government and private sector workers faced difficulties, and professionals such as university professors and doctors encountered their share of adversities.
The collective suffering endured was not in vain; it served as a crucial sacrifice to salvage our nation from the brink of bankruptcy. Through the dedication and perseverance of all those who bore the hardships, including the unwavering support from Parliament, we have now seized the opportunity to rescue our country from financial turmoil.
Those individuals who, with immense dedication, endured these tribulations for the sake of our nation, as well as those who stood alongside me in the Parliamentary arena, are deserving of pride. They are esteemed participants in the collective effort to steer our country away from the precipice of bankruptcy. I am confident that the contributions of these individuals will be etched in gold in the records of our history.
It is imperative to underscore another noteworthy achievement. We have managed to recover in a remarkably short span, outpacing the recovery timelines of other financially struggling nations worldwide. Importantly, this triumph was achieved with a minimal burden on our citizens, representing a significant victory for our nation.
Honorable Speaker,
Allow me to draw your attention to the economic crisis that befell Greece in 2008, a crisis that persisted for over a decade. In their struggle for recovery, Greece implemented stringent measures, such as raising personal income tax to 45%, significant reductions in salaries and pensions, and the imposition of various restrictions, leading to considerable suffering for the populace. Regrettably, similar examples can be found in numerous countries around the globe.
Upon assuming leadership in the early years, our nation faced a daunting inflation rate exceeding 70%. Remarkably, by last October, we successfully curtailed it to a mere 1.5%. Furthermore, we have witnessed a substantial reduction in Treasury Bill interest rates, reducing from over 30% to a more manageable 13%.
Taking decisive actions, we prevented a further decline of the rupee and stabilized it at around Rs. 325-330 per Dollar. Notably, the rupee had suffered an 80% depreciation before I assumed office, reaching a low of Rs. 360 per dollar. In contrast, Lebanon, grappling with its own economic crisis, has struggled to stabilize its foreign exchange rate.
As previously emphasized, the dedication and hard work of the majority of our citizens played a pivotal role in navigating the challenging economic landscape. In reflecting on this journey, the metaphor of crossing the vine bridge, immortalized in the iconic drama of Henry Jayasena ‘Hunuwataye Kathawa’, resonates deeply.
In harmony with Grusha’s poignant words in the song of Vine Bridge, today we find ourselves echoing a similar sentiment: “We have no other way, son – but this the only way.” The challenges we face compel us to acknowledge that our path forward is singular; we have no alternative but to persist on this course.
Since the beginning of this journey, the narrative has remained consistent: we have no alternative but to persist on this path. Two pivotal factors guide our trajectory—access to IMF assistance and effective debt restructuring. It is through prudent management of these factors that we have achieved positive outcomes. Sustaining this course positions us on a trajectory toward becoming a developed nation.
Undoubtedly, this is a long and arduous journey, one not accomplished in a mere two days but spanning until 2048. Yet, the essence remains, there is no alternative path that ensures a promising future. Deviation from this course risks reverting to a state of financial instability, once again marked as a bankrupt nation.
Allow me to highlight a significant example: the reluctance to increase water and electricity charges for over a decade for short-term political gains. Incurring losses by financing the Water Supply Board and the Electricity Board through foreign loans was a past mistake that must not be repeated. Loans should be sought for strategic investments, aligning with the wisdom conveyed by Buddha, that borrowing for mere consumption leads to decline.
To sustain progress, we must break free from past errors and persist in our current trajectory. The notion of symbiosis, as outlined in the report presented to the Parliament by Dr. Harshada Silva, Chairman of the Government Finance Committee on November 20, underscores the importance of mutual cooperation and shared responsibility in achieving our national goals.
“The presentation of the budget 2024 is situated within the context of the most severe economic crisis ever faced by Sri Lanka. The implemented policy measures, encompassing import controls, currency devaluation, cost-reflective utility pricing, new tax initiatives and monetary policy adjustments through raised tax rates and deposit rates, have contributed to some level of macroeconomic stabilization.
As noted by Dr. Harsha, the current economic stability achieved is a result of the policies being executed under the International Monetary Fund program. In all honesty, these are measures that should have been undertaken a decade or two ago. Regrettably, certain political factions overlooked these necessary steps in pursuit of short-term electoral gains.
The neglect of the Public Financial Management Accountability Act, passed in 2003 during my tenure as Prime Minister, is a clear example. Unfortunately, the full implementation of this act was hindered as economic objectives took a backseat to political considerations. We are now grappling with the consequences of those mistakes.
It is imperative for the entire nation to exercise caution regarding the narratives spun by politicians solely for the purpose of gaining power. Blindly following such fairy tales without a realistic understanding of their implications could propel us back into the depths of economic instability and bankruptcy.”
The approval of the second tranche from the International Monetary Fund heralds numerous advantages for our nation. With $150 million secured from the World Bank for deposit insurance, our financial sector receives a substantial boost, ensuring its complete security. Furthermore, we are poised to receive additional funding for the development process from financial institutions such as the Asian Development Bank (ADB) and JICA at low interest rates and favourable terms.
This approval reinstates the confidence of foreign investors, who can now invest in Sri Lanka without hesitation. Our international letters of credit (LoC) are once again recognized, providing us with the opportunity to expand our market more easily and gain global recognition. It is imperative that we strive to maximize these opportunities for the benefit of our country.
However, it is crucial to acknowledge that achieving this victory does not signify perfection. We have a long journey ahead to attain complete economic freedom. Hence, I implore every member of this honorable assembly to safeguard the progress we have made along the right path. While some merely engage in talk and criticism, I have demonstrated tangible results, steering the country towards victory with majority support both globally and within Sri Lanka. Let us remain steadfast in our commitment to the path of progress.
Honorable Speaker,
I would like to draw your attention to a key observation from the Dr. Harsha de Silva report:
“The initial assessment of the Extended Credit Facility by the International Monetary Fund in September 2023 indicated positive strides towards stabilizing the economy. While there exists some favourable momentum, the journey to establish conditions for a stable macroeconomic environment and sustainable, inclusive growth is still extensive.”
Acknowledging the substantial distance that lies ahead, envision our path as a vine bridge traversing a complex maze. Deviation from the correct course poses the risk of losing our way and succumbing to distractions.
In this trajectory, two imperative considerations merit our focus. First and foremost, as consistently underscored, we must advance steadfastly along this path. Second, we must exercise caution to avoid the recurrence of past errors that led our nation towards financial insolvency.
The commitment to these principles will unequivocally influence the security or jeopardy of our country’s future.
This journey is marked by several paramount objectives: minimizing the foreign exchange deficit, achieving trade balance, narrowing the income and expenditure gap, optimizing the surplus in the primary budget account, and upholding stringent financial discipline.
To address the challenges of the evolving global landscape, we must institute a transformative economy capable of navigating the complexities of the modern world. A digital and sustainable economy driven by innovation is imperative for our success. By undertaking this initiative, we can generate fresh employment opportunities and diversified income sources, while simultaneously attracting increased investments to Sri Lanka. Efforts are underway to progressively alleviate the tax burden, fostering an environment conducive to economic growth.
We are cognizant of the difficulties faced by a segment of our society, particularly concerning taxes, including VAT. Imposing taxes was not a choice made willingly, but rather a difficult decision essential for securing the future of our nation. As the economy strengthens, we envision implementing measures that provide substantial relief to our citizens.
Furthermore, we have identified weaknesses and deficiencies in our tax law system. As highlighted during the presentation of the budget proposals, the reluctance of many individuals to register for a tax file stems from the unnecessary difficulties they encounter. Our commitment is to rectify this situation, transitioning from a tax system that burdens citizens to one that respects and facilitates them.
Addressing the issue of prolonged tax evasion facilitated by loopholes in the tax law is imperative. Our stance is clear: we prioritize the protection of the taxpayer, and those evading taxes will be held accountable under the law.
The realization of these changes necessitates the creation of a new economy, grounded in contemporary concepts, innovative methodologies, best practices, and updated organizational rules and regulations. Embracing these transformations will position us to adapt effectively to the evolving economic landscape.
Failure to embrace a new economy fortified by these essential elements would inevitably plunge us back into the crisis within a few years. The queues for oil and gas, along with the perpetual increase in the tax burden, signal a precarious future where both government and private sector employees face salary reductions and widespread job losses. The prospect of recovery under such circumstances appears bleak, with the potential for lasting repercussions extending over 25 years.
Hence, it is imperative to discard out-dated concepts and embrace new ideas to safeguard our nation’s future.
To lay the groundwork for this transformation, we are enhancing educational opportunities for the next generation, ensuring that every high school graduate is provided the means for university education.
Recognizing our historical reliance on agricultural exports, we are committed to restoring and modernizing our agricultural sector through a comprehensive program.
Additionally, a shift towards renewable and green energy sources is underway to meet our energy needs sustainably.
In the coming year, a program is set to commence that aims to make a significant portion of the Sri Lankan population land and house owners, fostering economic stability. These initiatives are part of a broader strategy outlined in the 2024 budget.
Acknowledging that approximately 50 years of development were squandered due to past mistakes, we refrain from dwelling on accusations and instead focus on rectifying the shortfalls and omissions of the past through ambitious plans over the next decade.
Some critics question why a government should be subject to IMF conditions, arguing that they could impose conditions if in power. Such assertions are deemed simplistic and impractical by those with a deeper understanding of economic principles, akin to stories told by those with limited knowledge of economic intricacies.
It is crucial to recognize that adherence to the current path and stringent conditions are essential for freeing ourselves from IMF constraints and building a robust economy. Drawing parallels with other Asian countries, such as India and Thailand, provides valuable insights into overcoming economic crises through IMF support and subsequent rigorous economic reforms.
In 1991, India confronted a severe economic crisis, and Thailand experienced a significant collapse in 1997. Both nations, with the aid of the IMF and creditors, rebounded by identifying the causes of their economic downturns and implementing substantial and transformative economic reforms.
A comparative analysis between Thailand and Sri Lanka underscores the potential for economic growth. In 1960, Sri Lanka’s gross domestic product (GDP) was US$ 1 billion, while Thailand’s GDP was US$ 2 billion. Fast forward to 2022, and Sri Lanka’s GDP has grown to $74 billion, whereas Thailand’s has surged to $495 billion.
In 1960, Thailand’s GDP was double that of Sri Lanka’s, and by 2022, it has expanded to six times the size of ours.
Now, let’s examine the per capita income of the two countries. In 1960, Sri Lanka had a per capita income of $144, compared to Thailand’s $103. In 2022, our per capita income has risen to $3,474, but Thailand’s has doubled, reaching $6,908.
The question naturally arises: If Thailand can achieve such economic growth, why can’t we?
Thailand successfully implemented comprehensive reforms to attain its economic strength. Many countries, facing crises, have overcome challenges by adhering to financial conditions set by the International Monetary Fund (IMF) and creditors. They followed a similar trajectory, rebuilding their economies. Conversely, those who deviated from the conditions found themselves in dire straits once again.
It is crucial to recognize that liberation from these conditions can only be achieved through adherence to the stipulated terms. Regardless of the challenges, establishing a new economy in accordance with these conditions is the key.
Drawing inspiration from the successes of Asian countries like India, Thailand, Vietnam, South Korea, Japan, and China is imperative. Our journey should align with the conventions and strategies employed by these nations to strengthen their economies.
However, certain groups pose obstacles to this trajectory, using strikes as a means to disrupt progress. It is essential to acknowledge that those advocating for higher wages through strikes, while demanding ten thousand or twenty thousand rupees more, may inadvertently harm the future generations. By prioritizing short-term gains, they risk jeopardizing the future of every child, even those yet unborn, placing a nominal sum ahead of the potential prosperity of the nation.
Observing the success stories in Asia, we witness nations like India and Thailand that emerged through dedication and hard work. Across the continent, Asian countries have thrived due to the sacrifices of fathers and mothers who invested in the future of their children, prioritizing the long-term over immediate gains.
Regrettably, in our own country, some parents choose to participate in strikes, endangering the future of their children for present-day benefits. This act of sabotage is disheartening, especially considering the positive examples set by our Asian counterparts.
Yet, there are individuals in our nation who comprehend the current state of affairs, recognize the economic crisis, and appreciate the correctness and progress of our on-going journey. They understand that persevering on the same path, even amid difficulties, allows for the gradual reduction of challenges.
Stability and strength in the economy have the potential to alleviate the burden on the people. The recent budget has already provided relief to many, a testament to the victorious strides of the country. These concessions can extend to the entire nation in the future.
Hence, a sincere request is made to set aside political opinions and unite for the collective good of the country. By facing challenges head-on and navigating obstacles for the next four or five years, we have the opportunity to mould a better future for our next generation.
Honorable Speaker,
Opposition to the path we are currently on can only come from those who do not wish for the majority of the country’s people to become landowners and homeowners. It is only those who oppose the notion of three meals a day through agricultural modernization. Similarly, those against the influx of foreign investors to Sri Lanka, the creation of new job and income opportunities, and the country’s progress towards becoming a developed nation, are the ones opposing our journey. Those who wish to bankrupt the country are the sole adversaries to our efforts.
We, as stewards of our conscience, propose limiting the stranglehold on political power to election times. It is time to collectively contemplate the future of our country and the welfare of our nation. Our dedication should be unwavering, driven by a commitment to securing a prosperous future for our children.
Therefore, I pose this question to this honourable Assembly: Are you ready to make sacrifices for the future of our country’s born and unborn children? The true measure of readiness lies in actions, not mere words.
Thank you!”
