Finance State Minister Shehan Semasinghe emphasised that if the promises made by opposition candidates were implemented, the country would immediately lose IMF programmes. He also warned that agreements with foreign debt holders and private bondholders would be jeopardised, leading to a serious economic crisis.
State Minister Semasinghe made these remarks during a press conference at President Ranil Wickremesinghe’s political office in Flower Road, Colombo, on Thursday (29).
He noted that discussions with the IMF are on-going regarding amendments to Pay As You Earn (PAYE) taxes to provide relief to the public. He expects that tax reductions will be implemented by April 2025, following the finalization of the relevant agreements.
State Minister of Finance, Shehan Semasinghe, emphasized that any violation of the International Monetary Fund (IMF) agreements would immediately jeopardize the country’s access to IMF programmes. He warned that if the promises made by opposition candidates were to be implemented, it could lead to the loss of the IMF programme.
Minister Semasinghe further cautioned that such actions could put the country at risk of a serious crisis by undermining agreements with foreign creditors and private bondholders. He made these remarks during a press conference held on Thursday (29) at President Ranil Wickremesinghe’s political office in Flower Road, Colombo.
The State Minister also mentioned that he is currently in discussions with the IMF to revise the tax policies, aiming to provide relief to citizens by adjusting income taxes.
The goal is to implement these tax reductions by April 2025, following the finalisation of the agreement.
During the press conference, Semasinghe highlighted President Ranil Wickremesinghe’s newly launched presidential election manifesto, titled “Five Triumphant Years for Sri Lanka With Ranil” and credited President Wickremesinghe with transforming the country from the brink of economic collapse into a more stable and livable state, noting that no other leaders were willing or capable of taking on this challenge.
The “Five Triumphant Years for Sri Lanka With Ranil” policy statement focuses on building upon the economic stability that has been achieved. Semasinghe urged the public to decide on September 21 whether to continue with this programme and further enhance the benefits it provides.
The most pressing issue in our country right now is the economy. While various parties have proposed different economic strategies, it seems there is little understanding of
how feasible these proposals are. Many of us, including President Ranil Wickremesinghe, have worked tirelessly to rebuild the country’s collapsed economy over the past two years. Those who once scoffed at our efforts, hoping we would fail, should now consider whether their current promises to the public are truly ethical.
The benefits of the economic stability we’ve achieved are gradually being passed on to the people. The President has consistently emphasized that when the economy strengthens, a portion should be reinvested to further bolster economic resilience, while another portion should be allocated to mitigate the impact of the reform programme on the public.
In line with this approach, the President appointed a committee to address salary increases for public servants and eliminate wage discrepancies. Based on the committee’s recommendations, the minimum salary for public service will be raised to Rs.55,000, starting next year. As we move forward, we have significant goals,
including ensuring that the primary budget balance remains positive.However, it’s concerning that some parties are suggesting revisions to the IMF program in their proposals.
However, I must responsibly mention that if the opposition’s promises are implemented, rather than following President Ranil Wickremesinghe’s programme, this country will lose the ongoing programme with the IMF at the moment of its implementation. The reason for this is that we must keep the budget deficit at 5.2% of GDP. However, if the opposition’s promises are fulfilled, the budget deficit would balloon to 11.9% of GDP. Additionally, maintaining a positive primary account balance of 2.3% is a key goal of our programme.Yet,if the opposition’s promises are enacted, this balance would plummet from a positive 2.3% to a negative 4.3%, making it impossible to continue the IMF programme.
As a result, our country would lose the program with the IMF, along with the agreements we’ve made with creditors and private bondholders. It is, therefore, irresponsible to make promises without considering these technical realities. Moreover, it’s important to understand that decisions in negotiations with organizations like the IMF cannot be made overnight; they require time and careful deliberation.
The President has also prioritized providing concessions to private sector taxpayers. In this regard, we initiated negotiations with the IMF in September 2023. As a result, the current income tax exemption limit of Rs. 1.2 million per year will remain unchanged, and the Rs. 500,000 rupee threshold will be increased to Rs.720,000. The implementation of these tax reductions is expected to begin in April 2025.
A common question we face is how the government plans to offset the lost revenue from these tax reductions. We have reached an agreement with the IMF to cover this shortfall, ensuring that there will be no additional burden on existing taxes or the introduction of new taxes. This tax reform is being implemented gradually and without repetition, making it a sustainable adjustment.
Additionally, some parties have claimed that the Inland Revenue Department has around Rs. 1,000 billion rupees in outstanding taxes that are not being properly collected. However, it’s important to note that tax appeals have been filed for Rs.868 billion of this amount. As of 2023, Rs. 188 billion were in arrears, and during the first six months of 2024, we have successfully collected Rs. 104 billion from these arrears.
Our reform programme has thus not only provided relief to taxpayers but also improved the efficiency of tax administration.
We have also implemented a formal system called “Aswesuma” to provide relief to the poor and vulnerable in our country. Through this program, extremely poor families receive a monthly allowance of Rs. 15,000. The government has allocated Rs.205 billion to support 2.4 million families across three categories. Currently, 1.8 million families are benefiting from this programme, with no political interference in the distribution process.
Additionally, we are working on gradually relaxing the current vehicle import restrictions. Priority will be given to easing restrictions on vehicles that significantly contribute to economic activity and those required to meet public needs. Following this, the restrictions on private vehicle imports will be eased. It is essential that this process is carried out systematically.
We have successfully increased our foreign reserves from USD 20 million in 2022 to USD 5.6 billion. During this period, we have continued to service our debt. Although we’ve temporarily halted repayments on bilateral loans, we have continued to make payments on multilateral loans and other selected obligations. It is crucial that these actions are taken in a manner that ensures our foreign reserves remain stable, as we did in 2022.
Foreign Affairs, Justice, Prison Affairs and Constitutional Reform Minister Ali Sabry also spoke.
The post IMF support will cease when agreements are breached – State Minister Shehan Semasinghe appeared first on DailyNews.