Sri Lanka President calls for proposals from opponents of IMF program to rescue country from financial crisis

Sri Lanka President Ranil Wickremesinghe has urged all political leaders to exhibit responsibility in their approach to the International Monetary Fund (IMF) program.

He emphasized that those opposing the program should provide concrete proposals to rescue the country from financial crisis.

The President cautioned against engaging in rhetoric merely for public appeasement without shouldering responsibilities, noting that such political tactics could lead the nation back into economic turmoil.

The President underscored that, despite facing blame and acknowledging the challenge of making tough decisions, individuals resorting to popular statements exhibit an unwillingness to take necessary measures.

Emphasizing the absence of alternative options to salvage the country’s economy, he reiterated the initiation of the program with the IMF.

President Ranil Wickremesinghe made these remarks while participating in the inauguration of the Karaliya Convention Centre and Performing Arts at Kandy Municipality on Sunday morning (December 17).

The construction of the Karaliya Convention Centre and Performing Arts by the Kandy Municipal Council commenced in 2018, with an expenditure of nearly Rs. 600 million from the Municipal Council Fund.

The establishment of this conference and performing arts centre aims to address the city’s infrastructure gap by providing auditorium facilities and creating exhibition halls for art and sculpture.

The President inaugurated the building complex by unveiling the commemorative plaque.

President Ranil Wickremesinghe awarded certificates of appreciation to individuals and businesses for their outstanding contributions to the “Pivithuru Dorakada” business contribution program and the city beautification program.

These initiatives were collaboratively implemented by the Urban Development Authority and the Kandy Municipality under the Kandy Formal City Development Program, aiming to enhance and preserve the distinctive features of the world heritage buildings in the city of Kandy.

Additionally, a special souvenir gift was presented to President Ranil Wickremesinghe during the ceremony.

President Ranil Wickremesinghe, addressing the gathering, emphasized that the construction of the new Karaliya Convention Centre signifies a modern architectural model for the city of Kandy in the 21st century.

Highlighting the cultural significance of such structures, he expressed that the city, deeply rooted in history, plays a crucial role in the cultural and tourism industries of the country.

The newly established centre has the capacity to host conferences and events, thereby elevating the significance of Kandy city.

President Ranil Wickremesinghe expressed the intention to enhance Kandy’s cultural infrastructure by introducing a modern library.

Plans are underway to construct a three or four-story library building as part of the Bogambara program.

The relocation of the D.S. Senanayake Library to this new facility is expected, enabling the integration of the library with the theatre building.

This transformation aims to create a facility comparable to the Bandaranaike Conference Hall.

President Wickremesinghe expressed plans to initiate the Kandy development program in the coming year.

Additionally, a multimodal transport centre is slated to commence construction next year in Kandy.

The President emphasized the need for upgrading infrastructure on Gopallawa Mawatha, advocating for the replacement of single-story houses with at least three-storied structures.

These endeavours are projected to be completed within the next five years.

A modern Kandy city is set to take shape, with the commencement of the first phase scheduled for the upcoming month.

Although previously initiated, progress on these projects had been impeded by the economic crisis afflicting the nation.

The President highlighted that the stagnation resulting from the country’s financial distress had obstructed the momentum of crucial development initiatives.

Following the country’s descent into bankruptcy, the administration had to engage with two distinct groups.

Several nations extended loans, including India, China, Japan and entities associated with the Paris Club while India and other organizations participated in discussions within the framework of the Paris Club concerning these loans, separate negotiations were held with China.

The President highlighted that, akin to Sri Lanka, other nations grappling with bankruptcy also confronted similarly challenging circumstances.

Divided into three distinct groups India on one side, the Paris Club on the other and China forming the third the government initiated dialogues with each, facilitated by the Lazard team.

The negotiations adhered to the terms set forth by the IMF.

In a significant milestone, the administration successfully secured the initial agreement with the IMF and devised a debt restructuring plan that garnered acceptance from India, China and the Paris Club.

Consequently, the first installment of the loan, as stipulated by the IMF, has been received.

Engaging in a series of diplomatic dialogues, President Ranil Wickremesinghe held discussions with the Secretary of the Treasury in the United States.

Following this, deliberations were conducted with the President, Prime Minister and Finance Minister of Japan.

Subsequently, meetings were held with the Finance Minister and the Prime Minister of India. A visit to China ensued, during which discussions were conducted with the President and Finance Minister of China.

Negotiations were held with the Japan International Cooperation Agency (JICA), which serves as an aid organization. However, there is a notable absence of similar aid organizations in China.

Despite this, negotiations were successfully conducted with China’s Exim Bank, culminating in the challenging acquisition of the loan agreement.

Examining the situation in Zambia, it is evident that they remain entangled in a predicament.

The absence of consensus on credit review has emerged as a significant impediment for them.

“Our next step involves heading to London to engage in negotiations with private creditors. Successfully emerging from bankruptcy has paved the way for us to regain access to credit, facilitating the commencement of development initiatives in the near future. The upcoming year will witness a surge in development projects, marking a significant milestone achieved through agreements pertaining to loans from the IMF and other nations.

We find ourselves in the position of demonstrating a minimum income to meet our country’s debt obligations. Despite the challenges, we have committed to moving forward. Our primary objective is to increase the GDP by 10.4%, a target initially.

The target set for 2024 may not be achievable; however, there is an expectation to reach this goal by 2025 or 2026. Recognizing the need for flexibility, we engaged in negotiations with the IMF to revise the target to 9.2% for 2024.

Although they indicated reluctance to further adjustments, our determination is unwavering and we are poised to achieve this revised goal.

If you were in my position, facing the dilemma of extending the timeline or achieving these goals by 2024, what would you choose? I firmly asserted that expediting these accomplishments is the priority.

Meeting the 2024 goal will leave us with a deficit of 534 billion in our income, a challenge we are steadfastly working to address.

The shortage we face is partly attributed to the Aswesuma project. We invested 61 billion in Samurdhi, but an allocation of 207 billion has been earmarked for Aswesuma relief, specifically for the underprivileged citizens of our nation.

Additionally, the augmentation of government employee salaries required an allocation of another Rs. 133 billion. It is essential to recognize that the 534 billion deficits are a result of vital investments.

For three years, the country’s economy suffered a collapse without adequate capital expenditure, necessitating the infusion of funds into these crucial areas.

The IMF suggested that we should increase taxes. This presents an unbearable situation. While raising taxes may lead to a decrease in popularity, rescuing the economy is paramount to eliminating bankruptcy.

Although there were options to increase various taxes, such as fuel taxes, it was recognized that such measures would have widespread repercussions across multiple sectors.

When accounting for the cascading impact on electricity charges, the cumulative effect of raising the fuel tax becomes significantly more burdensome.

So we focused only on Value Added Tax (VAT). The VAT, which was 15%, was increased to 18%. Also, VAT was charged on those that were not currently VAT charged.

In other countries, VAT is charged on all of them. Also, in India, the VAT rate is up to 23% while in Pakistan it is up to 18%. Their per capita income is lower than ours.

Hence, I made the difficult decision within the Cabinet. The Cabinet comprises individuals who will be seeking re-election in the next election and it is widely acknowledged that none of them favor tax increases. However, we realized that there was no alternative.

The government is steadfast in its commitment to pulling the country out of bankruptcy by 2024. Consequently, although met with reluctance, everyone in the Cabinet ultimately agreed, recognizing that overcoming bankruptcy is essential for the progress of our nation.

Furthermore, what is our alternative? One option is to refrain from spending, but I find that impractical. I challenged others to propose an alternative, but no one has come forward with a viable solution.

Some experts and politicians suggest renegotiating with the IMF. However, this is a misleading proposition. The IMF is not a singular entity. We engaged in discussions with numerous countries, meeting with their leaders.

Altering the terms now would mean our country must repay the debt anew. I am not in favor of such a scenario. It is crucial to ask the people if they are willing to return to bankruptcy or not.

Those opposing this should articulate alternative solutions if the program with the IMF is rejected. It is imperative to declare how we can generate revenue and navigate our way out of bankruptcy.

This reflects a significant weakness in our political landscape, unwillingness to take responsibility and make challenging decisions. Mere attempts to please without contemplating the source of funds won’t suffice.

This lack of foresight was evident last May when no one stepped up to shoulder the responsibility. Hence, I urge all political leaders to act responsibly in this matter.

Central Province Governor Mr. Lalit U. Gamage expressed gratitude to President Ranil Wickremesinghe for inaugurating this theatre building in the heart of the historic city of Kandy.

He also extended appreciation to former Mayor Mr. Kesara Senanayake and the councillor group for their valuable contributions to the welfare of future generations of artists. Notably, this theatre was erected following the unfortunate incident of the D S Senanayake library being destroyed by fire.

This holds immense significance for our children and the broader community, serving as a crucial space to embrace the future. The modern technology integrated into this theatre enhances the importance of Kandy city.

The event was attended by State Minister Mr. Dilum Amunugama, Members of Parliament Mr. Rauf Hakeem, Mr. A.H.M. Halim, Mr. M. Velukumar, former Chief Minister of Central Provincial Council Mr. Sarath Ekanayake, former Mayor of Kandy Metropolitan Council Mr. Kesara Senanayake, Central Provincial Chief Secretary Mr. Ajith Premasinghe, Kandy District Secretary Mr. Chandana Thennakoon, Municipal Commissioner of Kandy Metropolitan Council Mr. Ishan Wijethilaka and an invited group.

(President’s Media)