Budget 2023: Sri Lanka sees major tax hikes and reforms

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The budget, presented by President Ranil Wickremesinghe, was passed with a majority of 43 votes..writes Susitha Fernando

Sri Lanka on Thursday passed the budget for 2023 with tax hikes and major reforms to please the International Monetary Fund (IMF) to address the current financial crisis.

The budget, presented by President Ranil Wickremesinghe, was passed with a majority of 43 votes. In the 225-member parliament, 123 lawmakers voted for it while 80 opposed it.

“We have to take unpopular decision for the future benefit of the country,” Wickremesinghe, who is also the Finance Minister, said taking part at the final day of the budget debate.

He said that the country has to face adverse repercussions today due to the short-sighted popular decisions taken in the past and unpopular decisions have had to be taken for the future prospects of the country.

The President told that a Parliamentary Select Committee will be established on a resolution by the lawmakers to look into those who led the economy to bankruptcy with their incorrect fiscal policies.

Backed by ex-President Gotabaya Rajapaksa’s party, Wickremesinghe’s budget plans to increase tax revenue by 69 per cent to help the ailing economy hit by increasing inflation and dollar crisis. The Wickremesinghe government is planning to restructure a number of both profit and loss making state-run enterprises including the national carrier, power, and telecommunication sector.

The budget aims at increasing tax revenue from this year’s Sri Lankan Rs 1,852 billion to Rs 3,130 billion next year while the budget deficit to be brought down to 7.9 per cent in 2023 from this year’s 9.8 per cent.

Coordinated assistance program

Visiting representatives from the World Bank (WB), Asian Development Bank (ADB), International Monetary Fund (IMF) and Asian Infrastructure Investment Bank (AIIB) have ruled that a coordinated assistance program supported by multilateral financial institutions is vital for Sri Lanka’s recovery from the current economic crisis.

On Tuesday, the group of representatives, which included WB Vice President Martin Raiser, ADB Vice President Shixin Chen, IMF’s Senior Mission Chief Peter Breuer and AIIB’s Urjit Patel, met President Ranil Wickremesinghe, other ministers and top financial officials in Colombo.

Wickremesinghe, who also holds the Finance portfolio, presented Sri Lanka’s development programme associated with the economic recovery and growth along with the vision for long-term development.

The meeting also saw the participation of Prime Minister Dinesh Gunawardene, Governor of the Central Bank of Sri Lanka Nandalal Weerasinghe, former GovernorIndrajith Coomaraswamy and many other senior officials from the government institutions and other institutions.

Going through the worst-ever financial crisis since the country’s independence in 1948 and battling with the skyrocketing inflation and dollar crunch, Sri Lanka decided to default its $51 billion foreign debt in May.

In September the island nation reached a staff-level agreement with the IMF to obtain a conditional $2.9 billion package. But the country has to obtain assurance from its diverse creditors including India, Japan and China.

India, which has provided over $3.8 billion financial assistance since January, the biggest ever by a single country, has urged the IMF to assist its southern neighbour, while Japan in September announced its support for the island nation to secure the IMF bailout.

China, the top lender since the end of civil war in 2009, is yet to announce its stance.

Last week, Shanakiyan Rasamanickam, an Opposition lawmaker representing the Tamil National Alliance, charged that China was stalling Sri Lanka’s IMF deal.

“If China is truly Sri Lanka’s friend, ask the Chinese to help with the debt restructuring and the IMF program,” he challenged.

Questioned by the media on Monday, China’s Foreign Ministry spokesperson Mao Ning said that Beijing would assist the countries and financial institutions to resolve Colombo’s crisis.

“China attaches high importance to Sri Lanka’s difficulties and challenges. We support the financial institutions in working out ways with Sri Lanka to properly solve the issue. We also hope relevant countries and international financial institutions will work with China and continue to play a constructive role in helping Sri Lanka overcome the current difficulties, ease its debt burden and realize sustainable development,” the spokesperson added.

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