DR HARSHA DE SILVA EXPLAINS
The Minister of Finance, Hon. Ali Sabry, stated that the reluctance to goto the IMF much earlier was a grave mistake, in addition to the massive tax cuts and delayed depreciation of the rupee. However, I cautioned and suggested these changes as far back as 2020 November, although it fell on deaf ears.
Today, these same Ministers act as if they are reborn. It is unfortunate that we did not make the right decisions at the time, as our debt was sustainable then, currently our debt is deemed unsustainable, thus the IMF is unable to provide us with any Rapid Financing Instrument (RFI).
In regards to the detrimental tax cuts, during the time of President Ranasinghe Premadasa, our tax to GDP was as high as 20 percent. When the SLFP came into power in 1994, taxation was still at 17 percent, however when Sirisena-Wickramasinghe took government in 2015, it had reduced to a meager 9 percent. Between 2015 and 2019 tax rates increased back up to 12.5 percent, although Sri Lanka’s tax to GDP today stands at 7.5 percent, which is the lowest in the whole world. How can an emerging island nation such as Sri Lanka move forward at this rate? Our people would not be suffering this much, had the government heeded the advice I repeatedly provided in Parliament and outside.
Hon. Ali Sabry made a massive revelation by stating that we possess only a mere USD 50 mn, while also highlighting the urgent need of USD 4 billion to keep the country functioning. We cannot even offload a fuel ship with USD 50 mn, thus where will we find this money to keep us afloat? Our beloved neighbor, India has already committed almost USD 5 billion. Asian Clearing Union (ACU) payments alone amount to roughly USD 200 mn a month, a total of USD 2.5 bn a year. In addition to another USD 1 bn to import food and medicine as well as USD 500 mn for fuel and USD 400 as a currency swap.
However, China is yet to make a commitment of this nature. Although they support our IMF program, they have clearly expressed their reluctance to restructure our debt, which will further delay our debt-restructuring process.We hear that President Gotabaya has written to the Japanese Prime Minister requesting some money, while extending his deep regret in scrapping the LRT project.It is critical that we receive these funds from Japan, as they are the only option we have left.
Contrary to statements made by former Ministers such as Cabraal who stated that we will receive funds from the Middle East and various other countries, ultimately, it is only Japan that we have left. Sri Lanka will come to a complete standstill if we do not find these urgent funds.This economic crisis has hit people across the board, indiscriminately of their social classes. Our middle class, in particular, has been hit severely although they would not discuss this in public due to embarrassment. Households are discussing how they can cut their expenses and utilize their diminished savings to fund their normal day-to-day activities. Today’s newspapers revealed that the Cabinet has decided to provide Rs. 7500 to all Samurdhi recipients