SJB says it will go ahead with EFF with amendments, JVP critical of ongoing programmes
The Janatha Vimukthi Peramuna (JVP)-led National People’s Power (NPP) has declared it has no issues dealing with the International Monetary Fund (IMF), but the global institution’s programmes should be in keeping with the national interest.
Former MP and JVP’s economic affairs spokesman Sunil Handunneththi, who took part in the discussions with the IMF delegation, told the Sunday Times that the party’s position was that it was not opposed to dealing with the IMF but would call for drastic changes in keeping with national responsibility.
“We told the IMF delegation to have talks with us even if there are differences between us in the future,” Mr. Handunneththi said.
“We pointed out that despite implementing laws such as the anti-corruption act to achieve the targets of the IMF, corrupt
practices continue. Among them have been the sugar scam and the malpractices in the purchases of pharmaceuticals,” he said.
The former MP said they pointed out to the visiting delegation that only the burdens had been heaped on the people, but the objectives had not been achieved. “We also said that if the people are taxed heavily, they should be provided with other benefits as well.”
He said they did not go into discussions about future dealings with the IMF under an NPP-led government.
JVP Leader Anura Kumara Dissanayake was not present at the talks.
Meanwhile, the main opposition, Samagi Jana Balawegaya (SJB), told the IMF delegation that it would go ahead with the existing Extended Fund Facility (EFF) framework signed by the government with the international financier in the future, subject to certain changes if the party were to form a government following elections later this year.
On Thursday, an IMF delegation led by Senior Mission Chief for Sri Lanka, Peter Breuer, met the SJB delegation led by Opposition Leader Sajith Premadasa and representatives of the JVP-led NPP separately as part of their engagements with opposition parties.
During the discussion with the SJB, the IMF delegation directly posed the question of how the party was planning to restructure the current EFF agreement in the wake of Opposition Leader Premadasa declaring at a public meeting that a future SJB government would revisit the programme.
“We have told them, ‘Look, we will make changes based on our party’s proposals to reduce the tax burden on the people,’” SJB MP Dr. Harsha de Silva, who took part in the meeting, told the Sunday Times
He said there was a mutual understanding between the two parties to “continue the exiting programme without major disruptions” in a future SJB government while discussing the alternative proposals the party came up with to reduce the tax burden on the people.
“Both parties also acknowledged the need for and complexities involved in the debt restructuring process and how crucial they were,” Dr. de Silva said.
“We have explained to them in detail our party’s proposals and plans to reduce the tax burden on people by adjusting the tax collection to make it palpable to people while achieving revenue targets. Since we have recalculated the tax collections based on proposals in the economic blueprint of the party, we have already submitted them to Parliament,” the SJB MP said.
Among the key proposals that were discussed at the meeting included amending the current Pay As You Earn (PAYE) tax to 24 percent from the current rate of 36 percent and with regard to Value Added Tax (VAT) which saw an increase up to 18 percent from January 1, the party is sticking to former Finance Minister Mangala Samaraweera’s policy decision of keeping the rate at 15 percent.
The SJB also indicated that ad-hoc tax holidays given to various entities would have to be reconsidered as well.
Neither the NPP nor the SJB issued a formal statement on the talks.
Meanwhile, Mr. Breuer said on Friday that Sri Lanka’s staying in the economic reform process supported by the IMF was necessary for stabilisation to evolve into broad-based and steady growth that would ensure a full and lasting economic recovery benefiting the people.
In this context, sustaining the reform momentum and ensuring timely implementation of all programme commitments were critical to rebuilding confidence and putting the recovery on a firm footing that would benefit all people, he said.
The economic reform programme implemented by the Sri Lankan authorities was yielding the first signs of recovery, with positive real GDP growth in the third quarter of 2023, low inflation, increased revenue collection, and a build-up of external reserves, Mr. Breuer said.
“The authorities have made commendable progress in putting debt on a path towards sustainability. The execution of the domestic debt restructuring was an important milestone,” he told journalists.
“So our understanding is that negotiations are ongoing, proposals are being exchanged, and it is important that the process continue and be completed as quickly as possible. It’s our strong expectation that there would be an agreement in principle by the time of the second review,” he said.
A swift completion of final agreements with official creditors and reaching a resolution with external private creditors remains critical.
“Progress in meeting key commitments under the reform programme has been assessed in the context of the second review of the Extended Fund Facility (EFF) arrangement alongside the forthcoming 2024 Article IV consultation assessing Sri Lanka’s economic health during the IMF team’s eight-day visit in the island.
“However, challenges remain as these improvements need to translate into improved living conditions for Sri Lanka’s people.
“Swift progress towards the introduction of a progressive property tax is key to ensuring fair burden sharing while sustaining revenue-based consolidation,” the senior IMF mission Chief said.
“Tax policy measures need to be accompanied by strengthening tax administration, removing tax exemptions, and actively eliminating tax evasion to make reforms more sustainable and to further build confidence among Sri Lanka’s creditors to regain debt sustainability to gain their support,” he added.
“Swift progress towards the introduction of a progressive property tax next year is key to ensuring fair burden sharing while sustaining the revenue-based consolidation.
“The property tax is to be enforced in 2025 as a progressive way of taxation. Meaning that those who can afford it more, those who have more expensive houses or property, will have to pay a higher tax,” he explained.