President says economy bouncing back; pledges more relief
President Ranil Wickremesinghe has declared that the country’s economy, once contracted, is now gradually awakening, and the progress is enabling the government to deliver relief to the people, step by step.
“By temporarily removing the Parate law, we’ve protected medium-scale industrialists. This week, we’ve managed to offer relief on electricity bills. Looking ahead, we aim to exempt items like books, school supplies, and health equipment from the VAT list and further reduce the VAT rate in the future," President Wickremesinghe told Parliament in a statement on the current economic situation. The president also said: “After shrinking for six quarters until mid-2023, our economy is rebounding and is expected to grow by 2-3% this year. In 2023, we increased state revenue by over 50%, achieved a primary account surplus, and settled all overdue contractor payments from the last 3–4 years.
In the first eight months of 2022, state-owned enterprises lost Rs. 720 billion. By 2023, we turned that into a Rs. 313 billion profit. Despite business closures due to the economic downturn, the recovery has sparked new ventures. Company registrations increased from 17,819 in 2022 to 22,376 in 2023, with 1,995 new companies registered in January 2024.
Inflation fell from 70% in September 2022 to 5.9% by February 2024. Interest rates decreased from over 30% in 2022 to under 10% in 2023, relieving SMEs and consumers. Foreign exchange reserves also surged from less than US$ 20 million in April 2022 to over US$ 3 billion.
We’ve removed import restrictions, except for private motor vehicles. Thanks to the primary surplus, the value of the US dollar against the rupee, which was 363 last year, has depreciated to 308 as of yesterday, strengthening the rupee.
A nation that was once confined indoors, struggling to afford emergency fuel for transportation or lacking cooking gas, now travels freely. The once dire need for basic medication, such as paracetamol for a sick child at night, has almost completely reversed, showing the tangible benefits of our economic progress.
Some doubt this economic progress, attributing it to paused loan payments, and argue that repaying debts will revive our difficulties, dismissing our gains as temporary. However, such scepticism is baseless. Discussions are ongoing about restructuring all loans, both domestic and international.
With great reluctance, we imposed VAT, given that our economic challenges left us no other choice. Enduring this temporary pain was essential for the greater good. This move raised state revenue to nearly 11% of GDP, affirming our debt repayment ability. Consequently, the economic revival strengthened the rupee, reducing the cost of imported goods, including fuel.
Companies paying VAT now enjoy the benefits of a stronger rupee, an advantage that spans all of Sri Lanka. Anticipate further benefits. By persisting on this successful trajectory, we will further stabilise our economy by the year’s end. Moreover, we have ceased using taxpayers’ money to offset the losses of government institutions.
We’re restructuring government institutions to hand them over to investors. We’ve expanded the tax net, increasing the total number of tax files to over 1 million in 2023. This is a 130% increase. We’ve completely halted printing money and are advancing legal reforms to strengthen and modernise our legal framework, systems, and processes, enhancing public financial and economic management.
We’ve published the Governance Diagnostic Report, a first for South Asia, taking steps to enhance governance and tackle corruption risks.
Our measures have enabled facilities and concessions for many citizens. Through “Urumaya,” two million families will gain land ownership, reclaiming lost ancestral lands. We’ve also tripled social security spending.
I plan to introduce the necessary ordinances and rules in Parliament to sustain this trajectory. My actions are not motivated by a desire for popularity. Unlike many political parties that craft fairy tales for appeal, creating fantasy palaces while ignoring ground realities and lying for power, I have not lied for power. My efforts are not for my future but for the country’s future, not aimed at gaining power but at rebuilding the nation.
Despite the improvements in the economy, some feel its benefits aren’t widespread because of high taxes. We must realise that we’ve navigated the toughest times caused by past governments’ shortsighted policies and the opposition from various political parties to beneficial initiatives for the country. This opposition was often politically motivated. Despite these and other challenges, my dedication remains strong and unchallenged.
When there was turmoil, governance faltered, and leadership was absent, I took charge to address the crisis. My aim was to first restore our country’s economy to prevent further instability. We partnered with the IMF to develop and implement a comprehensive economic plan, thereby restoring national stability. Economic indicators now reflect significant progress, a testament to our collective efforts.