The primary issue facing Sri Lanka right now is the economy. In 2022, the economy completely collapsed, and as a result, we declared bankruptcy. The first step was to emerge from bankruptcy. Declaring bankruptcy alone was insufficient; the world had to acknowledge it. Countries around the world advised us to negotiate with the IMF. They also suggested we come to an agreement with the IMF and inform them. We had taken loans from 18 countries and issued sovereign bonds to private investors worldwide.
Our initial step was to approach the IMF. We discussed with them how to recover from this bankruptcy, focusing on stabilising the economy and establishing a sustainable debt service. We talked about how long it would take to resume debt repayment, how much time could be allocated to do so, and the potential reductions in our debt obligations.
The IMF instructed us to begin debt repayments in 2028. If we fail to do so, we will face serious issues. We were also informed that debt repayments should start in 2028 and be completed by 2042. We can secure between $8,000–$12,000 million from the 18 countries and sovereign bonds. If we don’t follow these targets, we won’t receive this support.
We have set economic targets to achieve this. If we fail to meet these targets, we will not receive aid. Declaring an inability to repay our debt would lead us back into bankruptcy. We negotiated with all 18 countries, who agreed, with minor amendments, to the terms. We then submitted the IMF agreement, along with bilateral agreements with these 18 countries, to the sovereign bondholders, who also agreed.
We completed all this work before the election. On 4th October, we briefed the new government, which accepted the plan. Now, we must work accordingly to demonstrate our ability to repay the debt, beginning in 2028.
After taking on the debt, we are obligated to repay it as agreed. In the initial years, the repayment amount is set at $300 million, and we are progressing according to plan. A domestic debt repayment programme has also been established. The total debt, both domestic and foreign, is $84 billion, half of which—$42 billion—is foreign debt. We anticipate reducing this by about 20–25%.
Our main concern is the need to start repaying this debt in 2028. Failing to do so will lead to another bankruptcy. We must not ignore this reality. I would like to remind everyone to keep this in mind.
To achieve this, we must reach our economic targets, including raising government revenue to 15% of GDP by 2028. Currently, that figure is under 12%, so it must increase each year. This year, it was $4 trillion, and next year, it is projected to be $5 trillion. Thirdly, some individuals who should pay taxes are evading them.
We cannot impose new taxes on the public to raise this income, nor can we increase VAT; the current burden is already substantial. So, where will the additional revenue come from, and can we secure any relief? To find additional funds next year, we could resume vehicle imports, generating tariffs. Furthermore, if the economy grows rapidly, tax revenue from businesses and corporations will increase.
Thirdly, some individuals who should be paying taxes are evading them. We need to enhance tax collection. Later, we may need to consider additional taxes. This approach will shape our programme for 2025. I cannot say now how negotiations will unfold, but the task won’t end there. Next year, we need to secure six trillion rupees. Where will this funding come from?
Any government must focus on these issues. It is futile to ignore them in favour of other discussions. While working towards this, if possible, we should reduce the tax burden or provide relief. If relief can be given universally, it should be done. With this goal in mind, we proposed adjustments to government employee salaries.
The income tax threshold is set at 100,000 rupees per month, and we are discussing increasing this to 150,000 rupees, which would provide relief to certain groups. We have also raised wages in the plantation sector, from 1,000 to 1,350 rupees. Additionally, the tourism industry’s growth will help boost income. What will happen if we do not take these measures?
This is the critical question. It’s essential to focus on this, as discussing other matters will not help us. We cannot afford to fall back after climbing out of this crisis. Now is the time to hold on and reach the top.
Our main concern is to start debt repayment in 2028 within a strong economy. What is our economic plan? What is our political plan? What is our social plan? We must establish these and move forward.
We cannot continue with old business practices, old politics, or old media approaches. Everyone must participate in a new programme. Do not overlook this. If we lose the ability to repay our debts, everything will be ruined. We must keep this in mind and push ahead.
