President Ranil Wickremesinghe Says his Taking Over a Country that had Declared Bankruptcy was like taking over the Titanic after the ship hit the iceberg.

President Ranil Wickremesinghe on Sunday described his accession to power in crisis-hit Sri Lanka as “taking over the titanic after it hit the iceberg”.

His witty remark was made at the 32nd Annual General Meeting of the Sri Lanka Tea Factory Owners Association at the Water’s Edge Hotel as a response to what Wickremesinghe described as its Chairman Lionel Herath’s ‘tale of woes’.

“He (Lionel Herath) came out with a tale of woes. That is understandable looking at what we have gone through this year. Now, it is my chance to come out with my tale of woes because I have taken over the Titanic after it hit the iceberg. So, you can just imagine where I have to start. Everything was down. We have declared ourselves bankrupt,” President Wickremesinghe said.

“With the bankruptcy that we have declared, our economy has virtually come to a halt. The inflation, the bankruptcy, and everything else that is happening have brought our economy to a grinding halt. How do we restart it? That is what we are engaged in,” the President said in his speech in which he detailed measures taken to restore stability and he also listed various challenges ahead and steps taken and planned to address those.

The President said the priority had been to conserve foreign exchange and limit imports so that the country could get fuel, fertiliser and medicine. “It has not worked fully initially, but now it›s working much better. Therefore, that is how we started.”

“Then as the revenue dried up, we faced the difficulty of paying our bills or meeting our commitments. We had to keep two things in mind, one is to pay the salaries of government servants, about 1.7 million people and service our debts. Therefore, we have had to work within this scope,” Wickremesinghe explained.

He said that following the self-declaration of bankruptcy, the first issue was to ensure sufficient steps to wipe out that label of bankruptcy, which meant Sri Lanka going to the International Monetary Fund (IMF).

“We had no other option. Our growth rate this year is going to be -8%. Last year too we recorded minus growth. This year it is also -8%, and next year it is forecast that it would be -3%,” the President revealed at the forum of tea factory owners.

“However, there›s one other factor which worries me. When that forecast was made, everyone thought the global economy would do well. Now, all the indications are that the global economy will fare badly. How will it impact, because the rising inflation in European and other countries will mean that the cost of living will rise? This in turn can somehow affect exports such as less clothing, maybe less tea, and less coffee,” he said, adding Sri Lanka has to somehow manage the next two years.

Focusing on another challenge, the President spoke of the need to boost Government revenue.

“Our revenue was reduced from 15% to 8.5% and we are expected to get the revenue back to 15%, which I think we have to do. The timeframe is 2026. I went in for a four-year program.

“I didn›t think we could bear the burden if we tried to do it in two years and it may not have been possible. I›m happy that we went for four years because 2023 looks to be a bad year globally, not only for Sri Lanka,” he said.

In that context the President justified the move to raise taxes. “As someone once said, if it moves, tax it. We had to come to that level and we had no way out. I wish we could have done it gradually but couldn›t because we needed the money,” the President said.

“If you look at the taxes, those who paid taxes up to 2019 got a reduction in 2019. Therefore, that›s a loss of revenue. Now what we are trying to do is bring it back first to the 2019 level and add a little bit more. So if you look at up to 2019, your taxation then and today is one figure. However, if you look at 2020 the gap seems much bigger. The fact is that we are suffering, it’s not only tax, but our rupee has also depreciated and interest rates have gone up,” emphasised the President.

He expressed hope for an early conclusion of negotiations with Sri Lanka’s official and private creditors. “I have already started discussions with Japan and now with India and China. We get down to a common platform of how we can resolve it while we also have discussions on bilateral issues that affect each other’s countries.

“If we can move and come to an agreement by December, which means coming to an agreement by mid-November, and going up to the IMF Board in mid-December, we will gain a big advantage. However, I don›t know whether we can do it for the simple reason that in China, the focus has started now after the party conference. However, we must aim to have it by January,” the President added.

Courtesy:Daily FT