The president, Ranil Wickremesinghe stated on Wednesday that the administration intends to overcome the country's current economic crisis by 2026. At the same time, hundreds of people demonstrated against a recent tax increase amid soaring inflation.
The 22 million-person island is experiencing its greatest economic instability since gaining independence from Britain in 1948, leading to debt defaults and a request for a $2.9 billion rescue from the International Monetary Fund (IMF).
Sri Lanka announced additional income taxes in January for professionals, ranging from 12.5% to more than 36%. Sri Lanka has to hike taxes to increase government revenue to 11.3% of GDP this year from 8.3% in 2022 in order to receive the IMF monies.
As he pushed through economic changes to finalize the deal with the IMF, President Ranil Wickremesinghe, who assumed power in July after Gotabaya Rajapaksa was overthrown in a popular revolt, told parliament he could see a path out of the problems.
All facets of society find it challenging to live, he added. But if we put up with this suffering for another five to six months, we can find a solution.
If all political parties backed government policies like raising taxes, he said, "We can achieve economic growth" by the end of 2023 and "can emerge out of bankruptcy by 2026" or even before.
Following an 11% decline in 2017, Wickremesinghe predicted last month that the economy will drop by 3.5% or 4.0% this year.
His address to the legislature was ineffective in stopping a lunchtime strike by paid workers.
Public employees left government facilities to demonstrate, chanting protest slogans and some waving placards that said, "Yes to reasonable tax." Outside of Colombo's major hospital, black flags were also fastened to railings.
At state-run hospitals and universities, doctors and professors have been on strike for 24 hours. They have threatened prolonged strikes.
Ranjan Jayalal of the United Trade Union Alliance, which represents employees of the government-run Ceylon Electricity Board, stated, "We have come to the streets to inform this administration that they must immediately and unconditionally drop these discriminatory tariffs."
We'll force the government to the ground and compel them to revoke this tax measure if they don't do it.
According to Wickremesinghe, Sri Lanka's foreign reserves have increased to $500 million from $0 last year.
At the end of January, total reserves reached $2.1 billion, the highest level in almost a year. However, they also contained a $1.5 billion swap from the People's Bank of China, which cannot yet be used since core reserves are inadequate to cover three months' worth of imports.
In order to finalize an IMF program, Wickremesinghe stated that Sri Lanka was collaborating with China, its largest bilateral lender, to get finance assurances backing a restructure of debt.
All parties have given us favourable feedback, he continued. "We are now striving to align the strategies of China and other nations."
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