Government Initiatives Drive Robust Economic Growth

Addressing Parliament today (06), President Wickremesinghe lamented the tendency of certain political factions to prioritize rhetoric over tangible solutions. He argued that the intricacies of the country’s economic challenges defy simplistic remedies, urging those versed in economic matters to acknowledge this reality. With the government’s strategy yielding tangible results, he urged swift legislative action to cement these gains, signalling the forthcoming submission of the Economic Reforms Act.

In conclusion, President Wickremesinghe urged a collective decision on whether to persist with the current trajectory, which promises economic revitalization, or risk regression to the dire circumstances of eighteen months prior.

Following is President Ranil Wickremesinghe full address to the Parliament on 06th March 2024,

It is widely acknowledged that our country has achieved a certain level of economic stability at present. However, there are individuals who criticize the programs we enact without demonstrating acceptance of them. Despite the apparent strength of the economy, there are accusations that the general populace isn’t experiencing its benefits. Furthermore, there are claims of unnecessary tax burdens on the people, as well as excessive hikes in electricity bills and fuel prices.
There’s a commonly held belief that taxes should be collected from the people gently, akin to plucking flowers without crushing them. However, criticism is directed towards us for not adhering to this principle. Yet, it’s important to note that these critics overlook the opportunities available to harvest flowers while crushing them to generate revenue. This lesson is quite profound. Under typical conditions, it’s feasible to extract nectar without damaging the flowers. However, in the intermediate space, this isn’t always possible, as the situation differs significantly.

Today, we find ourselves journeying towards intermediate space, but our path has recently led us across a dangerous economic vine bridge. We find ourselves in a precarious situation due to several factors contributing to the collapse of our economy into bankruptcy. One significant reason is the short-sighted decisions made by past governments. Their failure to implement sustainable economic policies has exacerbated our current challenges. Additionally, various political parties have opposed numerous constructive government initiatives, leading to disruption and hindrance of positive work plans.

The destruction of public property further exacerbates the situation, adding to the economic turmoil we face.

Consequently, our nation requires a structured economic blueprint, a robust financial plan to navigate through these challenges. Despite several attempts to implement such a plan, we’ve struggled to do so consistently due to the lack of continuous opportunities.

I would like to excerpt a segment from an article authored by Dr. Chandima Wijebandara in 1989, published in the Budhusarana newspaper. In the mentioned article, Dr. Chandima Wijebandara discusses the “Kootadantha Sutra”, a teaching expounded by the Buddha. “Development is unattainable without a blueprint. The ‘Kootadantha Sutra’ from the’ Dīgha Nikāya’ explains the vital importance of such plans for development. It illustrates how a government, faced with an anti-government crisis raised by the proletariat in an underdeveloped nation, managed to develop the country through a structured plan. This plan is grounded in state-based economic strategies. Moreover, the sutra reveals that the public thrived not only economically but also enriched themselves in terms of values, fostered positive social relations, and lived contentedly and harmoniously.” We failed to adhere to a scientific and methodical approach like the one outlined. Certain groups obstructed the implementation of such a strategic plan.

Consequently, the ramifications are evident in the country’s current state. It has plunged into bankruptcy, unable to repay loans and withstand the economic pressures. During this period, the entire society, from ordinary citizens to major entrepreneurs, endured severe hardships. Power outages became commonplace, ushering in an era of long queues and scarcity. Countless individuals lost their livelihoods as businesses and industries crumbled. Some even opted to flee the country altogether. The nation found itself engulfed in turmoil, descending into an economic abyss. Amidst these trials, the country teetered on the brink of disorder. Governance faltered, and control slipped away, leading to grave danger not only on an economic front but also in terms of social and political stability. No individual stepped forward to confront the frightening task of reversing this dire situation. Despite invitations extended, all declined the opportunity. None possessed the courage to confront the raging inferno head-on and extinguish it.

Amidst the reluctance of others, I courageously accepted the challenge for the betterment of our country. Venturing into the heart of the crisis, I tirelessly worked to extinguish the flames of adversity. Today, the nation reaps the rewards of those arduous efforts, and I am grateful for the unwavering support of those who stood by me during this exhausting endeavour. We embarked on a methodical journey, collaborating with the International Monetary Fund to devise a comprehensive economic plan. Through the diligent execution of this plan, the nation gradually returned to stability. The burdens eased, and the clouds of distress began to dissipate. Before this esteemed House, I would like to present some economic indicators that vividly illustrate this progress. Our economy, which experienced consecutive contractions for six quarters from 2022 to the second quarter of 2023, began to show signs of recovery from the third quarter of 2023 onwards.

Forecasts from international financial organizations suggest that we are poised to achieve a growth rate of 2-3% this year.

Notably, in 2023, we managed to bolster state revenue by over 50% compared to the previous year. Furthermore, we attained a surplus in the primary account last year. This enabled us to settle all outstanding payments owed to contractors who had rendered services to the government over the past three to four years. In the first eight months of 2022, major state-owned enterprises collectively incurred a staggering loss of Rs. 720 billion. However, in the corresponding period of 2023, we successfully transformed this into a profit of Rs. 313 billion. Despite the closure of numerous businesses amid the economic crisis, the resurgence of the economy has encouraged the establishment of new ventures. In 2022, the Company Registrar recorded the registration of 17,819 companies, a figure that rose to 22,376 in 2023. Additionally, in January 2024, 1,995 new companies were registered. Through coordinated macroeconomic demand management efforts between the Central Bank and the Government, inflation dropped from 70 % in September 2022 to a significantly lower 5.9 % by February 2024.

Interest rates have undergone a significant reduction, dropping from over 30% in 2022 to less than 10 % in 2023. This decrease has brought relief to small and medium-sized enterprises (SMEs) and consumers, particularly as inflationary pressures ease. Moreover, the usable foreign exchange reserves, which stood at less than US$ 20 million in mid-April 2022, have surged to surpass US$ 3 billion. Import restrictions have been lifted, with the exception of private motor vehicles. In a notable milestone, the balance of payments achieved a surplus in the current account for the first time since 1977, during the year 2023. This achievement has led to a depreciation of the US$ from Rs. 363 to Rs. 308 as of yesterday, marking a strengthening of the Sri Lankan Rupee.

The impact of this economic progress is evident throughout society today. How many individuals embark on pilgrimages to Anuradhapura and Siripada from hand tractors to large buses? How many undertake journeys to Talawila and Madu Church for religious purposes? How many indulge in leisurely trips to Nuwara Eliya? How many individuals park their cars on the side of the road, open their trunks, and initiate small businesses due to their inability to repay the loans they obtained? And are they now experiencing a sense of freedom? How challenging is it to secure a seat on a long-distance coach? How many travellers fill the unreserved compartments? How many tourists explore every corner of the country?
A nation that once struggled to leave their homes is now traversing freely. Previously, they couldn’t afford to put a drop of oil in their car to rush a sick person to the hospital or accompany a deceased loved one to the cemetery. People faced challenges such as not having gas for cooking at home, leading many to prepare meals outdoors. A nation that, when a child fell ill, would go from house to house in the middle of the night searching for a Paracetamol pill.

However, this situation has undergone a remarkable reversal. There are critics who question the economic progress we currently experience, attributing it to the temporary suspension of loan payments. They argue that once the debt is repaid, the nation will regress into a state of hardship. They describe the current situation as an interval in hell, suggesting that despite the apparent progress, underlying challenges remain unresolved. I’d like to underscore that the criticism lacks a factual basis.

Currently, we are actively engaged in discussions regarding the restructuring of all loans, including domestic and foreign loans. We are optimistic that these negotiations will reach a successful resolution soon. Our goal is to obtain temporary relief from debt defaults from 2023 to 2027. Subsequently, we plan to diligently work towards repaying the loans in the period from 2027 to 2042.

Sri Lanka faces a significant burden of debt. By 2022, the country was slated to repay approximately US$6 billion in foreign debt annually, amounting to about 9.5% of the GDP, a considerable strain for any nation. Through successful negotiations for debt restructuring, we aim to alleviate this burden by reducing the annual foreign debt payments to 4.5% of the GDP, a substantial halving of the previous percentage.

If the current trend of economic growth, as observed in 2022 and 2023, persists, we can anticipate maintaining a high percentage of state income. In such a scenario, servicing the debt would no longer pose a burden on the country.

Currently, we have managed to elevate state revenue to nearly 11% of the Gross Domestic Product (GDP). This increase necessitated the imposition of Value Added Tax (VAT). Undoubtedly, this decision was a bitter and challenging one.

We made the decision to implement such a tax with great reluctance. However, considering the economic ailment we face, there are no other viable options. We must endure this temporary pain for the greater good. The implementation of VAT has bolstered the government’s revenue, demonstrating to the international community our capacity to repay the debt. With the increase in government revenues and the revival of the economy, the rupee has strengthened. The strengthening of the rupee has led to a decrease in the prices of imported goods, including fuel. As a result, all VAT-paying companies are now reaping the benefits of the stronger rupee, which extends to the entire country. Furthermore, we anticipate additional benefits in the future.

So, if we continue our current trajectory with the same vigour, our economy will be in significantly better shape by the end of this year. Additionally, we’ve ceased the practice of using taxpayers’ money to cover the losses of government institutions. Instead, we’re restructuring these institutions and transferring them to investors.

The tax network will be expanded, with the total number of tax files surging to over 1 million in 2023, marking a 130% increase. The practice of printing money has been completely halted.

We’re actively pursuing essential legal reforms to strengthen and modernize the legal framework, systems, and processes, aiming to improve public financial and economic management for the benefit of all.

In a ground-breaking move for South Asia, the Governance Diagnostic Report has been released, and on-going efforts are underway to enhance governance and mitigate corruption risks. We’re also attracting investments and establishing a new institution for this purpose.

Efforts are underway to modernize the agriculture sector, with several foreign countries expressing interest in starting large-scale farms under food security initiatives. We’re gradually unlocking foreign markets for exports, focusing on non-traditional export items.

Our goal is to transform the country into a green and digital economy and establish it as a regional economic and service hub, with plans to make the Port City an international financial hub. However, this can only be achieved if we continue to execute our plan diligently.

The measures we’ve implemented so far have allowed us to provide numerous facilities and concessions to the majority of our citizens. Under the ‘Urumaya’ program, two million families will acquire land ownership, reclaiming inherited land lost over generations.

We’ve tripled social security spending to protect the poor and vulnerable from the economic crisis, benefiting 2.4 million low-income families with “Aswesuma.” Around 4.5 million school children are now covered by the “Suraksha” insurance scheme.

Every school teaching information technology now has smart classrooms, and 100,000 school children have received scholarships through the President’s Fund. The funds allocated to patients from the President’s Fund have been doubled.

Development initiatives have begun in numerous villages across 89 Divisional Secretariat divisions as part of the “Kandukara Dashakaya,” with each regional secretariat allocated Rs.100 million for this purpose. Development activities in constituencies are underway through the decentralized budget, and agricultural modernization initiatives have been launched across 25 Divisional Secretariats.

Tourism is on the rise, benefiting many individuals, and we’re working to further enhance its development. The economy, which had contracted, is now gradually recovering, leading to relief for the people.

We’ve suspended the Parate law for business establishments and offered relief on electricity bills this week. Additionally, we aim to exempt items such as books, school equipment, health equipment, and medicine from the VAT list to continue reducing the VAT rate.

We’re diligently strengthening the economy each day, striving tirelessly to improve the lives of our people and fortify the economy. Our actions are guided by a strategic plan, ensuring a systematic and methodical approach.

Some suggest retail solutions or collecting funds from Sri Lankans abroad, but these are deemed inadequate by those with economic knowledge. Currently, we must decide whether to continue on our current path, reaping the benefits of our economic trajectory, or risk returning to a state of distress.

To sustain our current course, I anticipate presenting the necessary ordinances and regulations to Parliament, including the Economic Reform Act. My actions are not driven by personal popularity or power but by a dedication to the future of the country.

While certain segments of society have faced hardships due to our current practices, we’re striving to uplift the entire society and establish a sustainable economy where growth benefits all. As Professor Henpitagedara Gnanavasa Thero emphasized in 1983, addressing economic problems collectively is key to fostering societal peace and happiness.

Let’s execute our economic plan in this manner to resolve the issues and strengthen the economic practice of uplifting the entire society. I urge all members of this assembly and all Sri Lankan citizens to join us in this righteous journey.