Minister of Transport, Highways and Mass Media, Dr. Bandula Gunawardena said that addressing the prevailing economic crisis in the country requires an exclusive focus on economic solutions, highlighting the inadequacy of political measures in this context.
Dr. Gunawardena said that once the International Monetary Fund (IMF) issues the second loan installment, it will pave the way for the resumption of all stalled development projects.
The Minister conveyed this information during his participation at a media briefing at the Presidential Media Centre (PMC) under the theme ‘Collective path to a stable country’.
Minister Gunawardena, in his extended remarks, characterised this year’s budget, presented by President Ranil Wickremesinghe, as historic, radical and revolutionary.
He highlighted its significance as the first budget unveiled following the official declaration of the country’s bankruptcy last year.
The Minister underscored that the State Budget’s current account deficit and the international Balance of Payments’ current account deficit were pivotal factors leading to the country’s financial crisis.
He said that the failure to meet International Monetary Fund (IMF) criteria during the respective periods as a contributing factor to the current crisis.
To navigate the country out of the current crisis, a strategic approach involves focusing on four key aspects.
Firstly, there is an imperative to enhance Government revenue. Secondly, it is essential to curtail both Recurrent and Capital Expenditures of the Government. The third element involves boosting foreign exchange inflows while concurrently minimising foreign exchange outflows.
Lastly, the goal is to establish a current account surplus in the Balance of Payments. The budget presented by the President for the year 2024 is aligned with these crucial objectives.
Moreover, the existing national debt stands at approximately US$ 36 billion. Notably, only 37 percent of this debt is slated for payment within the next 5 to 6 years, with 51 percent of the loan amount scheduled for repayment between 6 and 20 years. The remaining 12 percent is earmarked for settlement after the 20-year mark.
It is crucial to acknowledge that irrespective of the governing party, the country is obligated to service this debt until the year 2048. Failure to meet these financial commitments would result in a governing party’s ability to administer the Government for only a two-week duration.
Avoiding loans from global entities and defaulting on payments poses a critical challenge, as the current international system relies on this financial mechanism.
In addition, refusal of other nations to accept Letters of Credit (LCs) issued by Sri Lanka would hinder the importation of vital commodities such as petroleum, gas, medicines and essential food items.
Consequently, political solutions prove ineffective in addressing this predicament; instead, the imperative lies in implementing an economic solution to navigate through these challenges.
President Ranil Wickremesinghe assumed responsibility amid financial management challenges. A resolution was achieved through debt restructuring, involving consultations with leaders from creditor states, including India, China and Japan.
Following the budget, the IMF is expected to issue the second loan tranche. Successful refinancing of the debt would provide ample resources to execute all the proposals outlined in the budget. Subsequently, the revival of all stalled development projects becomes feasible.
It is crucial for everyone to bear in mind that the anticipated increase in government employees’ salaries, as per the Budget, is contingent upon the tax revenues collected by the Government from the public.
Participating in a separate media conference at the PMC, Minister of Ports, Shipping, and Civil Aviation Nimal Siripala de Silva, said that the disbursement of the second installment of the loan under the Extended Fund Facility provided to Sri Lanka by the IMF is anticipated to occur in December.
The Minister said the budget outlined by President Wickremesinghe for the year 2024 marks the commencement of a comprehensive, long-term initiative aimed at the reconstruction of the national economy.
Minister de Silva underscored the significance of the current Budget, portraying it as the inception of a protracted initiative aimed at revitalising the national economy, devoid of immediate profit considerations.
He said the Budget intricately lays out essential programs and policies for this purpose. While some may label it as an election-oriented Budget, the Minister said that it is not formulated with anticipation of impending elections but rather as a strategic economic framework.
Had this budget been crafted with electoral considerations in mind, crucial development-related proposals and policies might have been neglected and the challenging decisions essential for economic stability might have been circumvented.
The authorities could have resorted to inflationary measures such as printing more money or offering greater relief to the general populace.
The recent economic crisis and accompanying public demonstrations have significantly eroded the political and social stability of the country.
It is imperative to recognise that a nation lacking political and social stability stands at a disadvantage in terms of securing financial aid, credit facilities and investments. Despite extending an invitation to the opposition party to assume responsibility for managing the economic situation, their acceptance of such responsibility has not materialized.
During that critical period, President Wickremesinghe assumed the challenging responsibility and presented a clear policy direction. He underscored his commitment to implementing projects with a long-term nation-building focus, rather than pursuing short-term, popular initiatives.
This approach, as mentioned earlier, may not immediately translate into widespread relief for the populace. The President has actively worked to alleviate the hardships faced by marginalised segments of the population.
Various impediments addressed
Simultaneously, a comprehensive national economic development program has been set in motion. This year’s budget has addressed various impediments that have historically hindered the country’s progress, thereby establishing a foundational framework to propel the nation towards sustainable development.
While there may be assertions that the people have not tangibly benefited from the 2024 Budget, it is crucial to note that significant concessions have indeed been extended to the public.
These include salary increments for Government employees, augmented allowances for the elderly and disabled, and provisions for education, health, regional development, and granting free land rights. It is imperative to recognise that funding these initiatives necessitates a robust revenue stream for the Government.
The budgetary allocations and concessions are designed to address the diverse needs of the populace while also ensuring the financial sustainability of these welfare programs.
Maintaining the equilibrium between expenditure and income is imperative.
Under the current circumstances, augmenting relief efforts necessitates an increase in taxation. It is crucial for the public to comprehend this fiscal mechanism. Despite salary increments by Rs. 10,000, certain factions persist in rallying for additional raises, a stance that, when examined pragmatically, appears more aligned with anti-Government sentiments.
It is essential for the citizens of our nation to recognise the practical limitations associated with such demands.
We anticipate the disbursement of the second installment from the IMF by December.
Beyond the financial inflow, the paramount significance lies in the trust instilled by other lenders through this transaction.
This trust not only facilitates dealings with additional international financial institutions but also serves as a crucial avenue for engagement.
It is noteworthy that upon the successful conclusion of our debt restructuring process, we are poised to resume all stalled development activities across the country.
The ongoing process of restructuring financially unsustainable Government institutions is currently in progress. Additionally, efforts are under way to reorganise institutions facing challenges in revenue collection. This includes initiatives to minimise corruption within entities such as the Customs, Excise Department, and Income Tax Department, transforming them into entities dedicated to the formal collection of funds for the Government.