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‘Japan suspended projects in SL due to loan non-payment’

29 Jul 2022

 
  • Ceylon Chamber Vice Chair Hulangamuwa says countries wait for SL to enter into an IMF programme 
  By Imesh Ranasinghe Japan has suspended all its projects in Sri Lanka due to the non-payment of loans, while Sri Lanka’s debt unsustainability has led the countries to wait on a programme by the International Monetary Fund (IMF) to offer any financial assistance, Ceylon Chamber of Commerce Vice Chairman Duminda Hulangamuwa said. In an interview with TV Derana, he said that when the Chamber met with representatives of Japan, the US, and India in Colombo, they had indicated that they could not provide any considerable amount of assistance without an IMF programme, as Sri Lanka’s debt is unsustainable. According to the Central Bank of Sri Lanka (CBSL), Sri Lanka had an outstanding liability of Rs. 621 billion in project loans obtained by Japan as at the end of December 2021. Moreover, The Morning Business exclusively learnt earlier this week that Japan-based Taisei Corporation, the contractor for the Bandaranaike International Airport’s (BIA) Terminal II project, which has been mired in complications since launch, is planning to exit Sri Lanka amidst the ongoing economic crisis. Reliable sources confirmed to us that with the Terminal II project nearing just one-fourth of its completion, the contractor is planning to exit the country, even though Airport and Aviation Services Sri Lanka (AASL) seems hesitant to let the contractor go and is in the process of convincing Taisei to stay onboard. AASL Chairman Maj. Gen. (Retd.) A. Chandrasiri stated that AASL is holding discussions with Taisei Corporation on the matter, but refused to provide further details, as both countries' involvement in the matter required confidentiality. Further, Hulangamuwa said that Sri Lanka should increase the indirect tax base rather than increasing the rates of indirect taxes such as Value-Added Tax (VAT) by considerable amounts, while removing thresholds and all VAT exemptions given to sectors other than public transport, health, and education. :I can’t think of any other way of doing this, because even though the VAT is increased to 25%, without widening the tax base, we cannot cover the deficit,” he added. He also noted that if Sri Lanka were to have at least a 1% surplus in the primary account by 2025, the Government should earn a revenue of Rs. 4 trillion compared to its current expenses. He said that direct tax rates should be increased and all tax holidays should be removed for Sri Lanka to try to achieve this Rs. 4 trillion revenue target after restructuring debt, reforming State enterprises, and cutting down unnecessary expenses. Hulangamuwa, who is the Senior Partner and Head of Tax at Ernst & Young, said that Sri Lanka will have to get rid of the welfare system that it has followed for a long time in providing services at below-cost values, before the country ends up like Libya, Afghanistan, or Lebanon.. “Countries such as Norway and Denmark have good welfare systems, but their tax rates are at 45%. Our tax rates are at about 18%, but we are providing welfare similar to them; the tax rates are too low, while the tax base is also small,” he said.   


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