The Hon. Ravi Karunanayake

¶ 01 Hon. Presiding Member, thank you for the opportunity to add a few words.

¶ 02 As the previous speaker noted, this agreement is not a bag we just signed and left; it is about moving forward. We are pleased that the earlier framework is being carried ahead. If we want the country to move forward, we must stand by policy and remember history.

¶ 03 On 12 April 2022, under President Gotabaya Rajapaksa’s Government, Sri Lanka attempted to pay USD 178 million to China and USD 78 million ISB interest but failed, declared a so-called “soft landing” default, and violated the Constitution. Under Article 148, Parliament holds full authority over revenue, expenditure and debt management; no such proposal came to Parliament. Otherwise, it is illegal and unconstitutional. Sovereign default should have been declared by Parliament. Oversight Committees, the then Opposition and Members overlooked that.

¶ 04 Now there is no point proposing new alternatives; this is a done deal, and it helps the country move forward. Whatever others said earlier, finally all reconciled that this is the only way. The Government of Hon. Ranil Wickremesinghe bore the burden, resolved crises—queues for gas, fuel, medicine, milk powder. Bangladesh still struggles with similar issues. So, taking this agreement forward is beneficial.

¶ 05 A brief timeline: On 1 September 2022, the IMF and Government reached a Staff-level Agreement. On 20 February 2023, the IMF team came to Colombo to discuss restructuring and sustainability. On 20 March 2023, the IMF approved the programme; Parliament debated and voted; the EFF of about USD 3 billion (SDR 2.286 billion) over 48 months commenced.

¶ 06 Debt restructuring had three stages. First, Domestic Debt Restructuring on 1 July 2023—imperfect but the least-impact solution. Second, bilateral and multilateral: the Official Creditor Committee co-chaired by Japan and India under France’s auspices confirmed agreement on 26 June 2024. Third, commercial creditors: ISB holders and China Development Bank. On 19 September 2024—two days before the Presidential Election—agreement in principle was reached; critics called it an election trick, but it proved a solid deal. The Government then changed, and on 1 November 2024, the new Government informed the IMF and Hamilton Reserve Bank it would pursue the same process. On 12 December 2024, Macro-linked Bonds restructuring concluded.

¶ 07 Had there been no agreement, the country would have faced instability, investor flight, social unrest, humanitarian crisis and strained international relations. With restructuring, benefits include restored market access, stability, IMF support, improved credit ratings and growth. The then President had to carry the burden.

¶ 08 At crisis peak: total debt USD 100 billion (domestic 57.3, external 43.2; bilateral 10.6, multilateral 11.6, balance ISBs). Debt sustainability was the core challenge. Negotiations sought the least harmful path. No government had faced such before. As a former Finance Minister, I know engaging the IMF is not easy; they may have their say, but we must have our way.

¶ 09 Once the agreement is in place, now you must get the economy moving. Reduce interest rates quickly; lower the Statutory Reserve Ratio effectively to expand lending; aim for single-digit lending rates to spur growth. Excessive monetary tightening for inflation control alone will cause contraction; we need supply-side management. Create competition rather than administratively fixing prices. On the external account, be cautious about vehicle imports; sudden large FX outflows can depreciate the rupee and trigger cost-push inflation. Phase controls prudently.

¶ 10 Increase exports, especially services, to raise FX above USD 13-14 billion. Encourage FDI with targeted incentives—IMF constraints notwithstanding—and reduce excessively high income tax burdens; raise the PAYE threshold to at least Rs. 200,000 to spur exports and investment.

¶ 11 This journey must proceed correctly; we cannot let the economy fall again. Advancing this framework is everyone’s responsibility. I wish all a Merry Christmas and a prosperous 2025.