The Hon. Ravi Karunanayake

¶ 01 Hon. Presiding Member, I rise to speak on the Foreign Loans (Repeal) Bill, which repeals the fragmented 1957 law and substitutes it with the Public Debt Management Act, No. 33 of 2024, the Public Financial Management Act, No. 44 of 2024, the Economic Transformation Act, No. 45 of 2024 and the Active Liability Management Act, No. 8 of 2018. This timely repeal replaces antiquated laws with modern frameworks. Yet we must move positively, which is why I speak on this Bill.

¶ 02 The backdrop is the US$ 2.9 billion IMF EFF and the need for proper implementation. The IMF Board is to decide on the fourth tranche, closely watching follow-up on the CEB’s cost-reflective pricing and whether SOE modernization/commercialization is accepted—key for moving forward.

¶ 03 I welcome Minister K.D. Lal Kantha’s presence. He is giving a new direction to the economy. I appreciate this new outlook and the move away from old dogma.

¶ 04 This is not an easy time. Coming out of bankruptcy, defaults require harsh treatment. The operation has been successful; do not let the patient die. Corrective action is essential.

¶ 05 We must address revenue, expenditure, the Budget, the fiscal gap, and borrowing. Despite earlier claims we would not borrow a cent, each year we borrow trillions. Debt sustainability, DSA, and ratings matter: Fitch “CCC”, Moody’s “Caa”, S&P still negative. There are no poor countries, only failed systems. The IMF’s current point-man is Evan Papageorgiou, successor to Peter Breuer.

¶ 06 Total debt of US$ 84 billion as at 31 Dec 2022 was our base. Secretary to the Treasury Mahinda Siriwardana said this must be the last time we borrow from the IMF. As Finance Minister then, we negotiated similarly, but at the end, changes diverted us back to trouble. Let this 17th IMF program be the last; move forward as a nation.

¶ 07 This year we must service about Rs. 4,950 billion: interest Rs. 2,950 billion and principal amortization Rs. 1,680 billion, while targeting Rs. 5 trillion in revenue—which is consumed by debt service. Household debt burdens affect 22 per cent of households; about 60 per cent have lower income than in 2022. The situation is dire.

¶ 08 We must grow revenue with a pragmatic vision. Set aside old hard-left combat manuals. The President says trade unions should speak to support the economy, not sabotage. No strikes so far. FDI so far this year is only US$ 197 million against a US$ 2 billion target. Investments today create tomorrow’s revenue. With a Rs. 5 trillion revenue target, we need more domestic and foreign investments.

¶ 09 We borrowed Rs. 2.2 trillion in 2023, Rs. 1 trillion in 2024, and Rs. 2 trillion in 2025 to finance deficits, adding Rs. 5.2 trillion to the 2022 debt stock (US$ 84 billion; Rs. 27.8 trillion). How do we hit targets with only US$ 197 million in FDI? The private sector awaits clear policies.

¶ 10 Each 1 per cent rate hike costs the Budget Rs. 160 billion; each one-rupee depreciation costs Rs. 47 billion. Policy rates cut from 8 to 7.75 per cent should spur investment and credit, but more is needed. Supply-side expansion is crucial: a 3–4 per cent lending rate reduction would make us competitive and save Rs. 600–700 billion in Budget costs, especially with c. US$ 56 billion domestic and US$ 40 billion foreign debt; lower rates aid domestic borrowing.

¶ 11 On inflation, mop up surplus judiciously—liquidity alone is not the answer. Let us target supply-side growth, not only money contraction.

¶ 12 When will we be ready to pay? On multilateral and bilateral debt, we pay about US$ 3 billion annually now; by 2028 around US$ 6 billion; by 2033, US$ 7.5–8 billion for ISBs. Despite earlier criticism of the IMF, President Ranil Wickremesinghe engaged and lifted revenue to about 15 per cent of GDP. Reversing that would jeopardize the future.

¶ 13 Being in Opposition and being in Government are different. In Government you must execute. I urge Minister Lal Kantha to brief your 159 Members with the same tuition and modernize the economy. Of 212 countries, around 170 follow this open economic model. Those who blamed the open economy for 76 years now see the path forward is the same: reduce expenditure, raise revenue, bring investment. SMEs are critical, yet have been crushed: people who borrowed at 7–8 per cent were forced to 30 per cent rates. The Central Bank must act humanely. We need to add US$ 200 million per month to meet roughly US$ 15 billion in external obligations up to 2028 and achieve a 2.6 per cent primary surplus.

¶ 14 Another issue: the public service is paralyzed by fear of FCID-type excesses and new laws—Proceeds of Crime, Anti-Corruption, Assets and Liabilities, audit surcharges. Officers are afraid to sign. We need a Public Service Discharge Act to set time-bound decision-making with protection—e.g., require decisions within hours while shielding bona fide acts. Many reforms are coming, but without de-risking officials, files will stall.

¶ 15 On Excise FL3/FL4 licenses, inconsistency created fear then and approvals now. Rationalize and move forward.

¶ 16 Undiyal market rates are around Rs. 304–305 per US$, pulling 3–4 per cent of flows abroad. With a 15 per cent tax on foreign earnings, funds bypass official channels. Legitimize and incentivize official inflows.

¶ 17 On gems and jewellery, high levies push trade to Thailand. Charge a simple US$ 1 per carat and build revenue.

¶ 18 Tourism should yield US$ 4–6 billion. Watch the US tariff regime under President Trump and the proposed UK–US FTA, which could impact us given close UK ties and firms like De La Rue, Marks & Spencer, Tesco, Primark and NEXT sourcing here. Our trade with the UK fell from US$ 1.5 billion to US$ 850 million. Engage proactively. Secure market access: pursue FTAs with Singapore and China, upgrade India FTA to ETCA, and attract deep-pocket investors from China, Japan and Korea. Open access to the US market and protect our US$ 3.1 billion exports there.

¶ 19 On taxes: we have 220,000 incorporated companies but only 11,000 pay taxes. Adopt rational taxation, curb evasion, lower the 36 per cent rate to 20–24 per cent to broaden compliance. Lending rates must be brought to 8–12 per cent to compete with India (~6 per cent), Bangladesh (~8 per cent), Nepal/Maldives/Singapore (~6–7 per cent). Support SMEs that contribute 65–70 per cent of the economy. On PAYE, raise the threshold to Rs. 250,000 given cost-push inflation.

¶ 20 With exchange control liberalization, provide tax incentives for official-channel inflows. To sustain Rs. 5 trillion this year and grow 5 per cent next year, we need durable investments.

¶ 21 Hon. Presiding Member asks to wrap up.

¶ 22 Even with no strikes, firms are closing—evidence of stress. On vehicles, revenue so far is about US$ 200 million—not the inflated claims previously made. Rationalize local government: reduce 8,800 to 4,000 members and save Rs. 1.75 billion annually; Rs. 7 billion over four years.

¶ 23 On Mattala Airport: total debt service is Rs. 41.68 billion, with Rs. 2.6 billion annual wages—commercialize operations. On SriLankan Airlines: US$ 1.2 billion (Rs. 372 billion) debt and Rs. 591 billion consolidated losses—must be commercialized with management reforms.

¶ 24 Hambantota Port’s commercialization saves Rs. 25–30 billion annually—pursue such models.

¶ 25 In public finance, account for state assets: CEB’s Rs. 4 trillion balance sheet and RDA highways worth about Rs. 2 trillion—leverage assets to reflect true national assetability.

¶ 26 On the Bill: repeal is good, replacement is better, but we lack professionalism. Appoint CFOs and Chartered Accountants; put the right people in the right places. Today, even top Parliamentary officials fear to sign—laws have handcuffed them. Motivate and protect honest public servants.

¶ 27 We must raise Rs. 5 trillion per year, growing thereafter by 5 per cent, to win the economic war, build a future for our youth, and integrate Sri Lanka with the world.

¶ 28 Thank you.