The Hon. Chathuranga Abeysinghe - Deputy Minister of Industry and Entrepreneurship Development

¶ 01 Mr. Speaker, today we are taking up for approval Gazette notifications on orders and regulations previously made by the Cabinet, to meet statutory requirements.

¶ 02 I must note: many of these decisions were taken by the then Cabinet under prevailing circumstances. While detailed analysis is warranted, timelines require us to place these orders and regulations before Parliament now.

¶ 03 The public should understand the actual state of the economy. The current Government did not bring the economy to this state; it was the result of decisions by previous political leaderships, Cabinets, and officials. Regarding taxes: IMF notes that developed economies collect about 20–25% of GDP as taxes. IMF’s Governance Diagnostic also highlights institutional corruption as a key cause of Sri Lanka’s collapse. Under-collection, evasion facilitation, and inefficiency led to bankruptcy. In 2019, the then Government cut total tax collection to about 8.5% of GDP—an arbitrary decision—forcing heavy domestic and external borrowing at high interest, leading to crisis. Under the IMF program, revenue targets required raising collections to about 13.5% of GDP. The previous Government raised rates as a quick method. We all know tax hikes dampen growth; yet the present Government assumed office within that context. Our policy statement sets out approaches, measures, and policies; implementation takes time and will be discussed transparently. The people know adjustments must be phased, review by review, to avoid returning to the 2018–2019 low-revenue trap.

¶ 04 On today’s items: - Import and Export (Control) Act regulations: these are important. For decades, substandard imports undermined domestic industry. We will extend standardization across goods and services. Anti-dumping policy will be implemented, enabling non-tariff barriers—used by countries like the US, India, and Singapore—to protect domestic industry. A minor issue arose over which agency certifies standards for certain food items—the Sri Lanka Standards Institution or the Health Ministry unit. We advised seeking the Attorney-General’s opinion and reaching consensus, but implementation must proceed.

¶ 05 - Foreign Exchange Act order: debate continues over the 2017 law and capital parked abroad. A prior amendment allowed investors to repatriate up to USD 2 million; due to forex stress, that was restricted and is now being gradually liberalized. Cabinet agreed to raise the limit to USD 0.5 million (five hundred thousand) per the phased plan, in line with CB/Finance policy to liberalize commensurate with external stability. We have no objection; it is necessary.

¶ 06 - On informal foreign exchange remittance (hawala/hundi): during the 2019–2022 crisis, capital controls and mismanagement depleted about USD 5 billion in reserves, and remitters shifted to informal channels. Now, beyond FX control, this is an AML concern; hawala is widely recognized as a channel for money laundering. The Central Bank argues the need to regulate non-bank transfer methods. We requested the Central Bank to study international practice and systemic impacts and report; however, statutory timelines require presenting the order now. Hon. Harsha de Silva also noted that entities conducting money changing must register with the Central Bank by 30 June; as of yesterday, we understand compliance is still being assessed.