The Hon. Ravi Karunanayake

¶ 01 We are discussing the Fiscal Strategy Statement - 2026. I believe this is the first time it is being presented, and, as I said this morning, fine-tuning elements such as required borrowing, debt burden reduction, and forward prognosis is welcome so we can plan beyond one year. Previously, budgets were compiled to match spending with anticipated revenue and borrowing capacity. Now, the framework targets 13% of GDP revenue, with about 4% for capital expenditure and a primary surplus. This is a change, so we must think in 5-year horizons.

¶ 02 I request of both Government and Opposition: let us be practical, refer to data, and avoid constant diatribe. As we stand, malnutrition exceeds 30%. This is not solved by blaming the Government alone; it has built over years. The 2024 Aswesuma beneficiary count rose from 1.7 million to 2.4 million families. Sri Lanka has around 5.7 million families and 14,022 GN divisions. Monthly household needs rose from Rs. 67,000 to Rs. 120,000. Public debt has risen by Rs. 2,913.4 billion since last September. We do not raise this to score points but to urge continuity where progress is made.

¶ 03 Youth frustration is high. If the economy grows, we support it. My plea is to grow enterprises, not Government. SMEs account for roughly 67% of GDP activity. The workforce is about 8 million; about 1 million are in Government; large corporates are few; around 3.5 million are in SMEs. Their burden is heavy.

¶ 04 On SriLankan Airlines: it has USD 175 million in ISBs; they have sought a High Court stay order. Hamilton Reserve Bank is objecting. We said then that even Rs. 20 billion would not revive SriLankan Airlines. I respect Sarath Ganegoda, but this requires more than petty steps; it needs a strong operator or consortium. The airline has three cash cows—Ground Handling, Catering, and Engineering—that can support the flying arm under the right model.

¶ 05 On SMEs, when they go to the Central Bank, they are told to go to a commercial bank; the bank tells them to clear arrears. Many have mortgaged their homes; we see families being thrown out—this is inhumane. I request the President and Government: grant a one to one-and-a-half-year moratorium for vulnerable SME borrowers. I will bring a Private Members’ Bill: the “Small and Medium and Vulnerable Borrowers’ Extraordinary Relief Bill,” covering the period from January 2020 to 31 December 2024 (COVID and default period), to allow alternative repayment arrangements. Otherwise, outstanding balances balloon and SMEs are orphaned.

¶ 06 A report titled “120 Businesses Auctioned Daily: Sri Lanka’s Economic Collapse Turns Banks Into Liquidation Machines” highlights the crisis. We also see repeated rice imports; SMEs in the value chain are being crushed.

¶ 07 On parate law, we must balance creditor rights with humane restructuring. India devoted around 10% of GDP to support SMEs; our Rs. 5 billion here or USD 50 million from ADB there is inadequate. We need a bolder approach.

¶ 08 On SVAT and deemed exporters: if the economy is normalized, withdrawal is fine, but exporters have concerns. VAT at 18% can exceed profit margins; SVAT withdrawal is not revenue in substance—it is a ~45-day cash flow timing gain, not true additional income. Please consider an automatic online VAT invoicing system; local companies can implement; Kenya has a strong model. Do not pull SVAT without addressing liquidity for deemed exporters, or you break a link in the export chain.

¶ 09 I urge the Minister to meet SME representatives urgently and consider targeted lending at 8–10% for SMEs without waiting for the Central Bank to dictate every move.

¶ 10 On Central Bank independence: independence is fine, but accountability is essential. The U.S. Federal Reserve Chair regularly answers Congress. Our Central Bank appears only occasionally to COPF or COPE. The Monetary Policy Board meets without even the Treasury Secretary present. Independence should not mean insulation from democratic scrutiny. Consider Indonesian or Thai models—no one asks for a Singapore-style exchange regime, but recalibrate the framework for accountability and coordination.

¶ 11 On the rupee: between June 13 and today, it moved from 296 to 301. Each rupee of depreciation adds roughly Rs. 50 billion to the cost; Rs. 5 means Rs. 250 billion—without building a single road or dam. Against the Sterling, depreciation is even sharper. We must work together to strengthen fundamentals.

¶ 12 On reserves and valuations: recent revaluations of reserves raise questions; similarly, SMEs would never be allowed to claim sudden asset revaluations—consistency is needed along with compassion.

¶ 13 With the IMF, we demonstrated in 2016 that one can raise revenue without harming growth. We have capable people in Sri Lanka; let them design smart measures. IMF goals can be met with growth-friendly tax design.

¶ 14 We must also prepare for 2028 when annual debt service may rise from around Rs. 300 billion-equivalent to about Rs. 800 billion-equivalent; we need investments ready now. Expedite projects like the Colombo Port joint venture areas.

¶ 15 I note BOI Chairman Arjuna Herath has flagged the USD 3.7 billion Sinopec refinery as fragile. Please resolve pending issues quickly; do not tell IMF “no incentives.” If structured properly, secure it with Cabinet approval.

¶ 16 Regarding Star Garments: a long-standing firm from 1978 in Katunayake is opening a state-of-the-art facility in Togo due to U.S. trade headwinds. Keep them here by facilitating, not pushing them out.

¶ 17 We risk losing the Russian tea and tourism markets. Why can we not accept rubles through appropriate arrangements for settlements, as others do? If the Central Bank blocks such avenues, then please hand the economy to them and we go home; fiscal authority remains with Parliament under Article 148.