COLOMBO, Sept 19 (Askume) – Sri Lankans will go to the polls on Saturday to choose their next president , who will play a key role in determining the future of reforms in a country slowly emerging from its worst financial crisis in decades.
Here are five key issues facing voters:
Economy and development
A massive drop in foreign exchange in 2022 plunged the Sri Lankan economy into its worst financial recession in decades. Although the economy has taken some steps towards recovery since last year, there is still a lot of work to be done.
Inflation is back in the low single digits, primary accounts are in surplus and taxes are high. The economy is expected to grow 3% in 2024. The economy shrank by 2.3% last year and contracted by 7.3% at the peak of the crisis.
Whoever wins the election will have to ensure Sri Lanka’s economy is on a path of sustainable and inclusive growth, reassure local and international markets, attract investors and help lift a quarter of its 22 million people out of poverty.
IMF programs, debt restructuring
The four-year International Monetary Fund bailout package finalized last March has helped Sri Lanka build reserves, halt the depreciation of its currency and control rampant inflation. It also sets the stage for Sri Lanka to begin debt restructuring talks with its official lenders and bondholders.
Once the debt restructuring is complete, Sri Lanka’s total debt is expected to be reduced by US$16.9 billion. Debt restructuring is also crucial for Sri Lanka to achieve its primary balance sheet target of 2.3% of GDP by 2025, a key fiscal target set by the International Monetary Fund.
Some leading candidates have promised to revive the International Monetary Fund’s $2.9 billion programme, but public finance missteps, problems improving conditions at loss-making state-owned enterprises and dwindling foreign reserves could derail the deal.
Tax
One of the key proposals put forward by President Ranil Wickremesinghe, who is contesting re-election, is to change the current personal income tax rate of 6%-36% to ease the burden on professionals. If he wins, the proposal could be included in Sri Lanka’s next interim budget, which is expected to be released in November.
Opposition candidate Sajith Premadasa promised to cut VAT by 3%, review trade tax and vehicle tax, and provide tax relief for the elderly. He also promised to keep income tax between 1% and 24%.
Marxist theorist Anura Kumara Dissanayake has promised to abolish VAT on some health, education and food items. He said he would discuss with the International Monetary Fund to adjust his tax reduction programme and free up public revenue for tax relief and investment.
Employment and benefits
Wickremesinghe plans to attract investment and reform the manufacturing and service sectors with the aim of creating 100,000 jobs by 2025. Premadasa promised to reform labour laws to make Sri Lanka more attractive to investors, link small businesses to markets, and liberalise trade.
Dissanayake promised to restructure state companies to improve profitability, create 20,000 new teaching jobs, and create more opportunities in key sectors such as tourism.
All candidates promised to expand existing welfare programs for the poor.
Geopolitics
Sri Lanka is trying to balance relations with neighbours India and China, major lenders and investors, who also compete for geopolitical influence in the small Indian Ocean country.
Japan, India and China are the main players in Sri Lanka’s US$12.5 billion debt restructuring. The main candidates in the election have expressed a desire to continue working with these parties to boost economic ties to promote growth.
