IMF, Debt Restructuring, and the Monetary Sector
1) Ranil Wickremesinghe
- IMF Alignment: Fully aligned with IMF proposals, already suggesting tax reforms.
- Debt Sustainability: Committed to Debt Sustainability Analysis (DSA) targets.
- Inflation: Plans to sustain inflation at 5%, down from 0.5% in Aug 2024.
- Treasury Bonds: Maintain Treasury Bonds below 7.5% of GDP (cf. 7% in 2023).
- Monetary Policy: Central Bank prohibited from printing money to cover the budget deficit.
- Tax Revisions: With the economy stabilizing, has secured IMF consensus to revisit tax conditions. Proposes increasing the gap between current tax slabs and adjusting tax percentages to alleviate the tax burden.
2) Sajith Premadasa
- IMF Alignment: Committed to DSA targets but seeks amendments to ensure relief for the poor.
- Debt and Interest Rates: Advocates low, stable interest rates and a competitive forex rate.
- IMF Reforms with Amendments: Will continue IMF reforms but amend them to reduce the burden on professionals and support those below the poverty line.
- Support for MSMEs: Proposes dedicated loan departments for MSMEs in all banks and the extension of Parate law suspension.
- Equitable Tax Structure: Seeks to reform the tax structure to make it more equitable, staying within IMF targets but focusing on reducing the burden on professionals and those below the poverty line.
3) Anura Dissanayake
- IMF Renegotiation: Proposes a renegotiation of IMF fiscal consolidation and poverty proposals.
- Debt Sustainability: Suggests creating an alternative DSA for restructuring and performing a detailed audit of foreign loans.
- Monetary Policy: Aims to stabilize policy interest rates and establish new banks to support MSMEs and long-term financing for entrepreneurs.
- Relief Measures: Introduce new financing schemes and investment plans to boost economic activity and protect the poor.
- Tax and Spending Management: Advocates for new proposals on efficient tax administration to align with an alternative debt sustainability framework, aiming to ease the tax burden on the public.
Each candidate shares a commitment to IMF reforms but differs in their approach to debt restructuring and fiscal policies, with Wickremesinghe focused on strict adherence, Premadasa seeking balanced reform with relief for the poor, and Dissanayake advocating for broader renegotiation to protect vulnerable populations.
Capital Markets
1) Ranil Wickremesinghe
- National Wealth Fund: Proposes establishing a National Wealth Fund by pooling the budget surplus and profits from government institutions, which will be invested in both local and international stock markets.
2) Sajith Premadasa
- SME Equity Platform: Plans to create local exchanges within the Colombo Stock Exchange (CSE) to help SMEs raise equity capital, offering them better access to financial markets.
3) Anura Dissanayake
- Tax Incentives for IPOs: Aims to provide tax incentives for companies that go public by listing their shares in an Initial Public Offering (IPO).
Each candidate focuses on enhancing capital market participation, with Wickremesinghe targeting institutional investments, Premadasa supporting SME access, and Dissanayake promoting broader market engagement through tax incentives for IPOs.
Fiscal Sector
1) Ranil Wickremesinghe
- Government Payments: No arrears of government payments will be withheld for over three months.
- Tax Reforms: Plans to abolish interim taxes within two years.
- Budget Surplus: Targets a primary budget surplus of 2.3% of GDP by 2025-2032 (cf. 0.6% in 2023).
- Public Debt: Aims to reduce public debt to 95% of GDP by 2032 (cf. 111% in 2023).
- Financial Needs & Foreign Reserves: Gross financial needs to drop to 13% of GDP by 2027-2032 (cf. 27.8% in 2023), and foreign reserves to increase to USD 15.1bn by 2028 (cf. USD 5.6bn in 2024).
2) Sajith Premadasa
- Excise Taxes: Adjust excise taxes on cigarettes, alcohol, and casinos to fund tax reductions.
- Personal & Corporate Income Tax: Proposes a progressive personal income tax starting at 1% and reaching 24% for up to ~half a million monthly. Corporate income tax on exports to be reduced by 6%.
- VAT & Government Spending: Reduce VAT to 15% once the tax base is widened, with essential items made VAT zero-rated. Reforms to state-owned enterprises (SOEs) will cut government spending and fund a social safety net.
3) Anura Dissanayake
- Personal Tax Exemption: Proposes increasing the monthly personal tax exemption limit to LKR 200,000.
- VAT Reforms: Plans to streamline VAT collection using POS systems, introduce varying VAT rates for goods, and exempt essential food and education-related items.
- Export Incentives: Expedite export VAT rebates, diversify exports to reach USD 45bn in 5 years, and increase aquatic exports by 25% by 2028.
- Public Spending: Allocate 3% of GDP to healthcare and 6% to education.
Each candidate proposes distinct fiscal strategies, with Wickremesinghe focusing on reducing debt and building reserves, Premadasa on reforming taxes and SOEs for social welfare, and Dissanayake prioritizing VAT reform, export diversification, and increased public spending on health and education.
Agricultural Sector
1) Ranil Wickremesinghe
- Support for Farmers: Provides seeds, fertilizer, and modern machinery for advanced farming.
- Supply Chain: Establishes a direct supply chain for purchasing agro-products from farmers.
- Subsidies & Pricing: Offers LKR 25,000 for fertilizer and sets a fixed paddy price each season.
- Land & Fisheries: Allocates 300,000 acres of state land for export crops and aims to double fishery exports by upgrading fishing boats.
- Dairy & Water Projects: Plans to increase dairy production to 820 million liters by 2035 and expedite water infrastructure projects for agriculture by 2030.
2) Sajith Premadasa
- Modernization: Proposes a technology-driven agricultural modernization program.
- Post-Harvest & Loans: Establishes climate-controlled warehouses to reduce post-harvest losses and waives existing farmer loans while ensuring credit access.
- Fertilizer & Insurance: Offers fertilizer at LKR 5,000 per 50kg bag and provides insurance for farmers affected by losses or animal incursions.
- Export Incentives: Introduces tax incentives for agricultural exports and modern farming techniques.
3) Anura Dissanayake
- Financial Support: Creates a development bank offering collateral-free crop loans and supports the creation of 50,000 agri-entrepreneurs.
- Agricultural Export Villages: Plans to establish 1,000 agricultural export villages.
- Animal Farms: Proposes 20,000 animal production farms managed by women and youth.
- Machinery & Subsidies: Introduces agricultural service centers for machinery rentals and provides subsidies for fertilizers and other inputs.
- Fisheries Support: Offers financial aid, technical assistance, and fuel subsidies for small-scale fisheries.
Each candidate emphasizes modernizing agriculture, with Wickremesinghe focusing on infrastructure and subsidies, Premadasa on technology and loan relief, and Dissanayake on entrepreneurship and financial support for farmers and fisheries.
Information Technology Sector
1) Ranil Wickremesinghe
- Digital Economy Growth: Plans to grow the current USD 5bn digital economy to USD 15bn, with a focus on digitizing public services.
2) Sajith Premadasa
- Tax Reforms: Proposes removing unfair taxes on IT businesses and implementing a fair, attractive tax policy. Also aims to minimize taxes on IT-related electronic equipment imports.
3) Anura Dissanayake
- Workforce Expansion & IT Economy: Aims to expand the IT workforce to 200,000 by 2030 and achieve a USD 5bn IT economy by the same year.
Each candidate emphasizes IT sector growth, with Wickremesinghe focusing on expanding the digital economy, Premadasa on tax reforms, and Dissanayake on workforce development and IT sector value.
Energy Sector
1) Ranil Wickremesinghe
- Cost-Based Pricing: Proposes cost-based prices for electricity and fuel, with the Treasury covering losses of the CEB or CPC.
- Renewable Energy: Aims to achieve 70% of power supply from renewable sources, including hydrogen.
- Green Energy Hub: Plans to transform Sri Lanka into a Green Energy Hub, exporting energy to India and neighboring countries.
2) Sajith Premadasa
- Renewable Energy: Targets exceeding 70% renewable energy by 2030 and plans to power 1 million homes with solar within 5 years.
- Wind & Smart Grid: Prioritizes a 1,200MW offshore wind project and aims to transform the national power grid into a Smart Grid within 5 years.
- LNG Transition: Modernizes existing thermal power plants to operate on LNG within 2 years.
3) Anura Dissanayake
- Renewable Integration: Plans to integrate 2,500MW of renewable energy into the national grid.
- Energy Infrastructure: Revise tariffs for LPG and oil and facilitate LNG imports for 1,500MW of thermal power.
- Affordability: Proposes instalment plans for electricity connection fees for small households.
Each candidate emphasizes renewable energy, with Wickremesinghe focusing on green energy exports, Premadasa on solar and wind energy, and Dissanayake on integrating renewable sources into the grid and ensuring affordability.
Transportation and Infrastructure
1) Ranil Wickremesinghe
- Electric Vehicle Infrastructure: Establishes charging centers to promote electric vehicle usage.
- New Road Network: Plans to design a future-proof road network.
- Airport & Port Expansion: Expands Palali International Airport by 2026, establishes Hingurakgoda International Airport, and upgrades Colombo and Trincomalee Harbours with Indian assistance.
2) Sajith Premadasa
- Modern Public Transport: Proposes a multi-faceted system with modern buses, LRT, and railway electrification, alongside Intelligent Transport Systems.
- Railway & Expressways: Focuses on modernizing railways and improving expressway efficiency with a Multi-Lane Free Flow system.
- Industrial Zones: Plans to create 25 new state-of-the-art industrial zones.
3) Anura Dissanayake
- Public Transport Focus: Aims to meet 70% of transportation needs through public transport within 5 years.
- Rail & Road Development: Renovates 50,000km of rural roads and upgrades railway lines to two or three tracks, with plans for electric trains.
- Rapid Transit Systems: Introduces MRT, LRT, and Bus Rapid Transit (BRT) systems in populated areas.
Each candidate emphasizes modernizing transport infrastructure, with Wickremesinghe focusing on EV infrastructure and ports, Premadasa on public transport and industrial zones, and Dissanayake on public transport expansion and rural road development.
Tourism, Gem & Jewelry Sector
1) Ranil Wickremesinghe
- Tourism Growth: Plans to enhance infrastructure to attract 5 million tourists in 5 years.
- Increase Tourist Spending: Aims to increase per tourist income to USD 500 from the current USD 150.
2) Sajith Premadasa
- Visa Reforms: Proposes annulment of the “VFS visa agreement” and introduces a new low-cost visa system. Also suggests visa-free entry for citizens of 100 countries for up to one month.
- Gem & Jewelry Sector Reforms: Proposes turnover-based tax for the gem industry, duty waivers for legitimate jewelers, VAT exemption on foreign currency sales, and discontinuation of VAT/SSL on gemstone imports to boost value addition.
3) Anura Dissanayake
- Tourism Promotion: Plans a marketing campaign to attract Free Independent Travelers and transit travelers.
- Gem Industry Development: Proposes an international gem center in Rathnapura and the creation of a “Gem Industry Workers Protection Authority” to improve labor conditions. Introduces a taxation system for the gem and jewelry industry.
Each candidate emphasizes boosting tourism and reforming the gem and jewelry sector, with Wickremesinghe focusing on tourist arrivals and spending, Premadasa on visa reforms and tax incentives, and Dissanayake on targeted marketing and labor protections in the gem industry.
Social Security Net
1) Ranil Wickremesinghe
- Poverty Reduction: Aims to reduce low-income hardships to 10% in 5 years.
- Housing: Plans to provide land ownership for 2 million people and introduce concessional loans for middle-class and low-income housing. Focus on multi-story apartments in cities and land ownership for plantation workers.
- Public Sector Support: Proposes a LKR 25,000 monthly cost of living allowance for public employees and salary increments, with the lowest salary set at LKR 55,000.
- Professional Incentives: Offers tax-free incentives to professionals.
2) Sajith Premadasa
- Senior Citizen Support: Proposes a 15% interest rate on senior citizen savings.
- Housing Loans: Plans low-interest loans for the fishing community and a special two-generation housing loan scheme.
- Public Sector Benefits: Suggests raising the minimum government salary by 24% and increasing the monthly living allowance to LKR 25,000.
- Land Ownership: Proposes granting freehold deeds to government land permit holders.
3) Anura Dissanayake
- Financial Assistance: Proposes a LKR 10,000 monthly allowance for low-income families and LKR 5,000 for senior citizens needing assistance.
- Pension and Disability Support: Plans to establish a pension fund as an insurance scheme for emergencies, enforce a 3% job quota for people with disabilities, and provide chronic illness allowances.
- MSME Relief: Offers a concessionary bank to help MSMEs with loan relief.
Each candidate emphasizes strengthening the social safety net, with Wickremesinghe focusing on housing and public sector support, Premadasa on senior citizen benefits and housing loans, and Dissanayake on targeted financial aid and pension reforms.
Reviewing the Promises
1) Ranil Wickremesinghe
- Public Sector Salaries: Increasing salaries could strain government finances, given the existing high costs of the public sector.
- Housing and Loans: Concessional loans for housing and MSMEs may disrupt credit markets and impact overall efficiency.
- Tax Incentives: Offering tax-free incentives to professionals might create unfairness in the tax system, potentially demotivating other taxpayers.
2) Sajith Premadasa
- Tax Reductions: Lowering personal and corporate taxes, and exempting VAT, could reduce government revenue.
- Excise Taxes: Increased taxes on tobacco and alcohol might drive consumers to illicit products, further affecting revenue.
- Public Sector Salaries: Raising salaries for over a million public sector employees could exacerbate budget deficits and strain expenditure targets.
3) Anura Dissanayake
- Debt Sustainability Analysis (DSA): Proposing a new DSA could delay debt restructuring efforts and require revisiting existing agreements.
- Central Bank Independence: Government control over policy interest rates might conflict with the Central Bank’s independence and its goals.
- New Development Bank: Establishing a national development bank would necessitate acquiring new long-term capital.
- Expenditure and Tax Concessions: Significant tax concessions combined with increased spending might challenge budget targets and strain finances.
Each candidate’s proposals face potential challenges: Wickremesinghe’s policies could impact fiscal efficiency, Premadasa’s tax and salary increases might strain revenue and budgets, and Dissanayake’s plans could delay debt restructuring and affect fiscal stability.
PRMinds Admin compiled an analysis of Sri Lanka’s presidential candidates’ economic policies, using insights from Softlogic Stockbrokers, Manthri.lk, and Verité Research. The comparison highlights the candidates’ key strategies on debt restructuring, tax reforms, and capital market growth, emphasizing their plans to stabilize and revive the economy.
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