Relief Plan

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Sri Lankan Government has decided to increase pay and pension for government employees along with the removal of some taxes on food and medicine as well as providing cash for its deprived citizens as prices of essential items surge in the country already running out of foreign exchange to pay for imports. President Gotabaya Rajapaksa’s government has decided to increase salaries of public sector staff by 5,000 rupees a month ($25) from January. Finance Minister Basil Rajapaksa in a briefing in Colombo revealed the decision. He further said that about 2 million people on income support will receive 1,000 rupees each and the administration will also buy crops at higher-than-market rates from farmers who suffer losses due to a government rule to stop fertilizer use. In aggregate, the package amounts to 229 billion rupees, about 1.2% of gross domestic product, which will be re-allocated from the 3.9 trillion rupees budgeted to be spent in the whole of 2022. The government also decided not to impose any new taxes. These initiatives have been taken to calm public anger about growing prices of wheat, sugar, and milk powder, which the country is struggling to purchase from abroad as the local currency depreciates and inflates its import bill. The coronavirus pandemic has badly impacted Sri Lanka’s crucial tourism sector, fueling debate among policymakers about whether it should pursue a bailout from the International Monetary Fund or depend on bilateral emergency support from other countries. Sri Lanka has $500 million of dollar bonds maturing by January 18 and another $1 billion in July. It has $3.1 billion of foreign exchange reserves, roughly enough to pay for two months of imports, based on extrapolations from previous government calculations

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