Sri Lanka’s new economic law to be presented to parliament this week

By Thomson Reuters May 20, 2024 | 3:37 AM

By Uditha Jayasinghe

COLOMBO (Reuters) -Sri Lanka’s new economic transformation law will be presented to parliament this week and will include measures to attract investors and increase productivity, the country’s state minister of finance said on Monday.

The law, approved by the cabinet last week, will mandate targets set under Sri Lanka’s $2.9 billion International Monetary Fund programme, Shehan Semasinghe told reporters.

The Economic Transformation Bill will be presented to parliament on Wednesday, along with the Public Finance Management bill also backed by the IMF.

“Both these laws are critical to ensure that Sri Lanka remains on the path to recovery and returns to sustainable growth,” Semasinghe said.

The country, which defaulted on its foreign debt in May 2022, will resume talks with bondholders “very soon”, Semasinghe said after an earlier round of talks ended inconclusively in March.

Sri Lanka plunged into its worst financial crisis in more than seven decades after its foreign exchange reserves sank to record lows in 2022.

Its economy improved after a $2.9 billion bailout was approved by the IMF last April and is expected to grow by 3% this year.

The Economic Transformation bill will legalise multiple targets set under the IMF programme, including a goal to reduce the debt to gross domestic product (GDP) ratio to 95% by 2032, and reduce debt servicing costs to 4.5% of GDP by 2027, Semasinghe added.

Sri Lanka will hold presidential elections before mid-October and opposition parties have said they could review current government policies on taxation and IMF programme targets if they win.

(Reporting by Uditha Jayasinghe; Writing by Shivam Patel; Editing by YP Rajesh and Susan Fenton)