SRI LANKA UPDATE | 14 – 20 JULY 2023

The Economy:

The European Commission proposes a 4-year extension of the Generalised Scheme of Preferences Plus (GSP+) scheme for Sri Lanka – In the midst of ongoing negotiations for the European Union’s (EU) new GSP+ arrangement, the European Commission has proposed a four- year extension of the GSP+ for Sri Lanka. Recognizing the relevance of the GSP+ system for Sri Lankan exporters, the EU delegation in Sri Lanka highlighted the importance of the EU as one of the country’s main trading partners. The EU recognizes the usefulness of the GSP+ scheme in facilitating commerce between the two parties, with over EUR 3.2 billion in Sri Lankan exports to the EU alone in 2022. While negotiations for the new GSP+ arrangement continue, the European Commission proposed extending the current scheme for another four years, until December 31, 2027, to ensure that countries such as Sri Lanka do not lose preferential access to the EU market during this interim period.

Tax revenue in 1H of 2023 nearly doubles to LKR 697 billion – Boosted by higher VAT, tax income collection quadrupled to LKR 697 billion in the first half of this year. Commissioner General of the Inland Revenue Department (IRD) stated that collection from January to June 2023 was LKR 696.94 billion, an increase from Rs. 361.8 billion the previous year. This represents a 92.5 per cent or LKR 335 billion increase. The Commissioner General attributed the favourable development to decisive improvements in tax policy, the steady recovery of the economy and the effectiveness of the IRD’s work.

EU, Agence Française de Development (AFD) and World Bank (WB) to support strengthening Public Finance Management (PFM) in Sri Lanka – The Sri Lankan government, the WB, the EU, and the AFD have signed financial agreements to help boost Sri Lanka’s PFM. The EUR 9.8 million grant for PFM is intended to help improve economic governance, transparency and accountability in the utilisation of public funds. This project will use technology to develop and scale up the government’s nascent e-procurement system (e-GP) and strengthen the institutional capacity of Sri Lanka’s National Audit Office, both of which are important steps toward improving efficiency and transparency in public procurement and external audits.

Politics & Policy:

Anti-Corruption Bill passed with amendments in Parliament – The landmark Anti-Corruption Bill, which defines methods to eliminate corruption and vulnerability by enhancing fiscal transparency and public financial management, was passed in Parliament with amendments, but without a vote. The Justice, Prisons Affairs, and Constitutional Minister first introduced the Bill to Parliament on April 27. In the midst of the ongoing economic crisis, negotiations for a rescue package with the International Monetary Fund (IMF) led to the decision.

Cabinet clears amendments to Inland Revenue Act for Parliamentary approval – The Cabinet of Ministers agreed to publish the Bill drafted to alter the Inland Revenue Act in the Government Gazette and table it in Parliament for approval. On June 28, the Cabinet approved amending the Inland Revenue Act to revise the income tax rate levied on income earned by the Employee Provident Fund (EPF), Employee Trust Fund (ETF), Pension Fund or Gratuity Fund, and similar funds investing in Treasury Bonds to facilitate the local debt optimization process. The draftsman’s tireless efforts culminated in the completion of the Inland Revenue Bill, which has

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now been approved by the Attorney General.

National Chamber of Commerce of Sri Lanka (NCCSL) promotes Sri Lanka and Pakistan economic cooperation – The NCCSL successfully concluded a symposium on Bilateral Trade and Investment between Sri Lanka and Pakistan. Pakistani High Commissioner Major General (Rtd.) Umar Farooq Burki was assisted by High Commission Colombo Trade and Investment Attaché Asmma Kamal to facilitate the event. The Sri Lankan High Commissioner designate to Pakistan Admiral (Rtd.) Ravindra Wijegunaratne noted that the existing cordial relationship between the two nations can be expanded to a higher level. There were discussions on trade, investment, and export/import potential. The attendees were able to freely communicate with the High Commissioner and his officers and discuss trade and investment opportunities in Pakistan.

MAS marching in the midst major crisis in the apparel industry – MAS Holdings, South Asia’s largest apparel exporter, reaffirmed its dedication to Sri Lanka, stating the Group will increase exports with a slew of new strategic initiatives of over USD 20 million in investment during the industry’s most difficult period. Apparel exports from Sri Lanka have declined this year as a result of a challenging 2022 2H performance, which has forced the industry to run with an unprecedented 30 per cent redundant capacity.

South Africa and Sri Lanka to engage in bilateral trade and investment sessions – The NCCSL will host a bilateral trade and investment meeting between Sri Lanka and South Africa at the Chamber Auditorium. The Special Guest Speaker will be Sandile Edwin Schalk, High Commissioner of South Africa to Sri Lanka, and the session will be assisted by the Commercial Counsellor of the South African High Commission. The overarching goal is to review the current trade climate, investment opportunities/services, policies, and other critical issues in order to promote and strengthen bilateral trade and investment between Sri Lanka and South Africa.

Disclaimer – This advisory is intended for circulation among JAAF stakeholders only. Please do not circulate or share on social media.

This Advisory, written for our partners interested in developments in Sri Lanka against the backdrop of the current crisis, is an update on the one issued last week. This document summaries developments covering significant political and economic events. The Advisory includes economic, political, social and governance perspectives. It draws on news reports, analyses, Government announcements and documents, and from other sources that we may be in contact with or have access to.

This Advisory was prepared by the Strategic Communications Unit of Adfactors PR Lanka. For inquiries, contact