Tax reforms announced . . .
After grappling with one of the world’s highest inflation rates last month – 39 per cent – the Sri Lankan government has announced it will raise taxes to help meet the conditions for a bailout by the International Monetary Fund. The government hiked taxes on value-added products (12 per cent) and corporate income (30 per cent) and reduced personal income tax exemptions. With these reforms, President Gotabaya Rajapaksa’s 2019 tax cuts, which are partly responsible for the current collapse of Sri Lanka’s economy, are effectively reversed. The revenue generated from the increased tax rates could help Sri Lanka bring down its fiscal deficits.
Youth representation in Sri Lankan politics . . .
While the Sri Lankan Prime Minister and Finance Minister, Ranil Wickremesinghe, is putting his best foot forward to tackle the economic crisis, the tax hikes are likely to be unpopular among a public already suffering from acute shortages. Recent protests signal a crisis of governance and the need to step away from the populist nationalism propagated by the politically powerful Rajapaksa family and previous governments. The Prime Minister has invited youth groups, which are prominent in the public protests, to be a part of the solution by joining various parliamentary committees. The protests represent an unprecedented level of solidarity between traditionally opposed ethnic groups, a wedge that the Rajapaksas had widened. President Gotabaya Rajapaksa continues to defy calls for his resignation, and removing him is unlikely to be an easy task. But Prime Minister Wickremesinghe has suggested that upcoming parliamentary reforms will limit the president’s powers.
Emerging from the Rajapaksas' shadow . . .
The current crisis has been years in the making, as the Rajapaksas prioritized political and personal gains over public benefits. One of the immediate crises is shortages of food and fuel. Sri Lanka is receiving fuel and food support from India and Russia and is looking to China and Japan for monetary support. However, the island nation is also undergoing changes that could benefit the country in the long term. For example, the government is trying to boost food production domestically and has asked the country’s farmers to start cultivating rice. While there is a lack of strong political opposition, it is unclear whether the Rajapaksa clan will remain at the helm as the country undergoes these slow and sometimes painful reforms.