****
The new measure mainly targets the Employee Provident Fund (EPF), a mandatory pension fund for private and semi-government sector workers. The fund, which covers 2.5 million workers, currently has over 3.4 trillion rupees ($US10.5 billion).
To avoid payment of the new 30 percent tax rate and maintain the EPF’s current 14 percent tax rate, the entire fund must be invested in treasury bonds from 2024 to 2032 at lower interest rate payments. According to Central Bank governor Nandalal Weerasinghe, this will only be about 9 percent, irrespective of the market rate.
These brutal measures are in line with International Monetary Fund’s domestic debt optimization (DDO) and other austerity demands, previously agreed to and imposed by the government in exchange for a $US3 billion bailout loan.
Presenting the bill to the parliament on Wednesday, President Ranil Wickremesinghe, who is also the finance minister, said the measure must be passed “to ensure debt sustainability.” An IMF team is arriving in Sri Lanka on September 14 to review implementation of its austerity measures before the next tranche of a bailout loan is approved.
In April 2022, the then Rajapakse government, amid a historic collapse of the Sri Lankan economy, defaulted on its foreign loans. In line with IMF directives, the Wickremesinghe government agreed to restructure its domestic debt before negotiating any restructuring of its foreign obligations. The government’s domestic debt is distributed among treasury bills and bonds held by local banks and individual dealers, the Central Bank, and superannuation funds.
The government has singled out superannuation funds, particularly the EPF, which is the country’s largest fund, to reduce the debt value in treasury bonds, while excluding commercial banks and other corporate sector financial operators.
According to the Verite Research think tank, “Sri Lanka is the only country in the world (based on published data) that is putting the entire burden of local currency bond restructuring exclusively on the social security funds of workers.” The government, it said, has offered a binary choice to present the measure as a “voluntary” debt exchange to “overcome the unconstitutionality of this unequal treatment.”
------ Post added on Sep 17, 2023 at 11:59 AM
https://www.wsws.org/en/articles/2023/09/12/tuho-s12.html
------ Post added on Sep 17, 2023 at 12:00 PM
The new measure mainly targets the Employee Provident Fund (EPF), a mandatory pension fund for private and semi-government sector workers. The fund, which covers 2.5 million workers, currently has over 3.4 trillion rupees ($US10.5 billion).
To avoid payment of the new 30 percent tax rate and maintain the EPF’s current 14 percent tax rate, the entire fund must be invested in treasury bonds from 2024 to 2032 at lower interest rate payments. According to Central Bank governor Nandalal Weerasinghe, this will only be about 9 percent, irrespective of the market rate.
These brutal measures are in line with International Monetary Fund’s domestic debt optimization (DDO) and other austerity demands, previously agreed to and imposed by the government in exchange for a $US3 billion bailout loan.
Presenting the bill to the parliament on Wednesday, President Ranil Wickremesinghe, who is also the finance minister, said the measure must be passed “to ensure debt sustainability.” An IMF team is arriving in Sri Lanka on September 14 to review implementation of its austerity measures before the next tranche of a bailout loan is approved.
In April 2022, the then Rajapakse government, amid a historic collapse of the Sri Lankan economy, defaulted on its foreign loans. In line with IMF directives, the Wickremesinghe government agreed to restructure its domestic debt before negotiating any restructuring of its foreign obligations. The government’s domestic debt is distributed among treasury bills and bonds held by local banks and individual dealers, the Central Bank, and superannuation funds.
The government has singled out superannuation funds, particularly the EPF, which is the country’s largest fund, to reduce the debt value in treasury bonds, while excluding commercial banks and other corporate sector financial operators.
According to the Verite Research think tank, “Sri Lanka is the only country in the world (based on published data) that is putting the entire burden of local currency bond restructuring exclusively on the social security funds of workers.” The government, it said, has offered a binary choice to present the measure as a “voluntary” debt exchange to “overcome the unconstitutionality of this unequal treatment.”
------ Post added on Sep 17, 2023 at 11:59 AM
https://www.wsws.org/en/articles/2023/09/12/tuho-s12.html
------ Post added on Sep 17, 2023 at 12:00 PM
