Development Banks and Loan Schemes State Minister Shehan Semasinghe assuming duties yesterday said the Government will announce its plans to tackle indebtedness once the reports have been analysed. He stressed the Government will stick to President Gotabaya Rajapaksa’s election manifesto to give relief to people struggling with microfinance debt and other loans.
Under former Finance Minister Mangala Samaraweera the previous administration in 2018 allocated an estimated Rs. 1.25 billion to write off loans up to Rs. 100,000 given to women in 12 drought-affected districts. The Government had planned to absorb unpaid microfinance debt incurred by 45,139 women in the North, East and North Central Provinces last year.
“We have to admit our economy is in bad shape. Entrepreneurs are suffering due to economic hardships. We have commenced preliminary discussions with public and private banks on the instructions of Prime Minister Mahinda Rajapaksa. During the discussion we requested heads of banks to submit reports on the loan commitments taken on by the banks. Once those reports are handed over we will be able consider how best to proceed,” Semasinghe said.
He opined the goal of the Government is to write-off as much microfinance debt as possible. According to Semasinghe, debt incurred by loans and microfinance is one of the key reasons for underperformance in the small and medium enterprise sector.
Even though the Government last week announced a wide ranging stimulus package, which included slashing VAT to 8%, Semasinghe acknowledged that the tax reductions will not help those affected by microfinance debt.
“Tax reduction will encourage entrepreneurs and public to engage in more economic actives, which will boost the economy. We will make sure that benefits will reach everyone. This will not be a one-sided story, everyone will benefit.”