Sri Lanka is preparing to introduce a new relief package aimed at supporting small and medium enterprises (SMEs) as part of a broader effort to address ongoing financial challenges faced by businesses. Deputy Finance Minister Harshana Suriyapperuma announced that the suspension of the Parate law, which applies to all borrowers, will conclude on December 15, 2024.
Speaking to Parliament on Friday, Suriyapperuma revealed that discussions had been held with the Central Bank regarding the law’s impact and that efforts were underway to address the financial distress among SMEs. “We have gathered data and analyzed the loan stock to assess the extent of difficulties businesses are facing. After thorough analysis, we are now preparing a mechanism to ensure the maximum benefit is extended to the largest number of SMEs,” he said.
The government’s relief package aims to support businesses that are struggling due to bad loans, many of which have been outstanding for over five years. The analysis also revealed a significant number of loans issued before the 2019 Easter Sunday bombings, which left many businesses grappling with financial losses.
Sri Lanka has been rolling out a series of debt relief measures since the Easter Sunday attacks and the COVID-19 pandemic, which disrupted consumer demand and led to further economic challenges. In addition, a sharp reduction in consumer demand, coupled with interest rate hikes and tax increases to cover public servant salaries, has added to the financial strain on businesses.
The government is currently finalizing a mechanism to present the relief package to the Cabinet in the coming days. This initiative aims to offer timely assistance to SMEs and provide them with the necessary support to navigate the economic difficulties exacerbated by recent crises.
