The Ministry of Finance proposed to restructure the superannuation funds, established as social security funds in Sri Lanka to achieve debt sustainability. There are over 170 superannuation funds in the country subjected to DDR that lend nearly LKR 3.9 trillion to the government as of the end of 2022.
It accounted for nearly 26% of the total loans taken by the government through T-Bills and T-Bonds. Under the DDR, it is expected to reduce the interest rate for the loans obtained by the government and request more time to settle those loans.
Further, the government proposed a 30% tax for funds that do not participate in the DDR from the current tax rate of 14%. It was challenged in court, which was dismissed, allowing the government to amend the Inland Revenue Act and proceed with the proposal.
The deadline for completion of the DDR was postponed for the third time delaying the DDR from the stipulated time. The IMF team expected to start their review of Sri Lanka’s progress in achieving debt sustainability starting from 15th September.