The government of Sri Lanka has announced that the freeze on parate action against Micro, Small, and Medium Enterprises (MSMEs) will be extended beyond the original deadline of 15 December 2024. This decision was made during a key meeting chaired by Deputy Minister of Finance and Planning, Dr. Harshana Suriyapperuma, with representatives of MSME organizations. The move aims to provide much-needed relief to businesses facing financial challenges.
Extension to Be Formalized Through Parliamentary Act
During the meeting, it was confirmed that the freeze on parate action will be extended for an additional six months through a Parliamentary Act. This measure is expected to offer critical breathing room for MSMEs struggling with debt repayment. The decision comes in response to persistent lobbying by organizations like the Ceylon Federation of MSMEs and the National Trade Protection Council.
Relief for MSMEs Facing Financial Strain
The Ceylon Federation of MSMEs welcomed the announcement, stating that it would offer significant relief to businesses in dire financial situations. The group also emphasized the importance of continued collaboration between the government, the Central Bank, and other stakeholders to ensure that this relief is effectively implemented.
Dr. Suriyapperuma expressed optimism that the extension would benefit a greater number of MSMEs, allowing them to stabilize their operations and recover from recent economic shocks.
Addressing Non-Performing Loans and Past Auctions
One of the key issues discussed during the meeting was the situation of businesses and properties that have fallen into non-performing loan (NPL) status. Many businesses have faced severe challenges due to the economic impacts of the COVID-19 pandemic and the Easter Sunday attacks. Attendees called for measures to address these challenges, including debt restructuring at lower interest rates.
Another major topic was the fate of properties and businesses that banks had auctioned off between 2019 and 2024. It was suggested that these assets should be returned to their original owners, accompanied by a structured debt repayment plan. The Deputy Minister urged the Central Bank and the Ministry of Finance to collaborate on creating a streamlined process for this initiative.
Creating a Supportive Environment for Entrepreneurs
The meeting also emphasized the need to build a sustainable and supportive environment for entrepreneurs and MSMEs in Sri Lanka. This would include initiatives to foster long-term business growth and resilience. One key suggestion was to establish a data system to identify and track the challenges faced by MSMEs, ensuring that future policies are better tailored to their needs.
Committee to Tackle MSME Challenges
To further support domestic MSMEs, attendees proposed the creation of a dedicated committee. This committee would include representatives from trade unions, the Central Bank, the Ministry of Industry, and relevant financial institutions. Its primary role would be to address and resolve issues faced by MSMEs. The proposal received widespread support from those present.
Tax Relief and Payment Flexibility
Taxation and tax arrears were another significant focus of the meeting. Representatives from MSMEs urged the government to remove penalties on overdue taxes and to provide flexible payment options for arrears, including contributions to the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF). These measures would help reduce the financial burden on small businesses, enabling them to focus on growth and recovery.
Looking Ahead
The extension of the parate action freeze is a critical step toward alleviating the financial stress on MSMEs. However, the success of this measure will depend on effective implementation and coordination among stakeholders. The government’s commitment to creating a supportive environment for entrepreneurs and small businesses reflects its recognition of the vital role MSMEs play in driving economic growth and stability in Sri Lanka.
As the government works on finalizing these initiatives, the collaboration between policymakers, financial institutions, and MSME representatives will be key to ensuring that these businesses can not only survive but thrive in the long term.
