Analysis: Shocks and missteps: how Sri Lanka's economy ended in crisis

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      COLOMBO, Feb 25 (Reuters) - In late November 2019, after winning Sri Lanka's presidential election and months ahead of a parliamentary ballot that would again test his popularity, Gotabaya Rajapaksa gathered his cabinet and made good on a campaign promise to slash taxes.

The move, which included a near-halving of value added tax, blindsided some top central bank executives.

"The tax cuts just after the elections came as a surprise," P. Nandalal Weerasinghe, the Central Bank of Sri Lanka's (CBSL) Senior Deputy Governor until September 2020, recalled.

"There was not any kind of a consultative process," added Weerasinghe, who spent 29 years at the CBSL before retiring.

The economic argument for the cuts was simple - to free up spending and boost Sri Lanka's ailing finances.

A similar move by an administration led by Gotabaya's older brother Mahinda had helped drive the country's economic recovery after a decades-long civil war ended in 2009, a ruling party member close to the Rajapaksas said.


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