MSMEs await Govt.’s decisive action on Parate law next week

Ceylon Federation of MSMEs President Mahendra Perera 

• Ceylon Federation of MSMEs President Mahendra Perera says members are hopeful of favourable outcome for strong pleas made in two rounds of discussions with Economic Council
• Submits six-point proposal calling for permanent overhaul of Parate law, debt restructuring of 
• Rs. 250 b and creation of National Policy for MSMEs
• Proposes appointment of dedicated panel to protect interests of 1.5 m MSMEs and 4.5 m employees
• Intends to discuss outcome and concerns with visiting IMF officials in town

By Charumini de Silva

The Ceylon Federation of Micro, Small and Medium Enterprises (MSMEs) yesterday expressed optimism that the Government will provide a favourable resolution to their appeal against the enforcement of the Parate law, as the temporary suspension is set to expire on 15 December.

The Federation revealed that its members had engaged in two rounds of discussions with key members of the Government’s Economic Council, including President’s Senior Consultant for Economic Affairs and Finance Prof. Anil Jayantha Fernando, Dr. Harshana Suriyapperuma, and Chathuranga Abeysinghe.

“We have collectively called for a permanent solution to the Parate law and its overhaul to reflect current economic realities. Our six-point proposal was also submitted and everyone is now hopeful for a favourable outcome for our pleas by next week,” Ceylon Federation of MSMEs President Mahendra Perera told the Daily FT.

He said the decision on the Parate law is expected following the Government’s policy direction announcement at the 10th Parliament tomorrow (21). 

“During the inaugural session of the 10th Parliament, the Government will set the tone for its economic agenda, with our members hoping for much-needed reforms to alleviate the pressures on the backbone of the economy,” he added. 

Perera emphasised that the Federation has also requested the establishment of a dedicated panel of experts to safeguard the interests of the 1.5 million MSMEs and their 4.5 million employees.

Additionally, the Federation proposed the development of a National Policy for MSMEs in collaboration with financial institutions and Government bodies to address long-term challenges.

“The window for action is rapidly closing,” he stressed, noting that there is less than 15 days left before the suspension ends.

Perera also disclosed that plans are in place for discussing the outcome of the Government’s decision and concerns with visiting IMF officials during their stay in Colombo. 

“These discussions are expected to focus on key aspects of the IMF-supported reform program and explore pathways to further align efforts towards supporting MSMEs. Although a date has not been confirmed yet, we hope the discussions will provide an opportunity to address critical areas such as restructuring debts to help MSMEs, a re-evaluation of interest rates, transparency, and recovery of MSMEs,” he explained.

The Parate law, which allows banks to seize properties in cases of default, has been a major source of concern for MSMEs. The Federation reported 1,400 properties were acquired by banks last year, forcing the closure of many family-run enterprises. 

“Over the past five years, MSMEs have borne the brunt of economic challenges, starting with the 2019 Easter Sunday attacks and continuing through the economic crisis. Around 263,000 MSMEs closed down during the height of the economic crisis, leaving over 60% of businesses in non-performing loan (NPL) status,” he pointed out.

The Federation has called on the Government to restructure Rs. 250 billion in total debt to provide relief to struggling businesses.