Revenue deficit up by Rs. 149 billion through Sri Lanka’s new budget
Posted on January 31st, 2015
Courtesy Adaderana
Though it was planned to reduce the budget deficit through the interim budget of the new government to 4.4 per cent of the Gross Domestic Product (GDP), the government revenue deficit being increased by Rs. 149 billion is a significant feature.
The total revenue expected by the government for 2015 would be reduced to Rs. 1,622 billion as compared to the former government’s estimate of Rs. 1,689 billion and the reason for this is the concessions provided on a range of consumer items, pointed out Finance Minister Ravi Karunanayake.
While the current spending has risen from Rs. 1,525 billion to Rs. 1,612 billion through this interim budget due to the salary hikes of government employees and pensioners, the Finance Minister said that this is the highest pay increase in history for Sri Lanka’s government employees.
While capital expenditure has been reduced from Rs. 521 billion to Rs. 499 billion through this budget, the 4.4 per cent budget deficit proposed by the former government has thus been maintained.
The main feature evident here is the increase in the revenue deficit related to monthly financial payments possibly causing negative impacts on economic stability and foreign exchange.
Analysts point out that if revenue deficit is not covered soon through bank loans without increasing interest rates, it may result in the weakening of exchange rates and the reduction of foreign reserves.
Another fact pointed out by economic analysts is that though there are possibilities of collecting higher tax revenue through proposals like a tax of 25 per cent on companies which have gained profits of over Rs. 2,000 billion and imposing huge taxes on telecommunications companies and casinos, it would be impossible to collect the Rs. 01 billion imposed on the sports television channel linked to the former government.
However, the Finance Minister said that this time the tax imposed on the people has been reduced from 14.4 per cent of the GDP to 14.1 per cent.
January 31st, 2015 at 6:04 pm
Namaste: The budget will massively increase the exports from India to Sri Lanka and India, Indians and Indian colonial parasites will be able to recoup the money spent on the last presidential election. It has the effect to change the eating habits of the subjects in line with the colonists.Jai Hind.
January 31st, 2015 at 10:39 pm
This is what Ceylon today says. A contradiction;
Budget deficit has reduced from Rs 521 B to Rs 494 B – Finance Minister Karunanayake tells CCC budget seminar
Ceylon Finance Today: Finance Minister Ravi Karunanayake, said that the slashing of wasteful capital expenditure by the present government had reduced the 2015 Budget deficit from the Rs 521 billion to Rs 494 billion.
Addressing a post mini budget seminar hosted by the Ceylon Chamber of Commerce at the Hilton Residencies on Friday night, he said that the 2015 Budget which was presented by former President Mahinda Rajapaksa and passed in Parliament last November which had a Rs 521 billion deficit, which was 4.6% of GDP, had been slashed to Rs 494 billion, which was 4.4% of GDP.
The slashing of such wasteful expenditure and capital costs has even stunned the Opposition members of Parliament, Karunanayake told a packed audience of private sector luminaries.
He also said that the contingent liabilities which were government projects which were done on Treasury Guarantees by the previous UPFA administration, had risen from Rs 6.9 trillion which was 72% of GDP which had risen to
Rs. 8.8 trillion.
He also explained that the new interim budget was prepared in a record time of around 8-10 days. We won the elections on 9 January and took around another eight days to settle down and the remaining eight days were taken to prepare the interim budget which was prepared by Deputy Minister of Policy Planning Economic Affairs
He also invited the private sector to bring in their own proposals for the betterment of economic development. “We will invite and evaluate all proposals which will benefit all segments of the economy and we will not entertain crony capitalism, he said.
Deputy Minister Dr. Harsha de Silva, in an obvious broadside at the previous regime said: “What we mean by development is not mere ad hoc infrastructure development, but by the general improvement of all the lives of people, across the board.
This would mean the development of the lifestyles of the people not only among the middle class in Colombo, but also those of suburban towns and also the rural community at areas such as Tissamaharama which means that the household incomes have to improve,” he said
He also stressed that though the previous administration boasted of a 7.5% GDP growth, the growth of the household income was a mere 0.5%.
Central Bank Governor Arjuna Mahendran also stressed on the need for the simplification of the tax regime. He said that Sri Lanka has now 20 taxes and another 15 pages of tax exemptions. This is a real paradox where most of the taxes which were installed by the previous regime were on food items, which were extremely regressive, he said.
He also cited the example of Georgia which simplified its tax regime which resulted in their revenue collections increasing from 10% to 25% within three years.
Retired Director General of Economic Affairs of the Commonwealth Secretariat Dr. Indrajit Coomaraswamy said that Sri Lanka had an aspirational society, but it was important to meet revenue targets.
He also stressed the need for the trickling of wealth from the rich to the less well off. However, if the economy gets overheated with consumption exceeding demand, then measures will have to be taken like in 2011/2012, he said