Hailed for reassuring macroeconomic stability | Sunday Observer

Hailed for reassuring macroeconomic stability

Senior Deputy Governor of the Central Bank of Sri Lanka, Dr. P Nandalal Weerasinghe on Friday commended the Budget 2018 for reassuring macroeconomic stability as it fell in line with the achievements already made on the front in recent years.

Speaking at a post-budget forum organized by KPMG Sri Lanka, Dr. Weerasinghe said the government, having recognized the key imbalance in the economy as the fiscal balance has committed to address the issue by sticking to its targets.

“There is reassurance that the government will go in the same direction which is to bring down the budget deficit to 5.2% this year and to 4.8% next year.

In addition, for the first time in many decades, the fiscal accounts are going to record a marginal surplus in its primary balance which means that government is now becoming a saver transitioning from a dis-saver position,” Weerasinghe said.

He explained that from a macroeconomic management perspective, the expected savings will allow the government to divert funds from recurrent expenditure towards capital expenditure without having the need to increase their borrowings for capital expenditure.

“This means that going forward debt dynamics will be much more sustainable and manageable as long as government generates Primary Surplus or in other words, savings in their Current Account. This is one of the key factors how we can manage the overall public debt and make it more sustainable,” Weerasinghe opined.

On the other hand, from the private sector’s point of view, he noted that if the government can create savings there will be a positive ‘crowding in’ impact as the government will not compete for domestic resources available but make them partly available to the private sector.

“From a Central Bank’s perspective a primary surplus will make it easier for the Central Bank to implement the Monetary and Exchange Rate policies.

When government is demanding less from the domestic market, it will stabilize the market interest rates and exchange rates,” the Senior Deputy Governor emphasized.

The KPMG post budget forum was attended by State Minister of Finance, Eran Wickramaratne, Chairman of the Ceylon Chamber of Commerce, Rajendra Theagarajah, Partner – Head of Tax at KPMG Sri Lanka, Shamila Jayasekara, Principal – Tax & Regulatory at KPMG Sri Lanka, Suresh Perera and Tax Policy Advisor at the Department of Fiscal Policy of the Ministry of Finance, Thanuja Perera.

The event which provides insights on the 2018 Budget Proposals was held at the Oak Room of the Cinnamon Grand in Colombo.

Meanwhile, the Chairman of the Ceylon Chamber of Commerce, Rajendra Theagarajah said the Budget 2018 had met the expectations of the private sector which was an encouragement.

“The Chamber was expecting consistency in terms of policy and export oriented focus for all and not just for few companies. It was also expecting trade liberalization and an inclusive approach for SME’s to fuel growth. So in all these four aspects, there has been consistency,” he said.

Theagarajah noted that in terms of policy consistency there is more correlation than regression of the Budget speech and the Prime Minister’s Vision 2025 statement.