Budget 2019: Finance Ministry to boost revenue by 17% of GDP | Sunday Observer

Budget 2019: Finance Ministry to boost revenue by 17% of GDP

6 January, 2019

Economists, Chamber heads and Financial analysts in their expectations of the forthcoming budget, said the Budget should focus on Fiscal consolidation maintaiingn the recurrent and capital expenditure which are key factors to curtail the budget deficit.

Professor of Economics, University of Colombo, Sirimal Abeyratne said the country has issues regarding tax revenue since the government has been taking measures to increase tax revenue, which are not yet completely in place. Therefore, there would be certain loopholes in revenue collection.

The tax collection process was disrupted following the political turmoil in October last year and now tax-payers may be asking why should they pay taxes when politicians act irresponsibly. There were issues on the part of tax expenditure triggered by the political drama in October, as it supported making certain irregular proposals for handouts which may have resulted in an increase in government expenditure.

“Put together, tax collection and expenditure problem, there will be a budget deficit which will be reflected in the March and year-end budgets,” Prof. Abeyratne said, adding that the economic performance in the country has been far short of expectations considering the economic growth rate and growth in exports. He said fiscal management is in disarray and added that serious attempts should be made to achieve fiscal consolidation.

President, National Chamber of Commerce of Sri Lanka, Sujeiva Samaraweera said there should be greater attention paid on promoting value-added exports selecting three sectors which will help the country to concentrate on them.

He said driving innovation will be a key element to stay in the game and without a new product range the country will be behind others in the global market. Innovation will help bridge the import-export gap that has been widening over the years. Nothing could be sustained without care for the environment.

The Cabinet decided last week to present the Budget for 2019 in early March. The Appropriation Bill which is currently being prepared aims at increasing government revenue by over 17 per cent of GDP, reducing recurrent expenditure to 15 per cent of GDP, maintaining investments at 5.5 percent, slashing the budget deficit to 3.5 per cent of GDP and maintaining government debt at 70 per cent of GDP. The Appropriation Bill which was to be presented on November 5 was delayed due to the Constitutional crisis.

A Government official said the March Budget will focus more on public spending. Sri Lanka is in a position to repay the massive debt obligation during this year, according to the road map presented by the Central Bank Governor Dr. Indrajit Coomaraswamy.

President, National Chamber of Exporters, Ramal Jasinghe said, “We are also confident that with a correct mechanism and correct strategies, the debt obligation could be met.”

The year’s debt obligation stands at US $ 5 billion and this should be serviced without creating a burden on the people, he said.

“The export sector could support the country’s development with a continuous drive to enhance export value and volumes. As we have achieved the targets set for last year despite political unrest in the last quarter, reaching this year’s target will not be an issue. We are expecting a 17 percent increase in exports this year and are confident of achieving it,” Jasinghe said.

However, the industrial sector recorded a dip. “We could take measures to increase the performance due to the resilience nature and move on. Along with the Balance of Payment and debt servicing we are optimistic that the increase in export performance in this process is vital as the country’s debt is high.

The cost-of-living has gone up as inflation in November shows an increase.

However, it is stabilising and will reach a mid single digit inflation regime.

The basket of goods consumed by the middle class may be different from the goods that the Central Bank is considering.

The inflation figure of 2-3 percent indicated by the Central Bank in reality may be different from what is in operation, he said.

There is a drop in motor vehicle registration due to the increase in the duty applicable. The move was to correct the BOP discrepancies.

“We are concerned that the upcoming budget will be a populist budget with more hand-outs. However, we need to be careful to protect long-term robust economic growth. We underline this need as a Chamber as we have to be cautious to make a balance between the people’s expectations and the country’s forward march.

“We expect the budget to be export-friendly in nature and effect tariff and taxes to enable its growth. Consideration should be given for an accelerated export drive.

“One of the concerns is the demurrage and certain steps should be taken to address this issue as exports and imports are becoming more expensive due to this.

“It is necessary to ensure ease of trade to drive exports,” he said.