The government will review the income and expenditure of the 2019 Budget to avert a budget deficit following all the incentives and tax concessions granted to various sectors affected by the terrorist attacks last month, State Minister of Finance Eran Wickramaratne told journalists at a meeting to discuss business issues under the prevailing security situation in the country.
It was organised by the National Chamber of Commerce of Sri Lanka last week.
He said the income and expenditure statement of the government will be reviewed most likely in September before the elections and added that a review of the budget is essential to ease pressure on the budget deficit.
A revised budget will be presented thereafter, according to the State Minister.
“There is no issue with the debt obligations which so far has been met comfortably. The government will be raising more sovereign bonds which will help refinance debt in the coming years,” the State Minister said adding that the IMF releasing US$ 164 million under its program with Sri Lanka is an indication of the confidence placed on the country.
However, according to economists, given the low rating by international rating agencies on the country, it would not be a smooth sailing for Sri Lanka to raise funds in the international market.
Fitch and Standards and Poor’s cut their ratings to B from B+ following the third major rating agency Moody’s which downgraded the country in November last year citing risks that Sri Lanka could struggle to refinance its debt..
Despite the many headwinds locally and internationally on the economy, the State Minister was optimistic that economic growth this year would be in the three to four percent range.
However, he said still the growth rate is far below many regional peers who have notched a growth rate over the mid single digit level.
GDP growth forecast this year for India is 7.3 percent, Myanmar 6.9 percent and Bangladesh 7.3 percent.
The International Monetary Fund maintains growth projections at 3.5 percent for Sri Lanka despite the recent developments in the country and the external challenges to the economy.
However, the ADB revised down its forecast for Sri Lanka this year from 4.8 percent to 4.5 percent. The World Bank expects Sri Lanka’s economy to grow at 3.9 percent this year.
On the reform program with the IMF, the State Minister noted that VAT reforms will be expedited and that an energy pricing formula similar to the fuel pricing formula is being worked out. He said the government has provided a host of concessions and relief measures to support the sectors that have been adversely affected by the recent attacks to ensure stability in the sectors driving economic growth.
A moratorium for capital and interest payments and working capital from the Enterprise Sri Lanka program for a period of one year was offered for the tourism sector companies which will help ease pressure on the cash flow of affected companies.
Tax concessions to tourism related companies to import scanners and other detectors were offered following the bomb explosions in three major hotels in the city.
However, business sector representatives said that certain banks are changing the moratorium period arbitrarily and converting it to a loan. They also expressed their displeasure over the move by banks to grant moratorium on a case by case basis which should be offered across the board to all affected sectors.
They said that such a move is unfair on the part of banks at a time of crisis. Most affected businesses are the small and medium sector enterprises that have no access to funding.
Sri Lanka Chamber of Small and Medium Industries Past President Mohideen Carder said there is a severe drop in income of many SMEs and that banks are reluctant to grant working capital and overdrafts.
“The SMEs were already hit by power cuts and have not fully recovered from the loss. We expect the government to provide a grace period and the Enterprise Sri Lanka loan concessions to SMEs,” Carder said.
Poultry industry representatives requested the government to revert back to the 10 percent cess charged three years ago on maize imports. The cess on a kg of maize was increased to 20 percent.