With declining government revenue and rising current expenditure, the resultant high budget deficit at about 10 percent of the GDP this year and prolonged economic recovery, the government should wade through the crisis and lay the foundation for long term growth in the future, former Central Bank Deputy Governor Dr. W.A. Wijewardena said.
He said the 2021Budget is to be presented at a critical time when the country and the whole global community has been hit by the disastrous Covid-19 pandemic with very little space for the government to provide relief to people unless it prints money through the Central Bank However, he said that printing money as a way out of the crisis in the short term would lead to inflation affecting mostly the low income groups Economists urge the government to expedite measures to support casual and daily wage earners who have been the most affected segments due to the lockdown.
The estimated budget expenditure for 2021 is Rs.2,690 billion.
State Minister of Money and Capital Market and State Enterprise Reforms, Ajith Nivard Cabraal said last week that the 2021 Budget will focus on macro-economic fundamentals such as increasing foreign reserves, debt management and strengthening the local currency.
According to the State Minister, the Government will also focus on facilitating new ventures while expediting work on mega development projects such as roads and highways, port and airports and dedicated industrial zones.
The government expects the budget deficit to be around nine percent of GDP this year while hoping to stabilize the deficit at around 4.5 percent of GDP in 2021 forecast to be a tough year for both local and the global environment.
Global economic growth estimates have been revised downwards by think tanks and donor agencies with slim chances of a quick recovery from the current pandemic that has already stifled growth across economies.
The 2021 budget will be presented this week based on President Gotabaya Rajapaksa’s ‘Vistas of Prosperity’ Policy Statement targeting people centric development, economic development and welfare for the people. The government expects economic growth to revive and notch the pre 2015 growth rates from next year onwards.
“The 2021 Budget will be a development oriented budget that will comprise strategies to revive and strengthen all Covid affected enterprises,” State Minister Cabraal said.