The National Chamber recognises the efforts of the Government to signal all stakeholders that they are on a path towards managing fiscal space by estimating the Budget deficit for 2022 in single digits (8.8%) compared to the estimated double digit (11.1%) during 2021, however, resorting to, inter-alia, on one off revenue proposals such as Surcharge Tax of 25% on people and companies with taxable income over Rs. 2 bn for the year of assessment 2020/21 and increase in VAT on financial services by 3% for 2022 and other revenue proposals such as the introduction of Social Security Contribution at 2.5% of turnover and implementation of Special Goods and Services Tax. The annual state expenditure for 2022 is estimated to be Rs. 3,912 billion while total revenue is Rs. 2,284 billion leaving a budget deficit of Rs. 1,628 billion.
The chamber also appreciates the government’s efforts to enhance the social safety net which is of paramount importance to sustain the livelihood of lowest income earners of the country through expenditure proposals such as rural development projects, vari saubhagya, development of local government divisions, rural livelihood development, water for all, home shops, home economy, modernisation of plantation sector, development of schools, development for rural houses.
The National Chamber is hopeful that careful regulatory and policy measures would be introduced to manage the impact of one off revenue proposals preventing spillover effects to the national economy which may restrict lending capacity of financial institutions and ability to expand the capacity of large business entities.
“We emphasise on the importance of careful administration and meaningful allocation of significant expenditure proposals which are expected to improve living conditions of low income earners and improving SMEs of the country which has attracted special emphasis under National Chamber vision. “We observe foreign currency scarcity, tangible efforts to improve export orientation and attraction of much needed FDI could have been addressed better in the Budget proposals.
“We expect efficient monitoring and disbursement of budgetary allocations would help to improve GDP growth in the medium term allowing the Government to divert the attention to addressing significant challenges such as debt refinancing, enhancing availability of foreign currency and loosening import restrictions gradually,” the statement added.