Finance Minister Basil Rajapaksa presenting his maiden Budget in Parliament on Friday (November 12) proposed a series of measures to attract local and foreign investments while encouraging a production based economy.
 Finance Minister Basil Rajapaksa arrives in Parliament to present Budget 2022 |
As a notable feature, the Budget proposed schemes to increase state revenue without placing any burden on the masses.
Government lawmakers said the Budget proposals for 2022 presented by Minister Rajapaksa is commendable as it was presented at a time when the country is facing numerous challenges with the Covid-19 pandemic.
In his maiden Budget speech, Minister Rajapaksa addressed several areas including the demands by teacher and Principals trade unions, fertiliser shortages and relief for sectors severely affected by the pandemic. In what was called a non-traditional Budget, Rs. 30 billion was proposed to be allocated to rectify the salary anomalies of teachers and Principals.
This amount has been allocated in addition to over Rs. 109,000 million already allocated to address the grievances of teachers and Principals. The long-awaited Budget proposals for the Financial Year 2022 presented during a global pandemic were applauded by the Government and Opposition lawmakers.
Challenging period
Minister Rajapaksa told Parliament, “We are living through the history’s most challenging period in terms of people’s lives, livelihoods, sources of income and job security. I believe that, even amid these challenges, we are equipped with the strength to manage the economy and overcome challenges.”
He said, “We are a Government that walked the talk. Today, we have achieved the vaccination targets. Therefore, today we are considered the “Vaccinated Nation in Asia”. We owe our special respect and gratitude to the President for leading the vaccination program.” The Minister said agents of foreign powers disguised as social activists are exerting considerable pressure on society to the extent that, today, such so-called activism can overthrow strong and populist governments. It is not possible for a Government alone to manage. “Therefore, I invite all citizens to be vigilant about this situation,” he said.
The Minister said we will have to transform our economy into an advanced manufacturing economy. The economy should be driven by innovations and within the broad framework envisaged in the “Vistas of Prosperity and Splendour”. Our annual earnings from tourism amounting to almost USD 5 billion did not materialise during the past two years. Adequate foreign direct investments have not flowed into the country. The inflow of worker remittances has also been somewhat limited. Many avenues of earning revenue locally have also been affected. The gap between the export income and the import expenditure is not simply a national challenge during the past several decades, but it is an unsolved economic problem.
 The Finance Minister in conversation with the MPs |
Minister Rajapaksa said that in 2014, when President Mahinda Rajapaksa handed over the country to the previous Government, the total debt of the country stood at Rs. 7,487 billion. It was 72.3 percent of the Gross Domestic Product. When President Gotabaya Rajapaksa came to power at the end of 2019, public debt had increased to Rs. 13,032 billion. That is how the Government of Good Governance had created debt.
During this period, we settled two international sovereign bonds amounting to USD 2 billion, reaffirming the country’s debt servicing capability while providing confidence to the international markets. We protected our banking system. Rs. 300 billion was provided as working capital facilities at a concessionary interest rate to provide relief to small and medium scale industrialists. We also provided relief through the debt moratorium on loans and leasing facilities amounting to almost Rs.700 billion, thus protecting the private sector. This Government is responsible for the servicing and the repayment of the debt raised by the previous Government including the debt raised amounting to USD 6.9 billion during 15-months between April 2018 and July 15, 2019, he said.
‘Vistas of Prosperity and Splendour” has created a broad scope for the production of agricultural and industrial goods that are identified as import substitutes.
Green economy concept
The President has introduced a green economy concept in this regard. We should create strong import substitution industries through the manufacturing of organic fertiliser, renewable energy and the production of milk, sugar and medicines. As such, we must focus on creating a strong mechanism to improve domestic income while saving foreign currency outflows.
He said the Members of Parliament are now entitled to a pension having served for five years. I propose to extend the five year period to 10 years. This proposal is valid for all positions including the Presidency for whom salaries are paid from the Consolidated Fund. Legal provisions are required to be formulated to bring this proposal into effect.
The Minister said it is proposed to allocate an additional Rs.5,000 million in addition to the already provided allocation to offer relief to micro, small and medium scale businessmen representing all sectors that were directly affected by the actions resorted to by the Government to control the Covid-19 pandemic. He said, “I propose to allocate Rs.400 million to provide relief to school van and bus owners. Rs. 600 million has been allocated to provide relief to the Three Wheel owners who lost their income since those vehicles could not be driven during the past few months. I propose to allocate Rs.1,500 million as relief to the private bus owners who lost their income.”
A one-time tax surcharge of 25 percent has been imposed on persons or companies with taxable income over Rs. 2 billion for the year of assessment 2020/2021. Rs.100 billion is expected to be earned through this tax. VAT on banks and financial service providers under supply of financial services by specified institutions will be increased to 18 percent from 15 percent. This tax should be paid monthly from January 1, 2022 to December 31, 2022. This tax should not be passed on to the customer. Rs 14 billion is expected to be earned through this tax. The Minister also proposed to transfer Rs. 8.5 billion that Perpetual Treasuries Ltd. had earned in violation of the Code of Conduct from the Central Bank of Sri Lanka to the Treasury, he said.
Relief
 President Gotabaya Rajapaksa arrives in Parliament for the Budget speech |
Minister Rajapaksa said Rs.2,200 million has been allocated through the Appropriation Bill to establish 1,000 National Schools. It is expected to complete the program by implementing expeditiously within the next three years. To accelerate the program and for other developments in the education sector, I propose to include an allocation of Rs.5,300 million as a Budget proposal in addition to the already made allocation.
Minister Rajapaksa said that the Budgetary allocations for the MP would be increased by Rs. 5 million each. Rs. 15 million would be allocated to each MP for development activities in their electorates. Relief would be provided for school van and school bus operators affected by Covid-19, Minister Rajapaksa said, adding that Rs 400 million would be allocated for the purpose.
The Government is planning to extend the retirement age for state sector employees to 65 years as the average life expectancy had increased and Sri Lanka’s population was ageing.
“As they are able to engage in active service for a longer period of time, it is essential to make use of their experiences and maturity,” the Finance Minister added, proposing to extend the age limit for public servants’ pensions to 65.
He said, “Our Government is always dedicated to safeguarding the interests of our farmers, adding that, however, a clear law had not been formulated for this purpose.
The Minister proposed the drafting of the ‘Green Agricultural Development Act’ for the benefit of the farming community. He said the country would be developed as a hub for “Wellness Tourism”.
The Government focuses its attention on avenues of tourism such as “Event Tourism”, “Destination Tourism” and providing tourists with “Home Stays”.
Key highlights of Budget 2022
*Additional Rs. 30 billion to rectify the salary anomalies of teachers and Principals.
* Rs. 15,000 to implement a program identifying low-income families at the Grama Niladhari Division level and to provide them with relief packages to alleviate the pressure of the soaring cost of living.
* Reduce the fuel allowance provided to Ministers and Government officers by 5 litres per month and to cut down the telephone expenses of Government institutions by 25 percent.
* Extend the retirement age of state sector employees to 65 years.
* Extend the minimum period a Member of Parliament must serve to be eligible for the pension to 10 years.
* Slash the provisions for electricity by 10 percent in order to encourage the shift to electricity generated through solar power.
* Suspend the construction of new office buildings for the state institutions for two years, except for the establishments that are under construction.
* Amendments to the Appropriation Bill preventing requests for Supplementary Estimates for 2022 by all Ministries.
* Establishment of a telecommunication network covering the entire country without delay.
* Add 5G (fifth-generation wireless technology) to the country’s information and technology field as well as a partial, transparent open bidding process by TRCSL to select suitable service providers.
* Issue radio and TV broadcasting and telecasting licences on an auction basis.
* Make the annual warrant for state expenditure a quarterly warrant.
* Implement the Special Commodity Levy from January 1 next year.
* Increase the price of cigarettes by Rs.5.
* Rs. 15 million to each MP to develop their areas.
* Rs. 2,000 million for Environment Protection.
* Rs.2,000 million additional allocation for Forest Conservation.
* Rs. 2,000 million additional allocation for Wildlife Conservation.
* Rs.700 million to three-wheelers sector, Rs. 1,500 million for Private bus industry, Rs. 400 million for school vans and buses and Rs. 500 million to Event Management sector to compensate for their losses during pandemic.
* Rs.15,000 million to provide relief packages to low income earning families.
* Impose a one-time tax surcharge of 25 percent on persons or companies earning an annual taxable income of Rs. 2,000 million in the financial year 2020/21.
* Increase the Value Added Tax on financial services provided by commercial banks and financial institutions from 15 to 18 percent.
* Release all vehicles held up at Sri Lanka Customs due to non-payment of taxes or other reasons after charging such relevant taxes and fines.
* Impose a levy on motor vehicles meeting with accidents and such levy to be reimbursed through insurance.
* Introduce Social Security Program for Senior Citizens who do not draw a pension and contribute Rs. 100 million as capital to this fund.
* Transfer Rs. 8.5 billion that Perpetual Treasuries Limited earned in violation of the Code of Conduct at the Central Bank, to the Treasury.
* Additional Rs. 5000 billion to promote Organic Agriculture.
* Additional Rs. 15,000 billion to ensure access to clean drinking water.
* Rs. 500 million to develop the renewable energy sector.
* Rs. 2000 million for urban housing projects, Rs. 5000 million for rural housing.
* Rs. 500 million for the development of houses for people living in estate Line-Houses.
* Rs. 85,000 million for rural community development.
* Rs. 3 million for every Grama Niladhari Division (14,021) under the Gama Samanga Pilisandarak program. Rs. 42,053 million will be allocated for the purpose.
* Restructure Samurdhi Banks and converted to a One-Stop-Shop.
* Provide Broadband internet connectivity using Fiber Optic technology to all 10,155 schools in the country.
* Establish a Three- Wheeler Regulatory Authority.
* Remove the registration fee for startup companies to shift the nation more towards entrepreneurship over job seekers.
* Draft a Green Agriculture Development Bill.
* Introduce a price mechanism to maintain the prices of medicines by implementing the recommendations of the Committee appointed for the purpose.
* Convert Sri Lanka to a hub for gem trade.
* Increase the local production of organic fertiliser in Sri Lanka.
* Construct Agro Parks in Sri Lanka to increase productivity.
* Introduce a Green Agriculture Development Act to protect the farmers as there is no legislation for the purpose where farmers get a fair price for their products.
* Concentrate on crops which can be exported such as cinnamon, cardamom, pepper and cloves.
* Relax regulations to further attract Foreign Direct Investments to Sri Lanka.
* Set up an Investment Committee to ensure stability of the Government procurement process.
* Construct a school and hospital in each district that meets international standards.
* Provide land and tax relief to attract Foreign Investors
* Use underutilised lands owned by Sri Lanka Railways for mixed development projects as Public-Private Partnerships.
* Remove Line-Houses and allocate Rs.500 million for the development of houses for people living in Line-Houses.
* Allocate Rs 4 billion to each electorate for development within the locale, confirming the priority of the Government to keep true to the promise of development despite Covid-19 pandemic constraints.
* Rs.31,000 million for home-based economies and welfare, which includes an increase in the pack provision for 24 months for the pregnant women with another Rs. 1000 million.
* Rs.15,000 million to provide Relief Pack for Poverty-Stricken Families.
* Rs. 5 billion to support the Covid-19 affected Micro and Small Businesses.
* Rs. 5,000 million additional allocation for Health and Nursing.
* Rs. 3,000 million additional allocation for sports development.
* Rs. 2,000 million additional allocation for Railway Passenger Transport.