Central Bank has predicted that we would be able to reach a stable level by the third quarter of next year:
No massive economic growth but we could minimise current hardships:
Government has no doubt whatsoever in passing the Budget:
The State Minister of Finance Dr. Ranjith Siyambalapitiya said that Budget 2023 has laid a the foundation to get the country out of the current economic crisis.
The State Minister in an interview with the Sunday Observer said the Central Bank has predicted that if we continue in this manner, we would be able to reach a certain stable level by the third quarter of next year.
However, it won’t be a massive economic growth but we would be able to minimise the current hardships that we have to undergo. Dr. Siyambalapitiya said whatever comments are made by various sections, there is a positive indication that some confidence is being built among the people on President Ranil Wickremesinghe’s leadership.
The Interim Budget presented by the President in August this year and the 22nd Amendment to the Constitution was passed in Parliament by a two thirds majority. Therefore, the Government has no doubt whatsoever in passing the Budget 2023.
Excerpts of the interview
Q: What was the most challenging aspect of the Budget 2023?
A: Actually, this Budget doesn’t have one particular challenging aspect and it is an overall challenge. The current financial year becomes the basis and foundation to present the next year’s Budget. However, our economic foundation has been eroded due to high inflation, decline of foreign reserves, depreciation of the rupee and increase of bank interest rates three fold. We have also become a country which gets the lowest State revenue.
Therefore, financially we are not in a stable position. Being in this eroded foundation, we have to prepare our plans for the next year. Then we have to act in a very prudent manner. Of the country’s total number of families, 60 percent are asking to provide them some sort of welfare benefit and relief for their living.
Then the entire budgetary program has become a challenge for us. In addition, presenting the Budget with fair statistics also became a challenge for us.
Q: There is criticism that the Budget has not given any relief for the people. What is your comment on that?
A: How do they say so? This may be a mere allegation leveled by someone with political interest. The Government’s expenditure for the next year is around Rs. 7885 billion. Of that, 10 percent has been allocated for social welfare. This is in addition to the expenditures on education and health. Over Rs. 1,000 billion has been allocated to education and health. I think the Government cannot do anything far beyond that. Of 5.8 million registered families to get welfare benefits, nearly 3.4 million families are at the level of receiving welfare benefits.
Certain amount of this figure will be reduced when the eligible families are selected. Even though this percentage is reduced by a certain amount, we have prepared this Budget by considering that aspect as well. Therefore, if somebody says the Budget has not given relief to the people, we can’t accept that. We couldn’t increase the salaries of the public servants through this Budget.
A wrong impression had been created among public servants that their salaries will also be curtailed by a certain amount. However, the Government has taken this burden without reducing the salary of public servants. The President has laid emphasis on public servants and we are well aware of the hardships faced by them.
We hope the existing issues in the country will be sorted out by the final quarter of next year. Then we will be able to provide some allowance and address the issues faced by the public servants. We can include so many proposals but we have to be practical. I don’t think anybody will be able to do something better than this at this juncture. Otherwise, somebody should receive at least US$ 50 billion free of charge.
If anybody attempts to prepare a Budget, I don’t think he can do much better than this.
Q: There is also criticism that the Budget has piled even more taxes and levies on the people instead of taking measures to recover at least part of the loot stashed abroad by some politicians and businessmen. What is your comment?
A: That is wrong. We have not given special treatment for anybody. I am trying to open a tax file to each Parliamentarian. At present, most of them have tax files. The society largely talks about casino businessmen. However, the annual tax imposed on casinos was increased from Rs.200 million to 500 million. Not only that, if a Sri Lankan goes to a casino, he will be charged US$ 200 with effect from January 01 next year. When it converts to Sri Lankan currency, it is nearly Rs.70, 000. While doing all this, if the casino owner earns a profit, we will also recover 40 percent of that total profit as well. So can anybody say we have helped or given concessions to certain segments? In addition, 36 percent new company tax has also been imposed.
It means the annual profit earned by companies; it has been proposed to recover 36 percent by the Government. I think most of these criticisms on the Budget are mere political slogans put forward by certain sections. We will have to introduce new laws if we want to recover the money stashed abroad by some politicians and businessmen. At present we have to deal with these matters using the prevailing laws in the country.
Earlier, a big hue and cry was made on the sugar tax scam. The Government has to recover Rs.16 billion as taxes from the importers. However, that benefit was not passed down to the people and the prices of sugar didn’t come down. Then how can we recover this money? We can’t impose that tax again. Those who formulated the law say they did it with the intention of reducing the prices of goods.
The income tax is the only option that we can recover the aforementioned amount. I also presented a report to Parliament as to how we are going to recover this money. Therefore, nobody can level an allegation that we are going to defend anybody. We have to recover this money using the existing legal framework in the country. If the present laws are not adequate enough to strengthen the tax framework, we can change them as well.
The President through the Budget has also appointed a new Tax Commission. It hopes to widen the tax structure by increasing direct taxes which means the taxes are charged from those who can pay taxes. Nobody can complain that the Budget has not laid emphasis on all key sectors. As there are shortcomings, we decided to appoint the Tax Commission and rectify them.
Q: Critics say that a disproportionate amount has been allocated for defence while education and health have been given much less. Why is this?
A: We can’t reduce the defence expenditure at once. We had to face a massive battle against terrorism ten years ago. When over 3,0000 soldiers were killed and another 3,0000 disabled, fortunately the existing soldiers at the battle front could somehow rescue their lives.
Therefore, we can’t immediately send soldiers home. So, we have to reduce the defence expenditure systematically. On the other hand, ensuring the country’s security is one of the key responsibilities of the Government.
Even without going back to 10 years of history, we could see how the country’s security became of paramount importance in the middle of this year. However, we have made a proposal that any soldier who has completed over 18 years service can retire from his service.
We are trying to minimise the defence expenditure to suit the country. Otherwise, we can’t ask our soldiers to go home as they have made a big sacrifice on behalf of their motherland. We should realise that as well.
Q: There is another criticism that the Budget has been drawn up more or less by the dictates of the IMF. What is your comment?
A: This is also a very old slogan. There are no such IMF conditions as speculated by certain sections. Is there any IMF condition that a part of our country should be given to them? Economically, the IMF only provides us certain guidelines on what we should do to address the current economic issues. Just because the IMF makes recommendations, we don’t accept them. We try to reach consensus after having extensive discussions and arguments with them. Actually, consensus is reached for our benefit and not for their benefit. If somebody makes any allegation that the Budget has been drawn up to cater to the interests of the IMF, it is a very primitive and outdated allegation. We categorically reject it.
Q: Does the Government plan to borrow more domestically to bridge the Budget deficit? And apart from taxes what are the other revenue generation methods suggested in the Budget?
A: Certainly. The Budget deficit exceeds 7 percent. Every year, half of the loans obtained to bridge the Budget deficit were foreign loans. At present, we can’t go to a large number of foreign countries to obtain loans. We can only obtain loans from international monetary organisations such as the Asian Development Bank and World Bank.
However, this time we have given priority to obtain loans from local banks. Nearly 90 percent of the Government’s revenue comes from taxes. When looking at the non-tax revenue, some primitive laws are still implemented on licence fees which go back to the 1940s. We hope to update these outdated laws to suit present day needs.
Q: Do you think this Budget will lay a the foundation for us to get out of the present economic crisis?
A: Of course. Our prime responsibility is to look after 3.4 million families who are asking for some welfare benefits.
We should start from that point. First, we should assist these people to continue their lives. Afterwards, we should take measures to strengthen and develop the economy.
The Central Bank predicts if we continue in this manner, we would be able to reach a certain stable level by the third quarter of next year.
It won’t be a massive economic growth.
However, we would be able to minimise the current hardships that we are facing. At present, inflation has come down. The shortage of certain food commodities has also been minimised to a certain extent. Therefore, there are lots of positive aspects in the Budget.
Q: As reported by certain sections of the media, is the Government planning to raise State revenue to 13 percent of Gross Domestic Product (GDP) in Budget 2023 from the current 8.5 percent?
A: We are not in a position to increase State revenue up to 13 percent at once in comparison to the GDP. It has to be done stage by stage. First, we should reach at least 11 percent. In order to do that also, we should increase the Government’s revenue by Rs.400 billion. After that, we should try to reach the level of 13 and 15 percent respectively. We should try to reach the level of 18 percent within the next few years because our expenditure is 20 percent when compared to the GDP.
Once we introduce taxes, there may be shortcomings. We should be flexible and discuss ways to provide relief to those who face hardships due to imposing these taxes. Actually, we have that kind of program. The Government is always flexible and sensitive to the issues faced by the people.
At present, SJB Parliamentarian Dr. Harsha de Silva is the Chairman of the Committee on Public Finance. At the previous occasion, he requested to postpone bringing some regulation and we accepted that. We are doing these things in a more democratic manner.
Q: Has the Budget 2023 allocated more funds on social welfare compared to previous Budgets?
A: Definitely. Of the total Government expenditure of Rs. 7880 billion, 20 percent has been allocated on social welfare including health and education. I think this is a very significant allocation compared to other countries.
Q: Speculation is rife that the Budget is going to be defeated. Is the Government confident of winning the Budget?
A: I would like to ask if a people’s representative has a duty to defeat this Budget what is his next aim by doing so? If he wants to completely ruin the country, he can do that. I don’t think any Parliamentarian will resort to such a move. Ranil Wickremesinghe who contested the presidency alone with one parliamentary seat could secure 134 votes in Parliament and was elected to the presidency. The Interim Budget presented in August this year by the President was passed in Parliament with an overwhelming majority and the 22nd Amendment to the Constitution was passed by a two thirds majority in Parliament.
Whatever comments are made by various sections, isn’t this a positive indication that some sort of confidence is being built among the people on President Ranil Wickremesinghe’s leadership. Therefore, I have no doubt whatsoever on passing the Budget 2023.