2015 Sri Lankan Budget bag-full of election goodies

2015 Sri Lankan Budget bag-full of election goodies
The Sunday times Sri Lanka
By Bandula Sirimanna


With the Presidential election around the corner, Treasury officials headed by Dr. P.B.Jayasundera are fine-tuning the 2015 Budget on the directions of the President enabling him to unveil it in Parliament in two weeks.

Officials of the Department of National Budget and Department of Treasury Operations are under pressure in compiling final amendments to the draft Budget estimates, annexure and tables as well as making direct and indirect tax revisions to find money for election goodies.
The Treasury has to incur a sum of over Rs. 120 billion to increase the salary of public sector employees and the officials of National Budget Department were burning the midnight oil to meet the expenses for the salary hike and other concessions to be granted to the people in the 2015 budget.

The possibility of revising the salary of government servants numbering 1.3 million is also under consideration on recommendations made by the National Pay Commission appointed by the President in November 2013, informed sources said. According to Treasury estimates the total revenue receipts and grants amounts to Rs. 1,713 billion. The Appropriation Bill presented in Parliament last week estimates the total government expenditure for 2015 at Rs.1.812 trillion.

The President is expected to deliver his budget speech onTuesday, October 21st. But this date will be confirmed after his traditional consultation with astrologers and its finalisation at the party leaders meeting in parliament scheduled for Tuesday, October 7, high ranking government sources revealed.

The Government is focusing on the Medium Term Budgetary Framework 2015 – 2017 mainly to ensure development by creating more livelihood and employment opportunities, food security, energy security and environmental safety with particular emphasis on low income and poor families, these sources said.

The 2015 budget accords high priority to defence and urban development, education, drinking water in districts which are below the national average in social development, health, employment opportunities, basic infrastructure facilities and economic indices.

It has been planned to reduce the budget deficit to 4.4 per cent and increase the economic growth rate to 8.2 per cent during next year. In 2015, government investment is expected to be increased to 6.5 per cent of the GDP and maintain inflation at 5.5 per cent. As a percentage of the GDP the current government debt which is around 75 per cent is expected to be reduced to 71 percent.

Treasury officials made clear that government borrowings both locally and internationally including the raising of bonds overseas through state owned banks will be utilised for infrastructure development projects and improvement of the rural economy as well as to bridge the budget deficit and service foreign debt.

With the aim of winning the confidence of rural voters, the 2015 budget will make some populist announcements including a new crackdown on tax evasion with punitive fines, revision of corporate tax, streamlining the revenue collection process and provide concessions for farmers, fishermen, self-employed and small businesses.

With a drought affecting many farmers, the government will direct banks to suspend interest payments and delay loan recoveries under a special loan rescheduling scheme.

Under the initiative of protecting local producers and promoting import substitution, the commodity levy and cess on essential items, including maize, onions, potatoes and dairy products will be increased. Concessions will also be provided to improve the poultry industry encouraging exports.

Sri Lanka Chamber welcomes budget 2015

Sri Lanka Chamber welcomes budget 2015
27 Oct, 2014 16:00:48
Oct 27, 2014 (LBO) –Sri Lanka’s Ceylon Chamber of Commerce welcomes the ‘National Budget of 2015’ which is presented to the parliament last week, the chamber said in a media release.

The Media Release by Ceylon Chamber of Commerce

The Ceylon Chamber of Commerce welcomes the commitment to continued fiscal consolidation in the Budget 2015, particularly the projected lowering of the deficit to 4.6%, which is supportive of macroeconomic stability.

Whilst there is a proposed 15% increase in government expenditure, given the slack in demand in the market recently, a degree of fiscal stimulus can be accommodated without substantial over-heating of the economy.

However, the Chamber encourages the authorities to act quickly and decisively if there are signs of significant deviation from the government’s commendable targets for inflation and the current account of the balance of payments.

Given the proposed changes in VAT, NBT and PAYE taxes and the fact that nearly two-thirds of the proposed new revenue for 2015 has been estimated to come from the refinance facility for collection of tax arrears, meeting the proposed revenue targets may remain a challenge.

It is encouraging to note the gradual shift in the nature of tax incentives away from blanket, long-term tax holidays towards alternatives that are more targeted, such as accelerated depreciation, tax holidays with defined time horizons, and tax concessions that are directly linked to the amount and type of new investments undertaken.

The Chamber welcomes the new initiatives to better link revenue and other state agencies and stronger integration of ICT in revenue collection.

It also supports the proposal to have a one-stop-shop service center at Sri Lanka Customs, which will contribute to improved trade facilitation. These measures will improve the ease of doing business in Sri Lanka, which is often more important than granting tax concessions.

The Chamber acknowledges the positive measures which have already been undertaken to promote exports, including entering into Free Trade Agreements (FTAs).

However, realizing the full potential of these would not be possible without a concerted effort at improving Sri Lanka’s export competitiveness. In this connection, we cannot overstate the importance of encouraging export-oriented foreign direct investment (FDI) into Sri Lanka.

The reduction of electricity tariffs is welcome given that high energy prices are a key factor affecting competitiveness of Sri Lankan enterprises. Moving forward, the Chamber recommends the implementation of a transparent and market-reflective energy pricing mechanism, rather than ad-hoc adjustments.

We also recommend that attention is placed on addressing the quality of electricity supply, particularly issues of power brown-outs and fluctuations, and efficiently meeting the emerging needs of industries.

The Chamber is encouraged by the increased attention to education contained in the Budget 2015, and its emphasis on strengthening Sri Lanka’s potential as a knowledge economy.

The Chamber particularly welcomes the proposals to invest a further Rs. 15 billion in school laboratories; to introduce a scheme of school-based teacher recruitment; to expand skill development and vocational training; and to establish new faculties and degree programmes in science, technology, management and multi-disciplinary studies across several universities in the country.
The Chamber observes that while many of the spending proposals on education are focussed on enhancing access and affordability, a stronger focus on improving the quality and relevance of education at all levels is a critical pre-requisite to increase productivity and competitiveness in order to achieve the ‘Vision 2020’. In this regard, we emphasize the importance of taking a pragmatic approach of public, mixed and private provision of education, training and skills development.

Measures for further public investment in irrigation and reservoir development contained in the budget are welcome, particularly in light of difficulties faced by communities across Sri Lanka during the recent drought.

Additionally, the proposal to improve the availability of water in areas affected by the kidney disease ‘CKDu’ will contribute to the longer-term health and well-being of these communities, which in turn strengthens their economic potential.

Given the changing demography of Sri Lanka’s population and the associated challenges in expanding social safety nets, the Chamber recognises the need for introducing pension schemes as envisaged in recent budgets including Budget 2015.

However, the Chamber cautions against pension systems that are non-contributory and that are occupation-specific, as they could lead to fragmented schemes that experience difficulty in making steady payments, and are expensive and unwieldy to administer. A pension scheme that is professionally managed and sufficiently robust to meet the financial obligations of an ageing population is desired. While recognizing the hardships faced by senior citizens in a low interest environment, we urge the authorities to exercise caution in implementing the proposal for offering a 12% interest on deposits in state banks, to avoid creating distortions that could have a negative impact on the financial sector. Moving forward, the financial needs of senior citizens should be addressed through the development of pension products.

While substantial new financial allocations have been made for various government institutions and development programmes, the Chamber emphasizes the need to accompany them with reform of the operating structures of the institutions utilizing these funds so that the envisaged outcomes can be better realized.

Overall, while acknowledging that any budget must be seen in a policy continuum, and is one in a series of ongoing measures to reach national economic goals, the Chamber observes that the proposals contained in the Budget 2015 must be complemented with measures that help achieve the economic transformation envisaged by the government in its ‘Vision 2020’ and ‘Five Hubs’ strategies.

To achieve this transformation it is also important to avoid the current over-emphasis on subsidies and welfare transfers that have the unintended consequence of keeping people in low productivity and low income-generating economic activities.

Finally, the Chamber encourages the initiation of work towards an accrual-based accounting system for government finances, with a view to full implementation by the year 2020, in line with best practices adopted by other middle-income countries.

Foreign direct investment in to Sri Lanka doubles to US442mn in 1Q

Foreign direct investment in to Sri Lanka doubles to US442mn   in 1Q

29 May, 2014 12:31:17

May 29, 2014 (LBO) - Foreign direct investments into Sri Lanka doubled from a year earlier to 442 million US dollars in the first quarter of 2014, investment promotion minister Lakshman Abeywardena said.

He said 36 percent of the investments came into tourism, 26 percent into utilities, 15 percent into infrastructure, 7 percent into industry and 4 percent into apparel.

In the first quarter 40 new projects were approved, and 38 agreements signed.

During the first quarter 27 have begun construction and 26 firms have started operations, Abeywardena said.

In 2013 Sri Lanka had attracted 1,398 million US dollars worth investments.

This year Sri Lanka is expecting 1.5 billion US dollars Minister Abeywardena said.

Sri Lanka outlines 12% defence budget increase

Sri Lanka outlines 12% defence budget increase

Jon Grevatt, Bangkok - IHS Jane's Defence Industry 
28 September 2014
 
The Sri Lankan government proposed on 26 September a 2015 defence budget of LKR 285 billion (USD2.18 billion), a 12% increase over military spending in 2014.

The allocation - contained in the government's 2015 appropriation bill - amounts to about 16% of the total expenditure for the year and about 2% of national GDP.

The government provided no comment or supporting information about the defence budget, although unidentified official sources cited in local media said the increase was the first step of a drive to boost the defence budget to LKR370 billion by 2017.

ANALYSIS
While this pledged increase is significant, Sri Lanka's military will not be the sole beneficiary of investment.

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2015 தமிழீழ ஆக்கிரமிப்பு இராணுவ வரவு செலவுத் திட்டம்