An Echelon Media Company
Tuesday February 27th, 2024

PREVIEW-Sri Lanka’s 2024 budget to see new welfare, revenue goals amid political concerns

  • Meeting IMF deficit target key to continue recovery
  • Tax on capital gain, primary dealings likely
  • Measures to expand tax net will be a focus in the budget
  • Surprise Parliament polls could be in second quarter

ECONOMYNEXT – Sri Lanka’s 2024 budget which will be presented to the parliament on Monday (13) is likely to focus on new welfare measures amid steep fall in government’s popularity among the public while new revenue measures are expected in line with meeting IMF targets, government officials say.

President Ranil Wickremesinghe will present a tough budget that has least room for maneuvering as his hands are tied with the commitments the government has made for the economic recovery program with the International Monetary Fund (IMF).

The 2024 budget presentation comes as the island nation is waiting for the second tranche of the IMF’s $3 billion loan. Though both the IMF officials and Sri Lankan authorities have concluded the staff level agreement, the global lender’s executive board is yet to approve the disbursement of around $330 million second tranche.

“The budget will be an acid test for this government. If it is completely going with the IMF targets, then people will have to pay more taxes on the one hand.  On the other hand, it will have to reduce taxes to reduce cost of living,” a senior government official who has knowledge of the 2024 budget policies told EconomyNext.

“President Wickremesinghe might lose his government if he leans too much to IMF policies and he might lose his fight against economic war if he is going to satisfy the public sentiment. It is really tough.”

AMBITIOUS TARGETS

According to Sri Lanka’s commitment to the IMF, the government will have to raise the state revenue to 13.3 percent of the Gross Domestic Product (GDP) from this year’s estimated 11 percent, an IMF March 2023 Staff Report showed.

The public debt, which was at 128.1 percent of the GDP last year is expected to be reduced to 108.5 percent in 2024 from this year’s estimated 111.2 percent.

Government officials said the budget will include enough measures to achieve revenue targets agreed with the IMF next year and Wickremesinghe’s digitalization strategy will help boost the tax revenue further.

“Tax on capital gain and transaction of primary dealers are likely. Some of the tax exempted sectors and industries will be brought into the tax net. A new strategy will be introduced to coordinate the three tax collecting bodies,” a senior government official who is in the close circle of the 2024 budget formulation, said.

“This country is doomed to plunge further if there are not tough measures on increasing tax revenue and eliminating corruption. We cannot go forward with them.”

REVENUE TO PICK UP IN MARCH 2024

President Wickremesinghe has said the revenue will see a boost by March next year when the digital payment system starts to take of the ground.

Wickresimghe’s government is in the process of external debt restructuring, though no pressure is expected on the 2024 budget because foreign bilateral and commercial creditors are likely to grant some grace period before Sri Lanka starts to repay defaulted sovereign debts, analysts say.

However, the government’s commitment towards an IMF loan and bringing down the country’s debt to a sustainable level are the key factors keenly watched by the island nation’s creditors.

The budget also is likely to introduce some practical measures on Sri Lanka’s governance-related issues, anti-corruption policies, and targeted subsidies in line with the IMF conditions, the senior government official said.

Sri Lanka’s stabilization process after the country declared bankruptcy in April last year has seen some recovery, but at the expense of higher taxes for a small group of taxpayers.

“But this time, the expansion of the tax net will be a reality. The government is already working on property, wealth, and inheritance taxes. Now it’s a matter of data collection and digitization before implementing them,” the senior official said.

POLITICS BEHIND THE BUDGET

Many officials said President Wickremesinghe is likely to focus on channeling the subsidies and the government’s transfer payment like Aswesuma to the people who are really in need of them.

And the move is an unpopulour measure among some of the ruling Sri Lanka Podujana Peramuna (SLPP) legislators, who are divided on backing Wickremesinghe’s 2024 budget.

The SLPP officially has written to the President of its demands to support the budget.

Sources close to the President said the demand include continuation of the Samurdhi program, which is also given to more affordable people by the previous governments led by current SLPP politicians, continuation of fertilizer subsidy, resuming to grant the decentralized fund for legislators, and not laying off state sector staff reforming state-owned companies.

Wickremesinghe, however, has yet to accommodate the SLPP demands, his close allies say.

“This is the reason he may go for a parliamentary poll in March or April next year,” a presidential source said.

“The SLPP might not agree with the whole budget. But the president is more focused on the overall economy than his future politics. So, he may not give into all SLPP demands.” (Colombo/Nov 13/2023)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka parliamentary committee says electricity tariffs should be reduced by 20 pct

ECONOMYNEXT — A parliamentary Sectoral Oversight Committee on Alleviating the Impact of the Economic Crisis has recommended to the Public Utilities Commission of Sri Lanka (PUCSL) that electricity tariffs be reduced by at least 20 percent.

A statement from parliament said on Monday February 26 that, following an analytical review of the figures presented by the Electricity Board, Public Utilities Commission, etc. and taking into consideration all other factors affecting the price of electricity, including considering the opinion given by experts that the existing electricity price can be reduced by about 33%, price of electricity should be reduced by at least 20% in the year 2024 so that the state-run Ceylon Electricity Board (CEB) will not suffer any loss.

PUCSL officials have informed the Committee that by the end of this month, they can submit the necessary recommendations to reduce the electricity bill, according to the statement.

The matter was taken up for discussion when the committee, chaired by MP Gamini Waleboda, met in the Parliament on February 22.

Officials from the Ministry of Industry, Ministry of Finance, Central Bank of Sri Lanka, Public Utilities Commission, Industry Development Board, Enterprise Development Authority, Department of Population and Statistics, Department of Inland Revenue and from government institutions including the Micro, Small and Medium Scale Industries Board and a group of industrialists had also been called for the meeting.

“The Committee gave several directives to the relevant institutions and officials to identify the micro, small and medium scale industries that are directly affected by the economic crisis and to activate the local economy and increase the foreign exchange earnings by reviving the industry sector.

“The Committee pointed out that due to the increase in electricity bills, the number of electricity connection cuts reported across the island has exceeded one million. It was also emphasised that in order to alleviate the pressure on the industry and the society, it should be arranged to provide electricity connections again by charging only 50 percent of the outstanding charges at the initial stage with the concessional basis of payment of outstanding electricity charges on installment basis,” the statement said.

The committee was also of the view to allow the customer to pay the connection fee in installments so as to avoid discouraging new entrepreneurs to start micro, small and financial industries due to high charges for getting fixed electricity connection and instructed to review the new connection fee and work to reduce it as much as possible.

The committee chair has instructed the PUCSL to conduct an audit on the electricity consumption in the public sector as an approach to ensure energy security.

“The Committee recommended to the Ministry of Finance and the Central Bank to start a loan scheme at subsidised interest for the purchase of solar panel systems with a view to promoting solar energy as a source of energy supply to industries. The Ministry of Finance expressed its agreement to provide refinancing facilities subject to a maximum as per the proposal made by the Committee to implement a loan scheme targeting micro, small and medium scale industrialists under subsidized interest rates.

The committee has also recommended that raw materials that must be imported from abroad and impose tax concessions on such raw materials be identified to ensure the supply of raw materials required for the smooth running of micro, small and medium scale industries. Copper, lead, aluminum and other industrial scraps used as raw materials in various domestic industries currently being sold by the CEB to external buyers and other entities should also be issued to micro, small and medium scale industrialists recommended by the Ministry of Industry and the Industrial Development Board, the committee has recommended.

The definition used by the Department of Population and Statistics for micro, small and medium industries and the definition used by other institutions such as the Industrial Development Board and the Central Bank for those industries are different from each other, which is an obstacle in making policy decisions, the committee had noted, directing the Department of Population and Statistics to support to the policymakers by releasing statistical data based on a common definition.

“The committee also recommended that the Credit Information Bureau should take prompt action to remove their credit information from the blacklists so as to facilitate access to credit facilities for micro, small and medium scale industries facing financial crisis to activate their balance sheets and to review all existing laws and procedures for registration of micro, small and medium scale industries as well as to obtain licenses and introduce a simple system.

“The committee informed all the parties to establish a steering Committee headed by the Ministry of Industry to implement the recommendations given by the Committee and to report its progress within a week,” the statement said. (Colombo/Feb27/2024)

Continue Reading

Sri Lanka sets up fund to help children of Gaza

The United Nations Relief and Works Agency for Palestine Refugees in the Near East is mandated to provide education, health, relief and social services, and emergency assistance to refugees. (Pic courtesy UNWRA)

ECONOMYNEXT – Sri Lanka’s cabinet of ministers have approved a proposal by President Ranil Wickremesinghe to set up a fund to help children caught in the war in Gaza, a statement said.

The government will contribute a million US dollars and use funds allocated by state agencies for Ifthar celebrations.

Public contributions are also called.

The Presidential Secretariat is requesting public donations citizens for the “Children of Gaza Fund” to be contributed to account number 7040016 at Bank of Ceylon (7010), Taprobane Branch (747) by 11th April.

Deposit receipts should to be forwarded to 0779730396 via WhatsApp. (Colombo/Feb27/2024)

Continue Reading

Top US official calls for inclusive reforms, deeper defence ties with Sri Lanka

ECONOMYNEXT — United States Deputy Secretary of State for Management and Resources Richard Verma in discussions with Sri Lanka officials had called for inclusive reforms and stronger human rights and also discussed deeper defence and maritime cooperation.

The United States remains committed to the economic growth and prosperity of Sri Lanka, statement from the US Embassy in Colombo quoted the official as telling government, civil society and economic leaders during his February 23-24 visit to Sri Lanka.

“Verma met with President Ranil Wickremesinghe and Foreign Minister Ali Sabry to discuss progress on Sri Lanka’s IMF program, including inclusive economic and governance reforms aimed at keeping Sri Lanka on the path to sustainable economic growth.  Deputy Secretary Verma stressed the vital need to protect human rights and fundamental freedoms, including freedom of expression. They also explored opportunities to deepen defence and maritime cooperation between the United States and Sri Lanka, including strengthening the Sri Lanka Navy’s capabilities to safeguard national security and promote a more stable Indo-Pacific region,” the statement said.

 On February 23, aboard the SLNS Vijayabahu, one of three former U.S. Coast Guard cutters transferred by the United States to Sri Lanka, Deputy Secretary Verma said: “I am pleased to announce that the Department of State has notified Congress of our intent to transfer a fourth medium endurance cutter to Sri Lanka.  The Department obligated $9 million in Foreign Military Financing to support this effort.  We look forward to offering the cutter, pending the completion of Congress’ notification period.  If completed, this transfer would further strengthen defense cooperation between the United States and Sri Lanka.  The ship would increase Sri Lanka’s ability to patrol its Exclusive Economic Zone, monitor its search and rescue area, and provide additional security for ships from all nations that transit the busy sea lanes of the Indian Ocean.” 

 Participating in the announcement at Colombo Port were Sri Lanka State Minister of Defense Premitha Bandara Tennakoon, Commander of the Sri Lanka Navy Vice Admiral Priyantha Perera, and U.S. Ambassador to Sri Lanka Julie Chung, who remarked, according to the statement: “The United States has previously transferred three cutters to the Sri Lankan Navy, which deploys these ships for maritime operations and law enforcement missions, countering human trafficking and drug trafficking, while supporting humanitarian assistance and disaster response efforts. The eventual transfer of a fourth vessel would be just one more point in a long history of cooperation between Sri Lanka and the United States in preserving a free and open Indo-Pacific region.” 

Verma also visited the site of the West Container Terminal (WCT), a deepwater shipping container terminal in the Port of Colombo. The WCT, currently being constructed by Colombo West International Terminal (CWIT) Private Limited with 553 million US dollars in financing from the U.S. International Development Finance Corporation, will provide critical infrastructure for the South Asian region, the embassy said.

“Operating near capacity since 2021, the Port of Colombo’s new addition will be the port’s deepest terminal and aims to boost Colombo’s shipping capacity, expanding its role as a premiere logistics hub connecting major routes and markets, boosting prosperity for Sri Lanka without adding to its sovereign debt,” it said. (Colombo/Feb27/2024)

Continue Reading