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Monday December 11th, 2023

Sri Lanka analysts frown upon Wickremesinghe’s high defence budget 

Image credit: SL Army

ECONOMYNEXT – Sri Lanka’s budget experts raised concerns over higher defence allocation in 2023 budget and said the move gives wrong signal on rationalizing the public spending.

President Ranil Wickremesinghe in his capacity as the finance minister presented 2023 budget in the parliament on Monday (14) which was expected to signal the policies needed to move out of the county’s economic crisis including hard reforms to satisfy the International Monetary Fund (IMF) to help approve an already agreed $2.9 billion loan.

Wickremesighe, who is also the defence minister, allocated 539 billion rupees for both defence and public security, while allocating 322 billion rupees for health and 232 billion for education, the budget document showed.

High defence budget comes when the country’s armed forces are not fighting any external or internal war. Wickremesinghe, however, allowed armed forces personnel, other than special categories, to retire after 18 years of service. The earlier duration for voluntary retirement was 22 years.

“The elephant in the room is defence. We are spending over 500 billion rupees to maintain the triforces and police. That’s a huge amount of money,” Sujeewa Mudalige, the Chief Executive Officer at PricewaterhouseCoopers told a post-budget forum on Tuesday (15).

“It’s 13-years since the end of the conflict. I Think there needs to be a review on this. The quantum of defence doesn’t mean you are secure. If you take 10% of defence at 50 billion rupees to double Samuradhi or imagine health or education getting an additional 50 billion, what transformation will the country get?”

Since the final years of the war, Sri Lanka has always given the top priority to defence and the highest budget allocation had always been given to it because of a large number of armed and police forces, who were mainly recruited during the war.

However, the public have now started to raise questions about if high public resources allocation for the armed forces is rational as there is no war.

“The president spoke of a youth led economy. So imagine what an extra 50 billion would go to the national vocational training? In a few years our defence bill will be at a trillion rupees. We got to review this,” Mudalige said.

“We are happy with one aspect, the military retirement age being brought down to 18 years of service. But I believe it should be further reduced to 10-years because after they are 45 (years), it’s hard to train.”

No politician has antagonized military leaders since the final stage of the war and the military personnel had been highly regarded by the general public despite international probe against their alleged human rights violations in the final stage of the war.

Military since the end of the war has been in forefront in rescue service during time of disasters.

A negative perception about military has been on the rise since armed forces had been allegedly involved in attacking independent protesters in July near presidential secretariat and disperse them from the site where they protested for more than four months.

“Public sector expenditure rationalization is difficult. But my fervent request is we need to look at defence as a starting point,” he said adding that when the economy is contracting, a 64 percent revenue is a very difficult task referring to Wickremesinghe’s tax hike target.

Dushni Weerakoon, Executive Director of the Institute of Policy Studies of Sri Lanka (IPS) said the government should release resources from the expenditure side that is supporting unproductive activities.
“The public sector is number one, whether it’s the armed forces or general public service and reallocates those resources to sectors that drive growth as well as the poorer segments of the population,” she said. (Colombo/Nov15/2022)

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  1. sacre blieu says:

    When in distress or victims of disaster, when people in such dire situations, are to be immensely commended and admired for that humanistic sense of duty. forces never hesitate to come to the rescue of people. But to use these magnificent people for political manipulation or lawless direction, thus denying basic rights is very regrettable.

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  1. sacre blieu says:

    When in distress or victims of disaster, when people in such dire situations, are to be immensely commended and admired for that humanistic sense of duty. forces never hesitate to come to the rescue of people. But to use these magnificent people for political manipulation or lawless direction, thus denying basic rights is very regrettable.

Sri Lanka rupee opens at 327.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee opened at 327.00/50 to the US dollar on Monday, from 327.00/30 Friday, dealers said.

On the Colombo Stock Exchange, both indices opened up: The All Share Price Index 0.28 percent at 10,823, and the S&P SL20 0.35 percent at 3,113.85.

Bond yields were up.

A bond maturing on 01.08.2026 was quoted at 14.05/20 percent from 14.05/15 percent.

A bond maturing on 15.01.2027 was quoted at 14.05/20 percent from 14.10/25 percent.

A bond maturing on 01.07.2028 was quoted at 14.20/50 percent from 14.20/35 percent.

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Sri Lanka promoting Buddhist tourism from Vietnam, ASEAN

ECONOMYNEXT – Sri Lanka is planning to boost Buddhist tourism by linking temples in the country with those in East Asia, Foreign Minister Ali Sabry said after to welcoming a delegation of monks from Vietnam.

President Ranil Wickremesinghe, and Minister Sabry have initiated a temple-to-temple program where 100 Sri Lanka temples will be linked with counterparts in the Association of South East Asian Nations region.

“Tourism development will get a lot of growth with the temple-to-temple program,” Minister Ali Sabry said.

Along with the delegation of monks, five travel agents from Vietnam were also invited.

Under the first phase of the Temple-to-temple programs, several monks from Sri Lanka had received invitations from Indonesia, Malaysia, South Korea and Vietnam the Foreign Ministry said.

The Temple-to-Temple diplomacy program will be extended to Singapore, Japan, Thailand and Cambodia during the second phrase of the program.

Sri Lanka is targeting 2.3 million tourists in 2023, after getting about 1.5 million this year. (Colombo/Dec10/2023)

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ADB $200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”

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