Sri Lanka hikes ceiling for deposit subsidy; annual cost Rs18bn

ECONOMYNEXT – Sri Lanka’s Finance Minister Ravi Karunanayake has raised the ceiling on deposits by senior citizens eligible for a taxpayer subsidized 15 percent interest to 1.5 million rupees from 1.0 million, the finance ministry said.

Taxpayer had forked out 13 billion rupees in 2016 to pay the difference between market rates and the subsidized rate with the number of depositors rising to 450,000 from 91,000 in 2015.

The interest subsidy this year is expected to rise to 18,000 billion rupees.

The new ceiling will be effective from March 01.

By February subsidy eligible accounts had risen to 500,000 the finance ministry said.
Sri Lanka’s budget deficit expanded in 2015 as state salaries and subsidies were raised.

The rupee collapsed as money was printed to finance the deficit and foreign investors also fled as the central bank cut interest rates by printing money as credit demand rose.

However in 2016 taxes were raised and exemptions on deposit interest was removed and the government is now collecting more taxes from the people to finance subsidies. (Colombo/Feb15/2017)

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