Sri Lanka to have long term budget in 2016: Ravi

ECONOMYNEXT – Sri Lanka will have a ‘long-term’ budget in 2017, finance minister Ravi Karunanayake said as the country moves towards a more prudent fiscal policy under a deal agreed with the International Monetary Fund.

In 2015, a massive state salary hike and subsidies hit the poor and private sector wage earners as the rupee collapsed, sending prices up and destroying their real salaries and lifetime savings.

Sri Lanka will meet 5.4 percent of gross domestic product deficit targets, Karunanayake said.  For 2017, Sri Lanka is expected to target a deficit of 4.7 percent of GDP.

Sri Lanka delayed an increase in value-added tax needed to bring revenues in line with salary and subsidy hikes made in 2015 after activists went to court to prevent it from being imposed on the people by ministers’ prerogative instead of by parliamentary consent.

Analysts say, if the budget is less profligate, even if no new subsidies (called ‘sahana’) are given, the poor and private sector workers will benefit from a stable economy with low inflation.

Critics say ‘people friendly’ or ‘sahana’ budgets, which help politicians pander to special interests like state workers and other tax-spenders, de-stabilise the economy, dragging people in productive sectors back two steps.  (Colombo/Oct03/2016)

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