Sri Lanka has no option than borrowing to bridge deficit:Amunugama
View(s):By Bandula Sirimanna
Sri Lanka has no option other than printing money or borrowing from foreign countries or lending institutions to bridge the gigantic budget deficit of Rs 500 billion, Deputy Minister of Finance, Dr. Sarath Amunugama said in an interview with the Business Times in Colombo this week.
Sri Lanka needs Rs. 1,700 billion as annual overall expenditure, as the annual income is only Rs.1, 200 billion, he revealed.
Dr. Amunugama predicted that the next economic boom would be experienced in African countries and therefore Sri Lanka should explore the possibility of entering these markets and strengthening relations with those countries which will get all the concessions from the US and Europe soon, he suggested.
“We are faced with a major challenge to fill the huge budget deficit. If we print money, it will create inflation in the economy. It will have a major impact on poor people. Every government tries to lower inflation. In my view, without increasing the salary of government servants, you should try to lower inflation” he said.
Under pragmatic financial management guidelines, inflation, which was at 20 per cent, has been lowered to 7 per cent. “Our aim is to bring inflation down to 5.2 per cent in 2013″, he added.
The government has to spend almost all of its revenue to pay salaries and pensions of public servants and politicians as well as to repay local and foreign loans and interest
There are 1.3 million public sector employees and over 600,000 pensioners at present, but there was doubt on their productivity and they want everything coming from the government… wasting state resources, he said adding that people have to undergo immense economic hardships due to the ever-escalating cost of living.
Incomes remain stagnant, while expenditure is on the rise. Dr. Amunugama was of the view that a country cannot go on spending more than it earns.
Another important factor in Sri Lanka economy was the foreign remittances of US$6 billion per annum being sent to the island by 1.3 million Sri Lankans working abroad mainly in the Middle East.
Most of this money is going straight into the lagging regions because the poorest of the poor are the people working in the Middle East or in Singapore or elsewhere, he said.
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