Under-fire Treasury Secretary struggles to balance budget
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By Bandula Sirimanna
Plagued by financial constraints, the Treasury is resorting to local commercial borrowings anticipating difficulties in raising revenue through taxes this year, informed sources said.
The Treasury officials are yet to work out modalities on balancing the revenue account as the 2013 budget proposal restricted foreign borrowings to Rs. 86 billion (aroundUS$675 million) from Rs. 205.6 billion in 2012 (US$1.6 billion), these sources revealed.
Sri Lanka is experiencing an erosion of the tax base as the financial authorities had to downgrade the tax revenue from the projected 12.7 per cent of GDP in 2012 to 12.2 per cent, official sources said.
It is hoped to compensate the tax revenue reduction this year through the Central Bank profit transfer like in previous years, they disclosed.
In the face of a worrisome balance of payment crisis, Treasury Secretary Dr. P B. Jayasundera has not issued any directive to treasury officials during the past few weeks as he was under fire from government top ranks, Finance Ministry sources said.
There was a plan to increase local borrowings from state banks, but it cannot be materialized as these banks are also under financial constraints due to the increase in salary bills as a result of thousands of new recruitment and overhead expenses, these sources revealed.
Dr. Jayasundera has tried to seek a loan of US $ 1 billion from IMF to finance the government’s budget for 2013 in accordance with the Budget announcement that it will not go for any more commercial borrowings from international markets this year.
But it has failed, as the treasury has sought quick money from the IMF without strict conditions.
The sources said that the IMF gives loans only to central banks in member countries to tackle balance of payment crises and had duly informed Treasury officials during recent discussions.
There is an exception to this only when a country faces a severe economic crisis, officials said.
The Treasury is struggling to meet day to day expenses of the government and it has borrowed a sum of over Rs. 8 billion from the funds of Telecommunication Regulatory Commission and Rs. 800 million from National Lotteries Board, informed sources said.
According to Finance Ministry officials, Dr. Jayasundera is highly frustrated with the outburst of Housing Minister Wimal Weerawansa who started publicly attacking him as an ‘economic assassin’.
The reason for the anger of Weerawansa was the rejection of four housing project reports submitted by him to the Treasury seeking new funds, they said.
Dr. Jayasundera was completely against the utilising of public funds for unviable projects and he had also rejected a similar request made by another highly influential young MP recently, official sources revealed.
He became highly unpopular among top government ranks due to these reasons, they said.
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