BUDGET: Sri Lanka faces fiscal crisis of its own
Sri Lanka is facing a fiscal crisis of its own, as the government struggles to rein in a widening budget deficit.
With 2013 budget targets already gone awry, the government will present the 2014 budget next month with subdued revenues, high fiscal deficit, sticky expenses, optimistic projections and heavy local and foreign borrowings.
The 2014 budget deficit is to reduce to 5.2 per cent of GDP 6.5 per cent in 2013 and it will be primarily funded by domestic borrowings (domestic 65 per cent and foreign 35 per cent), government sources said
The preparation of Budget 2014 has been completed adhering to the Medium Term Expenditure Framework 2014-2016.
Under this, government expenditure is estimated at around Rs 2.62 trillion.
Allocations for Defence & Urban Development and Education will increase to around Rs 320 billion and Rs.312 billion, respectively.
The allocation to the health budget is Rs.150 billion, up by Rs. 25 billion from the 2013 allocation of Rs.125 billion.
The budget proposals are aimed at encouraging development by expanding infrastructure facilities and strengthening financial management, the principal target of this strategy is to raise per-capita income to over US $4,000, officials said.
Many projects are being implemented at rural, regional and urban levels covering social, economic and environmental sectors to achieve these targets.
The 2014 Budget will give priority to timely completion of such projects to ensure that the expected benefits of those projects will reach the general public at the earliest, they said.
Certain long-term measures have been proposed to encourage exports as well as substitute imports to improve the external sector.
Broadly the direction is a continuation of the direction set in the previous budget proposals as no major changes are proposed on the revenue side, sources revealed.
As part of its cuts, the government will continue the public sector salary bill as it is, despite the persistent rise in the prices of essentials.
However the president as the finance minister of the country intends to grant an allowance for public sector employees and some benefits and concessions to government pensioners through the next budget, the sources added.
Sri Lanka will introduce a national policy on wages of employees for the first time in history to make salary revisions applicable to both the public and private sectors.
A Presidential Salaries Commission is to be created by the President to devise this national policy and settle salary anomalies of employees, officials said.
Anton Marcus, General Secretary of the Free Trade Zones & General Services Employees’ Union (FTZ&GSEU) told the Business Times that he had brought to the notice of the president at a pre- budget meeting with unions the urgent need to appoint the commission.
He said he had proposed that independent trade union representation should be included in the proposed commission and also urged that a Rs. 5000 budgetary allowance for employees be announced in the 2014 budget.
He noted that the Joint Trade Union Alliance (JTUA) in Sri Lanka has submitted a set of 21 proposals to the Finance Ministry to be included in the 2014 budget proposals.
The alliance will hold meetings in public sector institutions like the CEB, Petroleum Corporation, Public Administration Ministry to create awareness on their proposals and to unite all employees to exert pressure on the government to implement those proposals.
Wasantha Samarasinghe, member of the Joint Trade Union Alliance, said the proposals were prepared by the alliance according to the financial crises faced by the people due to the increase in cost of living and decline in purchasing powers.
“Concessions promised by the government in previous budgets have not been granted and the people’s living conditions have declined,” Mr. Samarasinghe said.
He added that while some concessions are offered to the public sector employees in successive budgets, the private sector employees who contribute the most to the country’s economy have been ignored.
Meanwhile to encourage the local value-added industries, cess is to be increased or imposed on the import of electrical appliances including refrigerators, table fans, etc, leather products including footwear as well as canned food, pharmaceuticals, dairy products, sugar, textile and, apparels etc, the government sources said.
The Government is also expected increase taxes on foreign liquor and beer as well as import and export Cess imposed on frozen vegetable, dried vegetables, fresh mandarin, wheat flour, malt extract, ferrous waste and scarp iron bars and rods, alloy steel, iron tubes and pipes.
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