Dilemma in allocating funds for 2019
Sri Lanka’s dilemma on allocating funds for the year 2019 continues even after the endorsement given by the cabinet of ministers newly appointed by President Maithripala Sirisena for the 3-month Vote on Account this week as it needs parliamentary approval to draw for expenditure from the consolidated fund, official sources said.
According to Article 150 of the Constitution,” the Government may withdraw funds from the consolidated fund once Parliament passes a resolution or a law, granting a specific sum of money for a specified public service to be spent in a particular financial year.”
Once Parliament authorises the warrant under the signature of the Minister of Finance, the withdrawal of the specified amounts can be done.
The ruling UPFA government newly appointed by the President will present the vote on account in Parliament next week and enact it with a majority vote in the legislature, cabinet spokesman Dayasiri Jayasekara disclosed.
Without a legitimate settlement for the current political impasse, the Finance Ministry will find it difficult to make payment for the salaries of public sector employees, pensions, Samurdhi beneficiaries and public welfare programmes for at least the first three months of 2019, official sources said.
If the vote on account is defeated in Parliament, the President has powers under the Constitution to sanction the payments for public services including salaries of public sector employees and the general election expenditure withdrawing money from the government consolidated fund for three months, a senior cabinet office official said.
However according to Treasury statistics, the consolidated fund has been over-drawn to the tune of around Rs. 250 billion at present for state expenditure. No money from state institutions including state owned enterprises is forthcoming to the fund and the Treasury cannot resort to borrowings to swell the consolidated fund, he revealed adding that sudden dissolution of parliament without passing a vote on account will push the country into a further financial crisis.
Aggravating the financial situation further, newly installed Finance Minister Mahinda Rajapaksa has instituted tax reductions recently causing a massive revenue slippage next year as there was no way to present revenue proposals in a 3- month vote on account.
Fifteen tax revisions will come into effect from January 1 next year on the directions of the Finance Ministry if those amendments are approved in parliament.
Out of this three such tax measures – Telco levy reduction, VAT threshold increase and WHT on interest income – would result in a revenue loss of around Rs. 75 billion, a provisional calculation made by an eminent tax consultant revealed.