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CBSL limits money printing: Govt. wants revenue raised by Rs. 450bn
View(s):By Damith Wickramasekara
With strict restrictions on money printing now in place owing to the new Central Bank of Sri Lanka (CBSL) Act, the Government has tasked agencies such as the Departments of Inland Revenue, Excise and Sri Lanka Customs with raising between Rs. 400 billion and 450 billion in revenue to overcome the shortfall.
With the new CBSL Act being effective from Friday, the CBSL’s ability to print money will be severely limited and will only be allowed under exceptional circumstances, such as a global health emergency.
This has posed a significant challenge to the Government, with a senior Treasury official noting that the CBSL usually printed nearly Rs. 600 billion for every Budget, while more money was also printed to pay salaries, welfare benefits and for funding local development projects.
“It will be a huge challenge given that we printed Rs. 3 trillion over the past few years for various government expenses,” Acting Finance Minister Ranjith Siyambalapitiya told the Sunday Times. Excessive money printing had hastened the country’s fall into bankruptcy, the minister pointed out.
He said the government was looking at several methods to raise revenue up to Rs. 400-450 billion to make up for the shortfall after pausing money printing.
One strategy is to have the updated Revenue Administration Management Information System (RAMIS) up and running at the Inland Revenue Department by the end of this year. Mr Siyambalapitiya said the government had also identified a large segment of the population who should be paying taxes but continue to be outside the tax net. Therefore, new laws would be introduced to widen the tax base.
He noted that the Government had already asked those who are aged 18 and above to open tax files. This measure too would enable the Government to identify various professions that should come under the tax net.
Sri Lanka Customs, meanwhile, has proposed further streamlining the single window system, which centralises tax collection.
The Excise Department is working to investigate the scam related to liquor bottle security stickers and ensure companies pay taxes due from them. More action will be taken to crack down on illicit liquor, Mr Siyambalapitiya added.
Government ministries would be instructed to further cut down on expenditure. This would include cutting down on expenditure for functions and halting all planned building projects deemed non-essential, he said.
The CBSL will also be required to accurately forecast inflation and work towards achieving the set inflation target while the CBSL Governor will be summoned before Parliament to answer questions related to any financial issue, according to the Act.
The Treasury Secretary, however, will no longer be able to issue instructions to the CBSL. The Bank will be led independently by a Board of Governors. A coordination committee will be appointed to ensure a link is maintained between the CBSL and the Treasury, in terms of the Act.
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