Sri Lankan budget to avoid tough choices as risks mount
Sri Lankan Finance Minister Ravi Karunanayake will seek to boost tax revenues and rationalise spending in the new government’s first full-year budget on Friday, but analysts see him showing little commitment to fiscal consolidation.
The coalition government’s formation in August helped complete a peaceful political transition after a long and bitter civil war, but the Indian Ocean island’s young government lacks a steady financial base to launch reforms.
The International Monetary Fund recently urged Sri Lanka to take “immediate and credible steps” to curb the budget deficit and reduce public debts. One analyst has even warned that a balance of payments crunch could loom next year without decisive action as Sri Lanka runs low on foreign reserves.
“These low reserves levels will leave Sri Lanka susceptible to a balance of payments crisis in 2016,” Eurasia analyst Sasha Riser-Kositsky said in a report.
“We believe that in such a scenario the government would approach the IMF, a step it has thus far avoided given that an IMF programme would require further unpopular reforms.”
Karunanayake’s 2016 budget will only reduce the deficit slightly from this year’s expected 6.9 percent of gross domestic product – which is much higher than an original estimate of 4.4 percent.
The government’s medium-term economic strategy foresees cutting the deficit to 3.5 percent of GDP by 2020.
Karunanayake has said the budget would be capital-oriented with a revenue surplus, raise taxes on some sectors without imposing extra costs on ordinary people, and avoid layoffs in the bloated public sector.
“It will be a completely revolutionary approach,” the businessman-turned-politician told the Foreign Correspondents Association last week, promising steps to attract foreign investors.
Many analysts expect the budget to focus on gradual reforms such as simplifying taxes, encouraging greater use of the formal financial system, lowering barriers to foreign investment and land ownership, and restructuring state firms.
W.A. Wijewardena, an economist and a former deputy central bank governor, said the government would have to raise tax revenues to keep its election promises not to cut subsidies and to raise pay for government workers.
President Maithripala Sirisena’s government has struggled with fiscal consolidation since coming to power after the Aug. 17 polls, bogged down with unexpected cost from contracts signed under the past government.
The government has estimated borrowing, both from local and foreign sources, at 1.35 trillion rupees ($9.5 billion).
However, analysts say the government is likely to face pressure on foreign borrowing and the balance of payments next year due to an expected rise in U.S. interest rates and $3.6 billion in debts that fall due in the first nine months of 2016.
($1 = 142.2000 Sri Lankan rupees)
(Reuters)
Latest Headlines in Sri Lanka
- Sri Lanka welcomes 2 millionth tourist, marking historic milestone December 26, 2024
- Sri Lanka Police introduces nighttime traffic rules to enhance safety December 26, 2024
- Today marks 20 years since 2004 Tsunami Disaster December 26, 2024
- Wasantha Handapangoda passes away December 25, 2024
- PM Harini Amarasuriya calls for togetherness, gratitude, and peace this Christmas December 25, 2024
It is matter of time before Sri Lanka ends up like Greece inevitable with a idiot like Karunanayke who is always seen with a gold plated pen trying to balace a budget which keeps spiralling to maintain a do nothing goverment.
The public should be told that this is a token budget to live with tradition and at the end of the budget which as usual will never be debated for Karunanayake at the end there would be additional taxes that Karunanayake forgot to add and this would come within a month . This is because Karunanayake failed to come upto the expectations of the donors donors who can be hoodwinke sometimes but not all the time.
Where did Karunanayake pick his doctorate from!
It is disgusting to note a fellow human being by the name of Ravi Karunanayake being called ‘con-doctor’ and ‘stupid’ by a fellow blogger.
This ignoramus blogger has forgotten that we are are equal in the eyes of the Lord Buddha; it does not matter whether we have one testicle or two or none; we are all equal.
Ravi K is doing a difficult job of trying to set the exchequer on growth curve following 10 years of plunder of the national wealth.
I have evidence to demonstrate value of commissions paid to key stakeholders for a project valued at US$100m in 2009, amounts to a staggering US$40m.
The plunder of national wealth in the years ending 2015 had reached monstrous proportions. The plunder included hidden treasures in our own lands.
Ravi K is doing a tough job; all the best to him.
A basic elment in a budget is to declare the total revenue (likely the GDP) and then budget the expenditure. If the allocated expenditure is in excess of the GDP and you need not be rocket scientist conclude that there is going to be a defecit. Government has the authority to print money to cover this deficit print more money and this excess is inflation ie mismatch between production and consumption.
.
Ganja you can speak for yourself as to how clever you are but then Sri Lanka is riddled with con artists
and these guys are the architects of corruption and go about with titles and your mentor Karunanayake is no exception. Since you raised the issue I tracked his credentials. Correct me if iam wrong wise guy for there is no record of his going to university and then the legitimacy of a post graduate qualification is a first degree and then his speciality.
You must be a complete idiot not to recognise the inequality that prevails and the gap is widening mainly because of the misguided policies of the likes of Karunanayake. Further you claim that you have the intelligence to a 100 dollar scam and the bribes (commissions) given to execute the scam……
When you talk of growth what do you mean before you write about simulations.
He is indeed doing a good job and he cannot go wrong with halfwits like you baking him Ganja