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Eran takes govt. to task for errant policies

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By Saman Indrajith

Samagi Jana Balavegaya MP Eran Wickramaratne warned in Parliament Thursday that Sri Lanka should prepare for its worst budget deficit in 35 years and the situation, which he said was due to the policy errors of the government.

 “Expenditure increases during a health crisis but that is not what has happened. Capital expenditure came down during this period. The crisis has occurred due to the collapse in government revenue. This is the policy errors, which, he said, had to be rectified urgently. He was taking part in the debate on six notifications under the Ports and Airports Development Levy Act, three Orders under the Customs Ordinance and six Orders under the Revenue Protection Act presented to the House for approval by the government.

Wickramaratne said that under the previous government, Sri Lanka had achieved and improved fiscal position after several years with the budget deficit kept at 5.3 per cent of GDP during that period.

“This however began to deteriorate by the end of 2019 because of the government‘s irresponsible statement, in the run up to the election, on taxes and while the fiscal position has deteriorated, the situation has got progressively worse in 2020.

“Government revenue has declined by 28 per cent compared to 2019. Recurrent expenditure has increased by l0 per cent. The budget deficit has increased by 41 per cent. Development spending that is capital expenditure has decreased by -1.1 per cent. And the government debt has increased by Rs. 1.020 billion in just six months rising from 13,000 billion to over 14.000 billion from January to June in 2020.”

MP Wickramaratne said that the fiscal results would get worse as the year progressed with an additional cost of a 10 per cent increase in the government staff cadre.

The import ban would begin to hit government revenue in the second half. “Corporate taxes will be sharply down and Sri Lanka should prepare for its worse budget deficit in 35 years,” he said.

The SJB MP said that in spite of the reduction in tax relief to the public there had been no benefit felt by the people.  “Prices of essentials have in fact increased despite the reduction and exemption in some taxes. Food price inflation reached 12.9 in July. The national consumer price index reached 6.1 per cent in July. These are not our statistics. These are statistics coming out of government departments,” he said.

MP Wickramaratne said the previous government had been able to rectify a regressive tax system.  The direct “tax percentage was 25 per cent in 2019 and 75 per cent was indirect tax. When we took responsibility for the government, the direct taxes were only 12 per cent and we have been able to correct a regressive tax system taking away or lessening burden on the poor in this country.”

The external sector as a result of the poor fiscal management had also lost the opportunity in the global capital markets and the country was paying its external debt by running down the reserves.  By the middle of 2019, the government reserves had been USD 859 billion, Wickremaratne said. But within one year in June 2020, the reserves were USD 6.7 billion. Therefore, there were major debt repayments. In 2020, 2021 and 2022, Sri Lanka would have to pay mainly on sovereign bonds. Sri Lanka had another USD 4 billion debt maturing in 2020 and 2024.

The country’s debt was about 87 per cent of GDP and of this 57 per  cent of was foreign debt, non-concessional as opposed to only 2.5 per cent, 15 years ago, Wickramaratne said, adding that most of the non-concessional borrowings of 75 per cent equal to US Dollars 15.3 billion were international sovereign bonds. “China has now displaced Japan as the largest bilateral creditor to Sri Lanka amounting to 12.4 per cent of government debt. Out of $ 4.1 billion of Chinese lending to Sri Lanka, only $ 760 million are classified as official bilateral debt. The rest are considered as commercial.”

MP Wickramaratne said that external debt in Sri Lanka was predominantly by the public sector and very high in relation to current account receipts. The pressure would intensify in 2020, when current account receipts would fall sharply amidst the down turn in tourism, exports, remittances and capital markets financing costs as they go up.”

He added that the government had an issue with State-Owned Enterprises (SOEs) particularly as they had issued guarantees to the Ceylon Petroleum Corporation (CPC), the Road Development Authority (RDA), the National Water Supply and Drainage Board, Ceylon Electricity Board (CEB) and SriLankan Airlines. “SOEs like CEB CPC and SriLankan Airlines are problematic for every government and therefore, we need to restructure the debt. Giving government guarantees is only manhandling the data, making the government look good.” Eventually that risk is not a contingent liability.

Wickramaratne charged that the government had mishandled the fiscal part at the beginning and then turned to the Central Bank and wanted the CB to do something about the monetary space.

“Despite the fact you forced out two members of the Monetary Board, Dr. Dushni Weerakoon and Nihal Fonseka, and despite the threat to senior members in the CB, it is not a matter of people, it is a matter of policy that you need to correct. They have done their utmost. They have provided the liquidity, but the credit growth in May, June and July has been negative. It cannot be solved only on the monetary side because you have little space on the fiscal side.”



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PMB declines to release Rs 1.2 bn FD for paddy purchasing

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Treasury forced to bear responsibility for Rs 2 bn in loans

By Shamindra Ferdinando

State Finance Minister Ranjith Siyambalapitiya has said that the State Banks weren’t in a position to release funds to the Paddy Marketing Board (PMB) as the enterprise owed them a staggering sum, running to over Rs 20 bn.

Due to the failure on the part of the state enterprise to settle previous loans, the Treasury has been compelled to accept the responsibility for repaying them, the State Minister said.

The Kegalle District lawmaker said so on the live political programme, Salakuna, telecast on Hiru on Monday night. The State Minister was responding to interviewer Chamuditha Samarawickrema’s query regarding the inordinate delay on the part of the government to implement the paddy purchasing scheme.

Referring to Agriculture Minister Mahinda Amaraweera’s abortive efforts to obtain the required funding, lawmaker Siyambalapitiya said that the Treasury was helpless.

State Minister Siyambalapitiya said the PMB couldn’t be faulted for the crisis as successive governments had directed the state enterprise to purchase paddy at a higher price, then ordered it to sell at a much lower price, thereby causing staggering losses.

The State Minister also acknowledged management level shortcomings and political interventions caused the ruination of the PMB.

The PMB owed the Bank of Ceylon and the People’s Bank Rs 1,600 mn and Rs 690 mn, respectively.

The State Minister acknowledged that the issue couldn’t be resolved in spite of interventions made by President Ranil Wickremesinghe and Premier Dinesh Gunawardena. Referring to a subsequent discussion he had with the Secretary to the Treasury Mahinda Siriwardana, lawmaker Siyambalapitiya said that the BOC has asked for Rs 1.2 bn fixed deposit as security though the PMB declined to do so. According to the State Minister the PMB asserted that it couldn’t forgo the fixed deposit as the

interest received was utilized for day to day running of its operations.

The State Minister said that the banks could release the required funding on the basis of a guarantee given by the Treasury. The lawmaker explained the inability on the part of the Treasury to give such a guarantee as further deterioration of public finance could have a devastating impact on the banking sector. Such an eventuality couldn’t be allowed, the SLFPer said.

The Minister acknowledged that the failure on the part of the government to launch a paddy purchasing scheme would dishearten the farmer community.

Chamuditha Samarawickrema pointed out that the private sector had managed their ‘operations’ in a much better way.

The State Minister said that the situation was so bad that of the recent Rs 93 mn public sector salary bill, the government could meet Rs 82 mn. The government had no option but to ask those state enterprises to pay salaries from their funds, pending repayment, the MP said, reiterating the Treasury couldn’t help the PMD at the moment.

Responding to further questions, the State Minister said that the government would definitely give priority to the PMD issue once they finalized public sector salary payments. The Minister urged the media not to pursue an agenda detrimental to the government’s recovery efforts. Asked to explain, the State Minister said that there had been accusations the government didn’t purchase paddy to clear the field for the private sector. The Hiru team pointed out that the banks had released substantial amounts to the private sector to purchase paddy. The Minister explained the banks tried their best to help but circumstances were such the government couldn’t help at the moment.

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PSC proposes amendment to Children and Young Persons Ordinance

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A meeting of the Parliamentary Select Committee to ensure gender equality in progress. Among those present were lawmakers Rohini Kaviratne, Sudarshini Fernandopulle, Dr. Seetha Arambepola and Deputy Secretary General of Parliament Kushani Rohanadeera (pic courtesy Parliament)

The Parliamentary Select Committee to ensure gender equality has decided to propose amendments to the Children and Young Persons Ordinance to consider all those below 18 years as children.

The PSC presided by its Chairperson Dr. Sudarshini Fernandopulle that met in the Parliamentary Complex last week also decided to replace the reference ‘young persons’ in the Ordinance and to rename it as the Children’s Ordinance.

As per the amendments every reference to “Children and Young Persons Ordinance”, “children and young persons”, “child or young person” and “age of sixteen years” in any regulation or rule made under the principal enactment or notice, notification, contract, communication or other document issued under the principal enactment shall be read and construed as a reference respectively, to “Children’s Ordinance”, “children”, “child” and “age of eighteen years.

Section 71 of the Ordinance will be amended, by the repeal of subsection (6) of that section establishing that “nothing in this section shall be construed to affect the right of any parent, teacher or legal guardian to punish a child or youth”.

The purpose of the Children and Young Persons Ordinance Clause 23 is to make orders for the establishment of Juvenile Courts for the supervision of juvenile offenders for the protection of children and young persons.

State Minister Dr. Seetha Arambepola, Members of Parliament Thalatha Atukorala, Rohini Kaviratne, Eran Wickramaratne, Dr. Harini Amarasuriya, Manjula Dissanayake, Secretary to the Committee and Deputy Secretary General of Parliament Kushani Rohanadeera and senior officials representing the Ministry of Women and Child Affairs and the Ministry of Justice, Prison Affairs and Constitutional Reforms were present at the PSC meeting.

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80 houses destroyed in fire at Thotalanga

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The scene of the fire(pic by Jude Denzil Pathiraja)

At least 80 houses were destroyed due to a fire that broke out in a highly congested area in Colombo on Tuesday (27) night. Around 220 people had been displaced, the police said.

The fire broke out at Kajeemawatte in Thotalanga at around 8 pm on Tuesday and it took firefighters several hours to bring the fire under control. Twelve fire engines were deployed, but many of the dwellings had been burnt out as approach roads were not wide enough for the vehicles to reach the fire.

Those who are affected are now housed in community centres and places of worship.

No casualties were reported in the incident. The police are yet to determine the cause of fire and the total damage to property has not been estimated still.

Meanwhile, President Ranil Wickremesinghe, who is on an official visit to Japan, has instructed Presidential Secretary Saman Ekanayake to take steps to provide immediate relief to all victims of the fire.

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