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.”
Bid to use private member’s motion to put off LG polls alleged
By Shamindra Ferdinando
Former Foreign Minister Prof. G. L. Peiris has questioned the rationale behind President Ranil Wickremesinghe’s warning that the military will be deployed to curb protest vis-a-vis a Foreign Ministry undertaking to boost foreign trade and investment.
Addressing the Parliament, during the Budget committee stage debate, on 28 Nov., Prof. Peiris said the Foreign Ministry couldn’t expect to succeed in economic diplomacy while the government was resorting to repressive measures.
Prof. Peiris asked who would want to invest in a country where the people were warned of dire consequences if they held protests, and elections were arbitrarily postponed.
Referring to the long overdue Provincial Council polls, Prof. Peiris discussed how postponement of scheduled Local Government polls could further jeopardise Sri Lanka’s standing among the international community.
Prof. Peiris alleged that the government was planning to use private members’ motion submitted by Attorney-at-Law Premanath C. Dolawatta (SLPP, Colombo District) to put off scheduled Local Government polls further. The ex-Minister claimed that the motion meant to enhance youth representation in governance would be utilised to delay the polls indefinitely. He recalled how the Yahapalana government had postponed the Provincial Council elections indefinitely.
The rebel SLPP Chairman pointed out that the government had chosen MP Dolawatta’s motion, handed over recently, though SJB’s Imthiaz Bakeer Markar submitted a private member’s motion on the same lines much earlier.
MP Dolawatta handed over a copy of his motion to President Ranil Wickremesinghe on Oct 31. Prof. Peiris said that they wouldn’t find fault with the lawmaker for making proposals which the academic said were timely.
Prof. Peiris warned Foreign Minister Ali Sabry, PC, that Sri Lanka wouldn’t be an appealing destination for investments unless the government adopted tangible measures to curb corruption. Shocking disclosures at parliamentary watchdog committees underscored that corruption was at unprecedented level and needed immediate attention.
Speaking on behalf of the breakaway SLPP faction, Nidahasa Jathika Sabhawa aka Freedom People’s Congress Prof. Peiris said that the recent declaration by the World Bank that it would audit the procurement and distribution of fertiliser here meant that the world had no faith in our system.
Commenting on assurances given by the government that a new Anti-Corruption Bill would be introduced soon, Prof. Peiris said that existing laws were quite sufficient. The issue at hand is absence of political will to battle corruption, the former Minister said, meant flight of professionals and intolerable increase in taxes on business wouldn’t encourage Foreign Ministry’s drive.
At the onset of his speech, lawmaker Peiris asked whether the government was genuine about the recent declaration that the national issue could be resolved by the enactment of a new Constitution by the next Independence Day. Who would take such a promise seriously against the backdrop of all previous attempts undertaken by far more stable governments failing to achieve the desired results? the former law professor asked. The former minister also questioned the feasibility of forming an apparatus on the lines of the Truth and Reconciliation Commission of South Africa. Prof. Peiris asked whether those now at the helm really had the wherewithal to meet the South African standards.
State FM assures there won’t be shortage of milk powder
State Finance Minister Ranjith Siyambalapitiya told Parliament yesterday (29) that there would be no shortage of milk powder in the coming days due to the Customs holding a consignment of six containers of milk powder, imported into the country, for violating regulations.
Minister Siyambalapitiya said the six containers had 105,375 kilos of full cream milk powder, imported from New Zealand, via Malaysia. It reached the Colombo port on 20 Oct. It was only after the consignment had arrived in the Port that the importers submitted the letters to get the consignment released from the Controller Imports and Exports. Arrangements would be made to release the stock from the harbour on the recommendation of the Secretary to the Ministry of Trade and Food Security.
As such, there is no need for permission from the Controller Import and Export to release the stock, the minister said, adding that there were no limitations imposed on importing milk powder and there would be no cause for panic buying in fear of a shortage of milk powder in the coming days.
Dolawatta responds to GL
SLPP MP Premanath C. Dolawatta said his private member’s motion wouldn’t lead to the postponement of local government polls. He said he felt the need to restore the 25% quota for youth, even before he entered Parliament, consequent to the August 2020 general election. The government and the Opposition could quickly reach a consensus on the proposals, and avoid unnecessary complications. MP Dolawatta said so when The Island sought his response to accusations made by Prof. Peiris, who said that time was rapidly running out for Local Government polls. As the nomination process needed to be commenced soon to ensure that 341 Local Government bodies could be constituted by 20 March 2023.
Bid to use private member’s motion to put off LG polls alleged
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