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Sri Lanka economy managed in ‘alternative’ way: CB Governor

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ECONOMYNEXT – Sri Lanka’s economy is managed through new policies in an ‘alternative way’ but critics are using the downturn seen in the second quarter of 2020 to make, doom and gloom predictions for 2021, Central Bank Governor W D Lakshman said on Friday.

The alternative policy now being deployed seemed to be criticized based on a political or ideological basis in his view, he said.

It was important to have a positive view he said. A pick-up in business confidence has been seen in the purchasing managers’ index.

 

Alternative Policy

“It is important to note the government’s determination to move away from the, so far, heavy dependence on imports for foodstuffs,” he said. “That is indeed a really significant long term policy approach despite in the short run there is an adverse impact in the prices.”

Sri Lanka was already growing enough turmeric he said. Sri Lanka banned the import of turmeric and as prices shot up to 200 rupees for 50 grams (about 4,000 rupees a kilogram) smuggling commenced.

But now nobody is talking about turmeric, he said.

The Navy was deployed to stop smuggling. Sri Lanka had seen similar smuggling in the 1970s.

Most negative analysis and critiques were based on the performance of the economy in the second quarter of 2020, but conditions for 2021 were different, he said.

The country was now using limited closures of areas instead of national lockdowns and business activity was picking up with people starting to move around.

Tourism, which was the most badly hit was also now starting to unlike in 2020, he said.

The government was moving towards a mass vaccination campaign which would also help.

The International Monetary Fund has forecast global economic growth to pick up to around 5.5 percent in 2021.

 

Pick Up

Gross domestic growth of 5.5 to 6.0 percent in 2021 was expected, recovering from a 3.9 percent contraction in 2019. The low base will also help the recovery number, Governor Lakshman said.

Per capita GDP is expected to be 4,000 dollars.

Inflation of 4-6 percent is targeted in 2020. Private credit is expected to grow by 850 billion rupees.

There were challenges in the fiscal side and external sector. But we will repay debt and maintain our unblemished record of debt repayment.

Year end gross official reserves were targeted at 5.5 billion US dollars. Negotiations were underway with multilateral lenders, and foreign central banks as well as commercial banks for credit and swaps, details of which would be announced as they are finalized, he said.

It was not correct to simply add debt repayments and compare against foreign reserves. The foreign share of central government debt was expected to fall to 35 percent in 2021 according to Central Bank projections. In 2020, foreign loans were repaid partly by using foreign reserves and selling Treasury bills to the Central Bank. Despite stronger private credit a 500 million dollar surplus in the current account is also forecast.

 

Inflows in 2021

Exports are targeted tat 13 billion US dollars, with apparel at 6.0 billion USD, tea 1.5 billion dollars, gem and jewelry 1 billion dollars. Imports are expected to be 17 billion USD. Among services, IT/BPO is expected to be 1.75 billion USD and tourist earnings 1.75 billion USD.

Worker remittances would be around 7.5 billion US dollars and foreign direct investments would be about 2.0 billion US dollars. Port City lease sales would bring in an additional billion US dollars.

Sri Lanka had recorded a surplus in the current account for part of 2020 for the first time in decades.

In 2020 up to October the government had repaid foreign debt on a net basis. Up to August 2020, private credit was negative, and the second quarter GDP was negative, which will also help create a current account surplus, analysts say.



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COPA questions lion’s share of fines going to Customs

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Irregularities, lapses, corruption erode public finance

By Shamindra Ferdinando

 The Committee on Public Accounts (COPA) has summoned the Inland Revenue Department tomorrow (23) for an inquiry regarding the inordinate delay in collecting taxes amounting to billions of rupees and extraordinary payments made to the officers of the Customs Department out of fines imposed on both public and private sector enterprises.

Besides, a COPA sub-committee is inquiring into revenue losses suffered over the years as a result of releasing vehicles imported for special purposes as dual-purpose vehicles. 

SLPP MP Prof. Tissa Vitharana heads the all-party watchdog committee. 

Secretary General of Parliament Dhammika Dasanayake in a statement issued on April 19 through the Communication Department of the Parliament said that Committee on Public Enterprises (COPE) and COPA summoned four enterprises. COPE called the Sri Lanka Football Federation and the National Film Corporation on April 22 and 23, respectively. The COPA summoned the Wildlife Conservation Department and the Inland Revenue on April 21 and April 23, respectively, Dasanayake said.

COPA has fixed the meeting in the wake of disclosure of major shortcomings in the overall revenue collection process. Following COPA meeting Inland Revenue Chief H.M.C. Bandara on March 10, the watchdog committee called for accelerated measures to recover dues. The COPA pointed out that out of Rs 107 bn due to the government, only Rs 224 mn had been recovered so far, immediate measures were required to collect taxes and fines.

At the same meeting, the COPA, having questioned the correctness of a list containing tax defaulters furnished by the Inland Revenue Department, emphasized the pivotal importance of rectifying the shortcomings. The COPA also raised the practicability in recovering taxes in terms of the data provided by ‘Legacy’ and ‘RAMIS’ computer systems. 

The Inland Revenue Commissioner General lamented before COPA how inordinate delay in legal proceedings thwarted their efforts to recover taxes. The COPA assured that the Justice Ministry and the Finance Ministry would be summoned for a meeting along with the Inland Revenue Department to explore ways and means of overcoming the issue at hand.

At a subsequent COPA meeting held late March, it was revealed that in addition to their failure to recover taxes amounting to Rs 2,670 mn due from casinos, the Inland Revenue received 6,878 dishonored cheques to the tune of Rs 2,451,465,383. COPA members present on this occasion included Dayasiri Jayasekera, Lasantha Alagiyawanna, Dr. Sudarshani Fernandopulle, Tissa Attanayake, Mohamed Muzammil, Niroshan Perera, Dr. Upul Galapatti, Dr. Harini Amarasuriya, Cader Mastan, S. Sritharan and Weerasumana Weerasinha.

That particular meeting was also told that the amount of collectable taxes in terms of the ‘Default Taxes (Special Provisions) Act No 16 of 2010 (certified on Dec 07, 2010) amounted to a staggering Rs 144.5 bn. 

COPA and the Consultative Committee on Ports and Shipping had also taken up on March 9 and 24 the highly contentious issue of the Customs officers taking a big share of fines imposed on tax defaulters, both public and private sector. COPA pointed out that the Customs took advantage of the provision that 50 per cent of the fines imposed on defaulters were shared among those involved in a particular detection. COPA has discussed two specific issues in this regard. COPA pointed out that the allocation of 50 per cent of a fine received from the Sri Lanka Ports Authority (SLPA) for defaulting in respect of gantry cranes to Customs officers was a major problem. COPA focused on taking necessary measures in this regard after having discussed the matter with relevant authorities, including the Treasury Secretary S.R. Attygalle.

COPA pointed out how out of Rs 205 mn fine imposed on Lanka Coal Company (Pvt) Limited for defrauding taxes, Rs 102.5 mn (50 per cent of the total amount) had been distributed among Customs officers as rewards and Rs 41 mn for their welfare (20 per cent) thereby leaving the government with only Rs 61.5 mn. COPA has directed Treasury Secretary Attygalle to conduct a fresh inquiry into this and take tangible measures to prevent similar malpractices in the future.

COPA investigations have also revealed massive racket in the registration of ‘dual purpose’ vehicles. It revealed that as a result of corrupt elements since 2013 registering vehicles imported for special purposes as ‘dual purpose’ vehicles the Treasury lost taxes amounting to Rs 220 mn.

In addition to that the Treasury had been also deprived of taxes amounting to Rs 1.300 mn by not imposing Rs 3 mn each on 443 special vans brought to the country during 2010-2019 period.

COPA also stated that the Customs perpetrated another massive fraud by allowing the import of 10 vans and 414 lorries as special purpose vehicles during 2010-2014.

COPA reported the Customs imposing Rs 1.5 mn tax on a super luxury car instead of legitimate Rs 56 mn.

It revealed the loss of revenue to the tune of Rs 6.1 bn during 2013-2016 period due to the Customs adopting wrong procedure in respect of large quantities of palm oil imports by two enterprises. The watchdog committee has instructed the Customs to expedite measures to recover the dues from those companies.

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India reiterates commitment to Sri Lanka’s security

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India has reiterated her support for Sri Lanka’s fight against terrorism. The assurance was made on the second anniversary of 2019 Easter Sunday attacks. The following is the text of statement issued by the Indian High Commission yesterday: “High Commissioner Gopal Baglay attended the solemn ceremony at St. Anthony’s Church on 21 April 2021 to mark the second anniversary of the dastardly Easter Sunday attacks. He lit a candle in memory of the victims of the attack and prayed for the recovery of those who are still suffering from its aftermath.

“It may be recalled that the High Commissioner had paid homage to the victims at the Church also on 23 May 2020, the first day after the completion of the mandatory 14-day quarantine period, subsequent to his arrival to Sri Lanka on 8 May 2020 on a special flight carrying a gift consignment of essential medical supplies from India. Prime Minister Narendra Modi had also paid his respects at the Church during the solidarity visit to Sri Lanka in June 2019.

“St. Anthony’s Church was one of the multiple targets of the Easter Sunday attacks, which also took away the lives of 10 Indians. These Indian victims fell prey to the perpetrators at Shangri-la, Kingsbury and Cinnamon Grand Hotels.  

India and Sri Lanka cooperate closely in all aspects across the security spectrum. India stands firmly with the people and Government of Sri Lanka in the fight against terrorism and also collaborate on curbing various other illegal activities, such as drug trafficking, narcotics, etc. “

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Explosive cargo: Ship carrying compound used for enrichment of uranium asked to leave H’tota port

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A ship that made an emergency call at the Hambantota International Port on Tuesday night (20) carrying Uranium hexafluoridea–a compound used in the process of enriching uranium, which produces fuel for nuclear reactors and nuclear weapons–has been asked to leave.

Chandula Rambukwella, Senior Manager, Commercial & Marketing, Hambantota International Port, issued the following statement yesterday: “M.V. BBC Naples sailing under the flag of “Antigua & Barbados” entered the port of Hambantota on 20th April at 2100 hrs, while en route from Rotterdam to China. The ship made an emergency call at the port for some urgent repairs. Agents for the vessel in Sri Lanka, Ms. Barwil Meridian Navigation, had not declared to the port authorities that there was dangerous cargo on board, prior to the vessel entering the port.

It was later found that they were carrying a cargo of Uranium Hexafluoride via investigations made by the Sri Lanka Navy and the Port Authority. The vessel was required to leave the port no sooner the facts were verified.

The SLPA, Navy, and Customs officials had approved all the necessary documentation prior to berthing of the vessel, based on the declaration made by the agent. The Navy and Customs were present at all times to ensure that there wasn’t any cargo unloaded onto the Hambantota International Port premises.”

 

 

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