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State Minister Dr. Godahewa explains govt economic strategy 

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State Minister Dr. Nalaka Godahewa told the parliament on Saturday (21) the government launched a pragmatic programme to lift millions of people from poverty.  The minister said that when one member of a family under extreme poverty received a permanent employment opportunity, the entire family achieved some degree of economic stability. The 100,000 jobs programme aimed to achieve that objective. Rs. 4,000 grant for vocational trainees also aimed to give opportunities for the youth of poor families, the minister said.

Dr. Godahewa said: “At the time of the 2015 regime change, I was serving as the Chairman of Securities and Exchange Commission of Sri Lanka which regulates Colombo Stock Market. Generally, Stock market is considered to be the barometer of any economy. Because investor confidence and stock market indices have a direct correlation. Typically the market slumps when investor confidence shatters.

 During the post war period between 2010 and 2015, market capitalization of Colombo stock market jumped by 535% and as a percentage of GDP it increased from 11% to 36%. All Share Price Index (ASPI) gained 255% during that period. Colombo stock market had even won accolades as the most promising and sustainable stock market in Asia.

 The IMF in its report dated 29 June 2014 identified Sri Lanka as one of the fastest growing economies of Asia. International rating agency Moody’s in July 2014 stated that the strength of the Sri Lankan economy is reflected in its increasing per capita income and global competitiveness index rating. 

 By this time Sri Lanka was holding Asia’s 1st or 2nd positions in almost all key economic indicators. In 2014 GDP grew by 6.8%. Total GDP (Gross Domestic Product) in 2014 was US Dollars 80 Billion and Central Bank of Sri Lanka (CBSL) forecast was Sri Lanka GDP to reach USD 163 Billion by 2020. Per Capita Income of US Dollars 3,654 in 2014 was anticipated to reach USD 7,500 by 2020.

 Unfortunately the ones, who are trying to teach us economic management sitting in the opposition benches today, are the same people who came to power in 2015 January. The opposition had similar arguments and criticisms before 2015 as well.  But when they came to power, as a group they proved how incompetent they are. Economic growth slumped year after year. 

2015 it came down to 5%

2016 it further reduced to 4.5%

2017 3.9% 

2018 3.1%

2019 2.1 %

 Though we anticipated per capita income to reach US Dollar 7,500 by 2020, it stagnated at USD 3,852 by end of 2019. GDP Per Capita didn’t even gain by US Dollar 50 in 2019.The first finance minister of the Yahapalana government Ravi Karunanayake in 2019 made a public statement that the country was heading towards bankruptcy. With that kind of economic collapse and a trend, the economic growth rate would have been a negative figure with or without Coronavirus pandemic.

 Unfortunately, it is such a team of losers who are trying to teach us economic management today in this parliament.

 The reasons for their failures are obvious. They didn’t have a common vision or a program as it was just an unholy coalition consisting of ad hoc political groups formed merely to defeat Mahinda Rajapaksa.

 Our government’s approach to economic management is completely different. We have a clear economic vision. That is people centric economic policy articulated in His Excellency President’s “Vision for Prosperity and Splendor” framework.

 A National budget should be formulated based on a government policy framework. Yahapalanaya had 10 policy statements for their 5 years. Budget speeches were prepared based on the serving finance minister’s will but not based on any stipulated economic policy.

 One has to first read the “Vision for Prosperity and Splendor” policy framework in order to understand the crux of this budget that we are debating. Then it would become a no-brainer to understand the concepts behind these budget proposals.

 I would like to elaborate a bit more on this.

 Vision for Prosperity policy statement has a 10 pillar policy framework. What are those 10 policies?

1. 

    Priority to national security

2.  

   Friendly, non-aligned foreign policy

3. 

    An administration free from corruption

4. 

    New constitution that fulfills people’s wishes

5. 

    Productive citizenry and vibrant human resources

6. 

    People centric economic development

7. 

    Technology based society

8.

     Development of physical resources

9. 

    Sustainable environmental management

10.

  Disciplined , law abiding and value based society

 

If these budget proposals are thoroughly analyzed, one could realize that the due attention has been paid to all ten areas. Each and every budget proposal is allied to one or more policies.

 If I take a simple example, the increasing of retirement age in the private sector to 60 years comes under “a productive citizen” policy. Re-forestation programme and 2 million trees planting along the roadways come under “Sustainable Environmental Management” policy. Rs.20,000 million allocation for national security is due to its utmost importance. Allocations of Rs. 10,000 million for technology parks and Rs. 8,000 million for digital infrastructure are based on our “Technology based society” policy. 100,000 kilometers of rural road construction with an investment of Rs. 20,000 million and allocation of Rs. 8,000 million for improving rural schools is due to our priority policy for the “Development of physical resources”.

 Since we are debating national budget proposals, for a moment let’s explore what is meant by people centric development. After receiving a historic mandate, His Excellency in his inaugural speech in this parliament articulated 4 priority areas of his economic policy.

 Firstly, finding solutions for the eradication of poverty

Secondly, creating equal opportunities for everyone to prosper

Thirdly, ensuring an administration free from corruption

Fourthly, encouraging and strengthening local entrepreneurship

 In some cases the reason for poverty is the landlessness and in turn, their inability to cultivate economic crops. As outlined by the President in his address to the nation yesterday, the objective of giving one acre each for 20,000 families is to achieve this objective. Everyone should have an opportunity to prosper in a people centric economy and it is the responsibility of the government to remove roadblocks for the same. Higher education doors should be opened to all youth and we should create a conducive environment to produce more and more entrepreneurs amongst them.

 That’s why we have paid special attention to expand the capacities and reform curriculums in universities and vocational training institutes in this year’s proposals. City campuses are being initiated based on these objectives. This budget has provisions to increase the intake for vocational training institutes from 100,000 to 200,000. 

 Today many countries have leveraged technology to uplift the productivity of the government. Hence a special attention has been paid in this budget to foster the technology usage in the government sector. Online tax administration process and e-filing of corporate taxes are good examples. 

 Private sector has a vital role to play in the economic development process. This budget has several proposals to uplift the local entrepreneurs. Special tax concessions have been granted for agriculture and fisheries sectors. Students who enroll for vocational training are encouraged to start a business by offering Rs. 500,000 loan at concessionary interest rates.



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Domestic debt restructuring will cripple EPF, ETF – JVP

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By Sirimatha Rathnasekera

The Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF) will lose about 600 billion rupees during the proposed domestic debt structuring, Co-Convener of the JVP affiliated National Trade Union Centre (NTUC) Wasantha Samarasinghe claimed.

Samarasinghe is of the opinion that the government is planning not to pay 20 to 25 percent of the loans it has taken from domestic sources. Successive governments have borrowed significantly from the EPF and ETF, he said.

Samarasinghe said that due to the depreciation of the rupee, the real value of EPF and ETF funds had decreased by half. “In such a context, can these institutions take a 20 percent haircut? This might be a big problem to the workers,” he said.

The NTUC Co-Convener said that a number of domestic banks, too, had lent to the government and domestic debt restructuring might lead to a collapse in the banking system.

However, Central Bank Governor Dr. Nandalal Weerasinghe says that they are confident of reaching debt sustainability without re-structuring domestic debt, which would lead to problems in the banking sector.

“There have been concerns among domestic bond investors about rupee debt/internal debt to be restructured following comments made by President Ranil Wickremesinghe to the effect that financial advisors were looking at domestic debt. However, there has been no request to restructure domestic debt. We are confident that we can make debt sustainable without restructuring domestic debt,” Dr. Weerasinghe told the media at the CBSL’s 6th Review of the Monetary Policy stance for this year, at the CBSL head office auditorium, in Colombo, on Thursday.

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Powerful CEBEU says yes to restructuring but on its terms

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Sri Lanka will experience periodic power cuts until 2027 if the government did not take steps to increase electricity production, the Ceylon Electricity Board Engineers Union (CEBEU) said yesterday.Due to electricity shortages, the Norochcholai Power Plant had been operational non-stop, sometimes even without scheduled maintenance, CEBEU President, Saumya Kumarawadu said.

“A generator is down. We will get it back online within 14 days. We had started maintenance on another plant in June and it was to be back online in September. But it has been delayed till November,” he said.

Kumarawadu said there would be 10-hour power cuts without Norochcholai. However, the power cuts could be reduced in two weeks when the generator was restored, he said.

He added that while they support restructuring of the CEB, they oppose de-bundling and selling the CEB to various private actors.

“Power cuts might have to go on till 2026 or 2027 unless new plants come up. A proposal to build an LNG power plant is still languishing in the Cabinet,” he said.

The CEBEU President also said that the electricity tariff was last increased in 2012. In 2014, the tariff was reduced. Without increasing electricity tariffs, the CEB will have to get increasing amounts of money from the treasury.

“The government should have increased the tariff at regular intervals. We haven’t increased in a decade and suddenly we have increased by a large amount.That’s why it has come as a shock to people,” he said.

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SJB opposes blanket privatisations

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… questions logic of selling cash cows like Telecom and Insurance

The SJB was opposed to the privatisation of profit-making government entities, Chief Opposition Whip, MP Lakshman Kiriella, said yesterday, in Colombo.Kiriella said that President Ranil Wickremesinghe had told The Economist magazine that they are thinking of privatising Sri Lanka Telecom and Sri Lanka Insurance.

“These are two institutions that make a profit. What is the point in privatising these?” he asked.

MP Kiriella said that they are not opposed to privatizing SriLankan Airlines, which has been making losses for years.

“We can talk about these things in Parliament. Even when we privatize loss making entities we have to take a number of things into consideration. What will happen to the workers? How will we compensate them? How will we re-skill them? We have to talk about these things openly before doing anything,” he said.

The Chief Opposition Whip said that one of the main reasons why people oppose privatization is because everything is done in secrecy.

“People wonder why things are hidden from them. We need to be open and transparent when we restructure,” he said.

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