Budget 2021 would reflect a ‘balanced partnership,’ says State Minister

• Says SMEs will be supported to create jobs in the economy 
• Rules out IMF recommended wealth tax 
• “You cannot make poor people rich, by making the rich people poor”- Cabraal
• Calls SL fortunate despite weak external sector
• Says import restrictions have paid off

As the newly elected government is gearing up to present its maiden budget next month, State Minister of Money, Capital Market, and State Enterprise Reforms, Ajith Nivard Cabraal said the Budget 2021 would reflect a 
“balanced partnership”. 

According to Cabraal, the upcoming budget that would be presented under the leadership of President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa would showcase a balanced partnership where small and medium scale businesses will be supported, enabling them to extend opportunities to the poor.

Cabraal presented his comments in an interview with the Indian newspaper, The Hindu, which explored the current position of the national economy and the country’s policy direction towards achieving economic growth.

Responding to the possibility of a wealth tax being imposed, as recommended by the International Monetary Fund (IMF) to improve Sri Lanka’s grim revenue position, the State Minister said there is no intention of imposing such “silly” taxes as the outcome is often detrimental than helpful to the economy.

“You cannot make poor people rich, by making the rich people poor.

“We don’t want to put mansion taxes, and these silly taxes have actually crippled the more affluent people and removed them from the equation of providing jobs and providing support,” Cabraal was quoted as saying.
Economists have repeatedly stressed the need for the government to re-look the current tax regime while also calling for the establishment of a sound fiscal policy in the upcoming budget. 

The red flags were raised as the country’s revenue fell by an estimated Rs.400 billion, amounting to about US$ 2.3 billion.  

While acknowledging that Sri Lanka has a weak external sector, Cabraal said the country is “fortunate” as foreign reserves have “not been affected too much” while exports have “held firm” and remittances been “pretty strong”.

In September, Sri Lanka recorded over US$ 700 million from worker remittances, whereas exports in July crossed US$1 billion. Further, he opined that the government’s move to restrict imports “has paid off”.

Meanwhile, justifying the ruling out of an International Monetary Fund (IMF) bailout, Cabraal frowned upon the multilateral lender’s ways of lending. The rapid credit facility that the government had earlier sought from the agency is yet 
to come through.  

“Rapid means rapid, no. Where is rapid in October when the accident occurred in March,” Cabraal told The Hindu.
The State Minister, who is an ex-Central Bank Governor, pointed out that emerging nations have all faced external sector stresses, and it is not peculiar to Sri Lanka.

“Recently, some of the international agencies had provided some support for around 70 odd countries, which have been ad-hoc arrangements. This is a global problem, which needs a global 
solution,” he stressed.