CCC urges political parties to avoid making false fiscal promises

Duminda Hulangamuwa

By Nuzla Rzikiya  

With Sri Lanka’s atmosphere dominated by campaigns  rhetoric and statements leading up to the pivotal presidential election this month, President of the Ceylon Chamber of Commerce Duminda Hulangamuwa urged political parties to refrain from making false promises about ensuring fiscal balance by enforcing better tax administration. 

Hulangamuwa, who also serves as the country manager of Ernst & Young audit firm, warned that such claims by political parties could mislead the public, given the uncertainty of revenue figures in future tax collection and the limited fiscal space available for the next administration in the country’s current economic context. 

“When I say false promise, I mean the imbalance in the fiscal route. As far as we know, there’s hardly any space to be extravagant to offer free and subsidised goods and services. When we raised this issue at the debate (organised by the CCC recently), the political parties answered saying they will increase tax administration for extra collection, but that is an unknown quantity,” Hulangamuwa stressed. 

“We don’t know how much is out there, which is not collected, but is due. So, you can’t prepare budgets based on what you don’t know is going to come. It has to be prepared based on what you know your income is going to be,” he further elaborated. 
He highlighted that the country has very limited space at the moment to increase taxes, while the fiscal space available for the government to spend is also severely constrained. On the other hand, the government cannot cut down capital expenditure because no country cuts down capital expenditure in their growth efforts. 
The biggest priority for the next president should be to raise the standard of living, primarily by maintaining the primary account balance targets, such as the Gross Financing Need (GFN) targets, while urgently concluding restructuring agreements, according to Hulanganuwa.

He stressed that these should be done within the framework of the International Monetary Fund (IMF) agreement and cautioned that any deviation from the agreement could destabilise the progress made so far. 

“The biggest priority in my view is the economy, to improve the standard of living for the people from where we are with limited fiscal space to operate while being under an IMF programme. So paramount is that we have to remain within the parameters of the IMF agreement. If we try to deviate, the whole thing might collapse and we could return to the situation we were in before,” he said. 

While working on this path of recovery, he emphasised that the government should increase its focus on key sectors such as shipping and logistics, tourism, and IT/BPO to achieve the growth target of 8-9 percent required to ensure sustainable fiscal stability for future generations. 

The country must enhance its engagement in international trade, facilitate its manufacturing sector to be competitive on a global scale and prioritise attracting foreign direct investment (FDI) to push up the current 3 percent economic growth rate. 

“The expectations of the next President should be to stabilise the economy and continue the stability programme that has been set in place. So, in our view, we need to walk this tight path for the next two to three years and build on the fundamentals that we have already achieved. If we are aiming for exponential growth, we must build on these fundamentals without sacrificing them,” Hulanganuwa said.