By Lakna Paranamanna
The main focus of the 2014 budget has been to maintain the growth momentum and stability of the economy as requested by the majority of the public, Finance and Planning Ministry Deputy Secretary to Treasury Dr. S. Batagoda said.
“Our aim is to sustain economic growth that has been underpinned through infrastructure development and other policy frameworks and induce a real financial development in the country. So, instead of highlighting the price increase of sugar and a few other commodities following the budget, what should be highlighted are the proposals that have been made for the long-term progress,” he said, speaking at the Budget Highlights 2014 seminar held at the Sri Lanka Institute of Development Administration (SLIDA) Auditorium, organised by the Institute of Certified Management Accountants of Sri Lanka.
He said several factors such as public debt and budget deficit were taken into careful consideration in order to pave the way to achieve the set economic goals. “Everyone has been complaining about the budget deficit which was at a 9-10 percent in 2002. But through careful planning and implementation of policies, we have been able to bring it down to 5.2 percent this year and we plan to reduce it further to a 4.5 percent in 2015 and to maintain it at a 3.5 percent from 2016 onwards,” Dr. Batagoda added.
“Lowering the public debt and public expenditure figures is also one of the key factors aimed at through the 2014 budget proposals,” he said. Although the plan was to bring down public debt up to 60-65 percent, the set goals were not feasible mainly due to the drought prevalent last year. “But we have been successful in bringing down the figures from a 105 percent in 2002 up to 74 percent this year and eventually we plan to decrease it to a 70 percent by 2015 so that in the coming years, the masses would have increased opportunities to borrow.”
Dr. Batagoda however said the main highlight of the 2014 budget should be the projected Rs. 109 billion primary surplus budget. “Since the 1980s the public revenue in the country has been lower than the recurrent budget so we are hoping we would be able to reach the goal of maintaining a surplus budget in the current account as planned, which would be a significant achievement.”
He also added that since 35 percent of the gross domestic product (GDP) is contributed through investments and since only 6 percent of it is made by the government, they are relying on the private sector to increase their contributions. “It is why the low tax policies have been maintained through the 2014 budget so that the private sector can consolidate and make their contributions to the country’ s economic growth as well.”
He went on to state that international trade policies were also considered as a key point through which economic stability could be sustained. “The proposal of import substitution introduced this year has been criticized by many as an archaic policy but we believe the system will work. While promoting exports and positioning Sri Lanka as a top level export point, we believe the tax proposals made with concern to imports will also help induce economic growth,” he added.
Speaking further, Dr. Batagoda said the President has also stressed on the importance of including every sector of the society to contribute for the economic growth in the country. “Therefore, we have opened opportunities for women as well as low-income households to start business ventures and make their contribution for the country’s development. Moreover, we have also introduced several perks for government officials who are engaged in the grassroots level so that they will be encouraged to strengthen the networks,” he added.
‘Brain gain’ through budget proposals
Meanwhile, Brandix Lanka (Pvt.) Ltd Chief Financial Officer Hasitha Premarathne said certain proposals made in the 2014 budget can be made use of, in order to reverse the brain drain that has been occurring for the past decade.
“If the country is to move forward, human talent plays a vital role. Since the 2014 budget has created incentives for the professionals who have migrated to return through proposals focused on granting concessions for corporate entities, construction of apartments for professionals, employment income of professionals and their skills development, these factors should be promoted so that Sri Lanka can benefit from a brain gain,” he said.
Premarathne also said that allocations made for development of education through expansion of universities and granting research allowances are also positive developments, but it is important to ensure that the allocations are made in a manner that would benefit the business sectors as well.
Speaking on the ‘Hub Concepts’ presently promoted in the country and through the 2014 budget, Premarathne said the exports in Sri Lanka can be increased by two/three folds through carefully using the limited resources and harnessing them in a positive direction.
“Sri Lanka can use the front end benefits such as the available skills, the stable financial framework available in comparison to the region and the white-collar jobs to develop the exports sector,” he said, adding the tax proposals made to promote the relocation of international headquarters in Sri Lanka would also benefit immensely if the available resources and opportunities are properly made use of.
Premarathne went on to state that the continuation of the low tax regime and stable policy frameworks are positive developments but added that the government’s focus on running businesses is not a positive development amongst them. “I believe it should be left for the private sector. When it comes to strategic business, yes, but when it comes to competing on unfair grounds, it would leave adverse impacts on the private sector businesses,” he added.
SL should focus on post-2016 challenges
Gajma and Co. Senior Partner N.R. Gajendran, who also spoke at the seminar on Monday, stressed on the importance of focusing on challenges that Sri Lanka will face after 2016, upon reaching the status of a middle-income country.
“Sri Lanka is using 2016 as a strategic year and although many were sceptical initially concerning the set economic goals and the figures, we have performed exceptionally well fiscally. Out of all the proposals made through the 2014 budget, I would say the most significant is the projected Rs.109 billion revenue surplus because it indicates we are on the right track. It would be a significant achievement if Sri Lanka can achieve the set goal at least partially,” he added.
Gajendran said it is also vital that Sri Lanka focuses on the challenges of turning a middle-income country. “We have to identify and prepare ourselves because at a certain point, although the economic growth will reach a saturated level, the expenditures will continue to grow. In order to address such obstacles, I believe one of the key measures to be taken is to change our exports structure and concentrate on other parts of the world apart from Europe and the US.
Meanwhile, for the first time through a budget the professionals have been recognized and it is of paramount importance that these factors are made use of in a way that would benefit the economic growth of the country,” he added.
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By Lakna Paranamanna
