Budget 2024 with novel features presented to kick start economy

The budget for the fiscal year 2024 was presented to Parliament yesterday by President and Minister of Finance Ranil Wickremesinghe with several novel features to kick start the Sri Lanka economy which suffered its biggest setback last year.

During the presentation Wickremesinghe highlighted the prevention of hyperinflation, attributing to the country’s successful reduction of the inflation rate to a single digit.

Highlighting a pragmatic perspective, President Wickremesinghe emphasized that advancing a nation requires more than mere fairy tales. He underscored that the prolonged reliance on election promises by political parties has historically led to the economic bankruptcy of the country. Regrettably, some factions within the nation have yet to grasp the gravity of this situation.

He underscored those pursuing dream palaces for short-term political objectives might risk pushing the country back into bankruptcy. The President acknowledged the consistent borrowing from State banks to offset the losses incurred by financially struggling State entities like the Ceylon Electricity Board and the Ceylon Petroleum Corporation. He underscored the necessity of utilizing taxpayers’ money to safeguard the stability of banks, preventing their weakening and potential collapse.

The President highlighted the removal of legal obstacles hindering the integration of large-scale, low-cost renewable energy into the primary electricity grid.

The President emphasized that unless State income is increased from 10% to 15% of the GDP, the country faces the risk of economic challenges once again. He highlighted several proposals in the current year’s budget aimed at addressing shortcomings, including long-standing issues like tax evasion.President Wickremesinghe emphasized that the current year’s budget is more important than an election in shaping the future of the country by establishing a new economic foundation aligned with contemporary international trends. He said that they paid emphasis on some vulnerable sectors and provided them with incentives and also has decided to increase public sector salaries and pensions.

Meanwhile Senior Tax & Legal Consultant, Dr. Prasanna Imaduwa said that the Government currently spends about Rs. 93 billion for public sector salaries and allocating more towards them via the budget is a challenge. “Currently, a large amount from the State tax revenue collection is spent for salaries and pensions and the government must initiate this process carefully without exacerbating the revenue crisis.”

Founder Almas Holdings with 35 years experience investing in the share market in CSE and overseas markets, Imtiaz Buhardeen said that giving out 20% stake of the two large State owned banks to strategic investors or to the public to improve capital for the future growth of the banks is a timely move. “First this will help to get more capital to the bank and secondly it will create a better check and balance system specially when granting loans to individuals and political pressure too could be minimized.”

He also justified the increase of public servants salaries and pensions saying that cost of living has gone up and people need more in their ‘purse’ to meet these expenses and balance the home front. “Increasing of VAT and increasing revenue could be used to cushion these extra expenses.”

Former Secretary of Ministry of Higher Education and former Director General of National Institute of Education Dr. Sunil Navaratne hailed the proposals for the education sector and said that those could take the country towards creating a ‘Hub of Excellence in Higher Education’ in the South Asian region and bring in huge foreign exchange. He said that the second highest FOREX earner for Australia is from foreign student’s education and Sri Lanka too could follow this.He said that Sri Lanka is a ‘neutral’ country and hence could invite both Pakistani and Indian students to study in these foreign universities.

The move will also help to retain students going overseas which will also save around USD 3 billion annually to the country.

The allocation of Rs. 50 billion to restart some of the stalled development projects was welcomed by Chairman Ceylon Institute of Builders Dr. Rohan Karunaratne.

“Actually we needed around Rs. 200 million worth of projects but with the country’s economy just limping to normalcy this is a good start.”

Secretary General/Chief Executive Officer National Chamber of Exporters, Shiham Marikar said that they forwarded some proposals to be included in the budget and some of them have been accepted. “We are thankful to the government for it.”

He said that exporters had wanted the government to be a part of the Madrid System, a convenient solution for registering and managing trademarks worldwide and the government has promised to do this. Currently exporters have to go from country to country to register trademarks of their products but with Sri Lanka registering with Madrid System it will allow exporters to go to one body and get trade markers registers for several countries in one go saving a lot of money.”

He said that the other proposal which they forwarded requesting for a “single window” concept that can facilitate a trading system aimed at simplifying the processes which offers a centralized platform for traders to submit all required import, export, or transit documents and information, in a digitalizing platform and consolidating traditionally paper-intensive processes involving various government agencies too had been granted. This concept will minimize paperwork, delays and cost and time consuming and will also enhance transparency and efficiency in the global trade transactions process.

He said that this is a request they, along with the exporters made to successive governments for several years with no avail and now it has been finally included for 2024 budget.”

The government’s budget proposal for 2024 includes the formulation and implementation of an inclusive National Logistic Policy.

This policy initiative is aimed at leveraging Sri Lanka’s strategic location as a significant economic asset. It’s crucial to highlight that Supply Chain and Logistics have been recognized as key components of an organization, contributing to 80% of its activities.

With the introduction of this policy, there is a clear intent to strengthen and fortify the country’s Supply Chain and Logistics sector. It’s essential to emphasize that we have highlighted the importance of Supply Chain and Logistics in various instances, including the National Supply Chain Day said Jayantha Gallehewa, President, Institute of Supply and Materials Management

The implications of this proposal are extensive. By developing a National Logistic Policy, Sri Lanka can enhance its position as a regional logistics hub, facilitating smoother trade and transport operations. This has the potential to attract more international businesses and investments, ultimately boosting the economy.

Allocation of 300,000 Acres for Large-Scale Agricultural Activities: Another significant budget proposal for 2024 is the allocation of 300,000 acres of government land, including areas managed by the state plantation corporation, Mahaweli A & B zones, and the Land Reformation Commission, for large-scale agricultural activities.

This proposal has the potential to impact the Supply Chain and Logistics sector in several ways. Large-scale agricultural activities are inherently connected to the supply chain. It implies an increased production of agricultural goods, which in turn necessitates an efficient supply chain network for transportation, storage, and distribution. This could result in the expansion of logistics and transportation services to support the agricultural sector, especially in supporting and enhancing the export-oriented supply chain networks.

President Chamber of Commerce Industry Yalpanam (Jaffna) K. Vignesh said that creating a special economic zone for Jaffna, Trincomalee and Bingiriya was a timely move. “However we suggest that the government convert the existing Achchuveli Industrial Zone to this proposed economic zone. The Government should not allocate fresh land and spend money again for infrastructure.”

Many infrastructure facilities are lacking in the industrial zone and we request the President to upgrade Achchuveli industrial area to an economic zone.”

President Confederation of Micro Industries (COSMI) Nawaz Rajabdeen welcomed the Rs. 50 billion allocated to revive and restructure the micro and small businesses in the country.

“Government should also look at allocating a separate amount of Rs. 5 billion for research and development funds for the young entrepreneurs to start new business ventures in the regional district’s. “Similarly, women entrepreneurs too should be given low interest loans to start up businesses.”

Chairperson/Managing Director at New Philip Hospitals (Pvt) ltd Indrani Fernando said that the allocation of Rs. 100 million to develop medical tourism is something the industry was asking for many years from successful ministers.

“With more than Rs. 100 million budget allocation the President has identified the importance of medical tourism and this gives us a guarantee to speak to travel agents to market our hotels to woo tourists for medical treatment.’

“Private hospitals are adequately geared with modern equipment to offer treatment for tourists. And as for tourists it will be far cheaper to get their treatment done in Sri Lanka even after paying for an air ticket and enjoying a holiday here.”

“This will also bring in added FOREX to Sri Lanka and it will also be a lucrative business to us.”

Chairman of Federation of Information Technology Industry Sri Lanka (FITIS) Indika De Zoysa said that the framework for a digital economy has been already done with the involvement of the ICT industry stakeholders, government and supported by the World Bank with technical inputs.

The Budget 2024 allocation of Rs. 3 billion will help to establish a National Center for Artificial Intelligence to ensure an economic and social transformation, based on the latest trends in digital technology, cyber security and artificial intelligence.

“The industry is very happy with this allocation which will help to speed up implementing the digital framework.”

After a volatile economic situation the government has decided to recommence the long delayed Kadawatha- Mirigama expresses way and to start other halted projects due to lack of capital could be a boost to construction industry and positively impact on the automobile industry as well, opined Automobile Service Providers Association President Amal Piyatilaka.

“We see a lot of power delegated to the provincial council in order to make all councils run as self sufficient entities in the budget proposals but there is vagueness as to who will lead these institutions.”

The proposals to increase access more to borrowings by changing laws is also a positive proposal. Piyatilake also said the budget has introduced the need to submit TIN numbers at different places as a bottleneck but it has totally forgotten to ask the private sector to submit the TIN.

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