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Govt equipped with necessary strength to manage economy and overcome challenges – Finance Minister

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Corporate top brass see silver lining in Budget
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Finance Minister Basil Rajapaksa presented the Second Reading of the Appropriation Bill (Budget Speech) for the Fiscal Year 2022 in parliament on Friday setting a total revenue target including grants of Rs. 2,284 billion while total expenditure is estimated at Rs. 3,912 billion and recurrent expenditure at Rs. 2,996 billion.

“We are living through history’s most challenging period in terms of people’s lives, livelihoods, sources of income, and job security. I strongly believe that, even amidst these challenges, we are equipped with all the necessary strengths to manage the economy and to overcome such challenges.”

The Finance Minister said his vision is to manage the overall budget to reduce the budget deficit from 10 per cent of the national income level at present to 1.5 per cent by 2027. 

The Budget for 2022 is focused on a revenue-based fiscal consolidation model while also focusing on rationalizing Government Expenditure, according to First Capital Research.

Heavy focus on its infrastructure drive continues while efforts are made to promote local manufacturing. The Budget attempts to promote Government sector efficiency via digitalization while also focusing on encouraging green energy projects in an environment of rising fuel-related commodity prices. As the Government takes forward its fiscal consolidation plans, the budget deficit expands to 8.8% of GDP for 2022 while the Debt to GDP ratio is expected to rise to 101.7%.

The Government has made a major effort to expand its tax collection with a primary focus on trimming down its budget deficit introducing taxes on multiple angles including a Super Gain style tax in the form of Surcharge Tax. Efforts have also been made to rationalize recurrent expenditure by lowering expenditure allocation into selected segments while also promoting the installation of renewable energy as an attempt to lower costs.

Digitalization has been introduced as a strategy to lower Government sector costs and improve efficiency. Further proposals were made to promote renewable energy projects within the country. Similar to previous years, the budget continues to focus on infrastructure projects with a heavy emphasis on the development of rural roads and projects to provide clean water.

Promoting local manufacturing has been a priority with a number of investment zones proposed while strengthening the telecommunication infrastructure is a key element with proposals to improve internet facilities throughout the country. The budget also promotes the introduction of 5G and the related services.

As a Capital Market Development measure, green bond financing facilities are encouraged to be introduced to foreigners, First Capital said.

Chairman of Ceylon Institute of Builders (CIOB) and holding top positions in banking and other private sector companies Dr Rohan Karunaratne. said the business community is not very happy with the proposal for a 25% one-off tax surcharge to be imposed on persons/companies with taxable income exceeding Rs 2 billion for FY 21/22 where the government expects to earn Rs. 100 billion through this tax.

“Large or small private sector companies too are finding it hard to survive due to unforeseen overheads and to impose a 25% one-off tax surcharge against their ‘hard-earned money’ at a time of this nature is not the right move. A handful of big corporate may indeed be able to absorb this but if you take the banking sector, their NPL are very high and taxing them along with the insurance and leasing sectors which are doing well now, too would have some kind of negative impacts to them,” he opined.

Commenting on the construction sector Dr Fernando firstly thanked the government for implementing around 50%of their proposals. “We also feel that curtailing the building of new offices for the public sector is timely. If you take some public institutions, there are unwanted buildings. (in some you find two auditoriums when even one is hardly used!)

“The Women’s Chamber of Industry and Commerce congratulate the government on presenting a budget which focuses on streamlining processes to facilitate entrepreneurs to engage in business effectively by amending the Finance Act to simplify the complex processes currently in place for the new business registration process and consolidate fees levied by various institutions.

“We are also encouraged by the allocation of another Rs. 1,000 million for the development of traditional cottage industries and handloom and batik industries which include a significant number of women business owners,” said The President of the Women’s Chamber of Industry and Commerce and Ernst and Young Partner Anoji De Silva.

“WCIC also commend the Government for taking into account gender, racial and other cultural differences and demographics in preparing the budgets, allocation of funds and implementing budget proposals by Ministries, Departments, Corporations and Statutory Bodies and for proposing the establishment of a mini supermarket chain for women entrepreneurs which will assist a lot of women who are into micro-businesses and promotion of the new hi-tech agro parks to produce new agro entrepreneurs by providing uncultivated lands to women and youth.”

Asked to comment on the budget proposal ‘TRCSL licenses for Telecommunication companies to be issued through a public auction,’ Infosoft Lanka CEO Mahendra Dissanayake said, “most people will support any move from the government to increase transparency and accountability when issuing licenses in the telecom industry. Telecom companies invest a lot of money in Sri Lanka and they deserve a fair playing field and less red tape.”

“We have over 10,000 government schools in Sri Lanka and to provide internet connectivity using FIBER OPTIC technology will be a very costly project. To expand the network closer to each school would cost a fortune and on top of that, we have to sustain the project. My opinion is that we should utilize the most economically viable internet connectivity for rural schools and provide faster connections (fibre optic or other technologies) for schools located in towns.”

Chief Executive Office Shippers’ Academy, Colombo, Rohan Masakora said he welcomes the government decision to introduce necessary legal provisions under a new Finance Act to establish free Ports.

The budget 2022 also proposed to simplify strict rules currently in place concerning the registration of ships and to facilitate and increase focus for this purpose.

Finance Minister Basil Rajapaksa also proposed to transform Sri Lanka which is physically located as a Naval hub to be central as a naval hub in the global context.

Past Chairman of the Planters’ Association, Hayleys Agriculture Managing Director and Spokesman Dr Roshan Rajadurai said: “The intervention by the Government to increase the component of the Plantation Housing Stock is very laudable indeed.

“This intervention is a very welcome move which will further improve plantation housing.”

President of the International Business Council Kosala Wickramanayake said: “The maiden budget of Finance Minister Basil Rajapaksa is production-oriented and is so innovative that he has taken the budget into the periphery. The 2022 budget has addressed various sectors which have been affected by the COVID -19 pandemic such as the tourism sector, the Micro and Small and Medium Enterprises which have 50% of the employed people and 80% of the GDP.

Another positive aspect of the Budget is that there will be employment for women who will have the opportunity to work from home and get employment opportunities with the establishment of COOP houses in each of the Grama Sevaka Divisions

The decision of the Government to increase the retirement age of government servants has both positive and negative aspects. While the Government servants could draw on the experience of the long-standing public servants which is the positive side, the negative side is the employment of the younger generation will be further held back, he said.

“All in all, this is an extremely good budget but, it is time that the Government walks the talk”!!”, he said.

Colombo Business Association (CBA) Secretary, Chaminda Vidanagamage thanked the government for presenting a budget sans huge taxation for them. “It’s easy to present a budget when there is adequate money with the government treasury. However, for the last two years, Sri Lanka’s exports earnings dropped drastically to 9% due to the global pandemic. In contrast oil, gas and other essential imports skyrocketed and freight charges were at an all-time high.”

“Considering these facts, presenting a budget with a large allocation to key thrust sectors like education, roads and other infrastructure along with plans spelt out to increase government expenditure and cost-cutting measures for the public sector was unexpected and are highly creditable.”

Veteran hotelier and tourism industry leader and President of City Hotels Association and next President of Tourist Hotels Association of Sri Lanka M. Shanthikumar said that the proposal for Sri Lanka to be developed as a wellness tourism and event tourism destination will help to attract a bigger MICE and Ayurveda market, especially from Europe and UK.

Sri Lanka already has high profile and dedicated wellness hotels and hospitals and this promotion will attract more high spending ‘long stayers’ for these venues.

Vehicle Importers Association of Sri Lanka President Indika Merenchige said although there were no proposals concerning vehicle importation, the government could always seek their advice and expertise in this matter. If the problem was the lack of reserves the country could look at a long term credit line that could be used to import vehicles causing no harm to the reserve position. He expressed optimism that the government would reconsider the importation of electric vehicles to the country.

Chairperson of Royal Touch Ceylon Tea and Ingine Lanka, Dr Farida S. Bondarenko said, “Sri Lanka has currently serious issues on dollar reserves, which higher taxation might not necessarily solve and will hurt Sri Lankan citizens. However, the following might avert the current crisis: Planning tax incentives and creation of free zones for foreign companies especially those manufacturing products that Sri Lanka imports the most. This will help to create more jobs and decrease imports and consequently increase dollar reserves. Also financing and encouraging high-tech agricultural companies, particularly, those in the EU to invest in agricultural fields in collaboration with Sri Lankan farmers. This will combat the food shortage, increase supply and exports and help the current decreasing dollar reserves.”

The Ceylon Motor Traders Association (CMTA) said, “While understanding the difficulties faced by our country’s leadership during these challenging times, we are disappointed to see that none of the proposals that we had submitted for the budget, especially those that requested for best practices and regulations to be implemented, have not been considered. No support has been provided for franchise holders represented by the CMTA who are facing severe difficulties due to the ban on motor vehicle imports, and the significant costs of sustaining their significant employee bases.”

The new programme to promote Ayurveda treatment centres and indigenous medicine will further help to boost tourism-related revenue. Veteran business leader Tissa Jayaweera says Sri Lanka needs to re-look at existing systems in particular at state-owned organisations to curtail unwanted expenditures or misuse of funds to develop Sri Lanka’s economy.

According to Jayaweera, the Government needs to come up with viable solutions to empower people thereby providing them assistance to get them into work or promote startup culture rather than increasing money allocations for social welfare in a big way.

 

Monday, November 15, 2021 – 01:00











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