Implementation is key

The highly anticipated Budget 2017 has met most parameters in setting up incentives to primary industries, supporting exports, attracting investment and providing a clear way forward based on the policy statement delivered by Prime Minister Ranil Wickremesinghe in October. But the real test of the Government will now be in the implementation. 

Pundits and business chambers were wary of presenting their views in the hours following the Budget, preferring to take a closer look at the tax proposals presented in the document. Tax and auditing firms will pore over them now as the private sector waits to see how they will be affected by public revenue initiatives. At first glance, efforts to stop workers from taking mid-career loans from the Employees Provident Fund, Carbon Tax and a 10% Capital Gains Tax on immovable properties as well as possible tax increases on motorcycles and three-wheelers could create consternation. 

Yet the larger picture remains positive. The Government has given substantial incentives for small and medium enterprises as well as halved the corporate taxes companies dedicated to environmental initiatives would have to pay. Taxes on import of machinery for selected categories, more funds for research and development of tea, rubber and coconut, allocation of more than 20,000 acres of Government land for export agriculture are some of the policies that leap out as positive from the 147 page Budget report.

Social development was a serious concern heading into the Budget, given steep slashes in the Appropriation Bill for health, education and women and child affairs, but in a last minute turnaround the Government allocated Rs. 17 billion more for education and pledged to be ready for more funds. While the amounts might still be inadequate, economists and civil society watchdogs will have to work harder to calculate how much of what is pledged is actually released to these sectors. Political moves such as renaming ‘Samurdhi’ aside, the Government has pledged to raise 1.2 million people who are currently below the poverty line above it by 2020. A worthy goal that deserves sustained attention. 

Another crucial proposal is establishment of crèches or child care centres at companies with more than 500 employees to encourage more women to be part of the formal workforce. The proposal also includes specifically targeting low income women and training them in geriatric and infant care so that they can earn a subsistence wage without seeking employment in the Middle East. This may seem like a side-policy but should not be allowed to fall by the wayside as it is the first policy in years to specifically target the needs of women and promote their financial empowerment. 

Public Private Partnerships (PPPs) returned to feature prominently in the this Budget though some such as the listing of State-owned companies such as Mobitel and Hilton are repetitions from Budget 2016 or proposals introduced earlier this year that the Government could not accomplish. Overall, the space for PPPs and investment seems to have been opened and the Government has pledged to re-look at para-tariffs that have been earmarked as making Sri Lanka’s economy significantly less competitive.

Economists keeping an eye on fiscal consolidation may be relieved at the relatively few handouts in this Budget but that could change as elections return in 2017. As Finance Minister Ravi Karunanayake himself acknowledged; now comes the time to walk the talk.