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Finance Minister Ravi Karunanayake
By Ranga Sirilal
and Shihar Aneez
Colombo (Reuters): Government revenue will increase by at least 30% in 2015, but the new administration is struggling to repay the massive debts on infrastructure projects incurred by the previous Government, Finance Minister Ravi Karunanayake said.
Since assuming power after the 8 January presidential elections, the Government has slowed many infrastructure projects amid allegations of corruption and over-estimation of projects by the previous administration, headed by Mahinda Rajapaksa, who has rejected such allegations.
It has also plugged many tax loopholes to boost revenue and cut spending on infrastructure in order to meet an ambitious budget deficit target of 4.4% of the Gross Domestic Product (GDP) this year from 6% in 2014.
“We have basically looked at cutting unnecessary expenditure,” Karunanayake told a Foreign Correspondents Association forum late on Thursday. “We believe that revenues will go up by at least about 30% full-year.”
The Government has been borrowing heavily through local Treasury Bonds and Bills as it struggles to pass crucial tax bills announced in an interim budget in January due to a lack of a majority in Parliament. The Government’s Treasury Operations Department has received some expenditure bills that were not approved by Parliament or the previous Government’s Cabinet of Ministers, he said.
Karunanayake said the Treasury had received a Rs. 510 billion ($ 3.81 billion) worth expenditure claim for road projects and a Rs. 325 billion worth claim for water projects in 2014 alone, both of which were not approved by Parliament or the Cabinet. The Government’s total capital expenditure was Rs. 596 billion last year.
“Surely this country doesn’t live only on water and road. This is like spending from your credit card thinking that you’ll win the lottery tomorrow. This is why we have to borrow more.”
Already the Government’s revenue has surged 21% in the first five months of this year compared to the same period last year.
The $ 75 billion economy’s growth is expected to slow to around 7% this year due to sluggish increases in the construction sector after the Government suspended some projects that were mainly financed through Chinese investment.
