Ranil to revive and modernise economy via Budget 2023

• Lists three-pronged strategy of export-oriented competitive economy; environmentally-friendly green and blue economy and digital economy; reforms with relief key factor
• Says proposals contained in 2023 Budget are different from the traditional with no reductions in prices of goods or salary increases
• However, several measures in Budget likely to push prices, charges and costs up
• Assures to avoid populist policies but take right decisions 
• Announces slew of policies and initiatives needed to create better future for youth who are the real national wealth 
• Calls for common consensus and create a national economic policy framework with periodic review every five years
• Analysts term 2023 Budget revenue goal overly ambitious given precarious economic situation

President Ranil Wickremesinghe yesterday appealed to all political parties and other stakeholders to support the national effort to bring positive change to the country with the 2023 Budget unveiling slew of proposals to restructure and modernise the economy for the benefit of youth – the real wealth of the country.

Analysts described the 2023 Budget as overly ambitious when it came to revenue and expenditure targets given the precarious economic situation in the country. 

Nevertheless, Wickremesinghe sounded confident and optimistic based on the proposals and policy initiatives unveiled.  

The Budget 2023 included a raft of reforms especially in the public sector as well as relief to the poorer and vulnerable segments of the population. Cost of the social safety net program envisaged  is Rs. 43 billion. This is apart from Rs. 66 billion for monthly Samurdhi relief allowance and Rs. 14.5 billion as financial support for elders and Rs. 8 billion as support for low income disabled persons.

As per numbers, the Budget 2023 targets a revenue of Rs. 3.4 trillion up from estimated Rs. 2 trillion this year. Revenue will be 11.3% of GDP up from 8.7% in 2022. 

Most of the revenue measures were first announced in the Inland Revenue Amendment Bill introduced in October but currently being challenged in the Supreme Court. Separately measures to improve tax administration were announced yesterday via the 2023 Budget as well as increasing the existing three band tariff system by 5%. 

Fees and charges which have not been revised for three years from 2020 to 2022 will be increased by 20% whilst a Surcharge tax will be charged at the point of importation, on diesel, petrol and crude oil.

Expenditure forecast is a staggering Rs. 5.8 trillion (19.2% of GDP), up from Rs. 4.4 trillion (18.6% of GDP) estimated for 2022. Salaries and wages account for Rs. 1 trillion and for payment of pensions Rs. 375 billion has been allocated. 

Subsidies and transfers will be Rs. 1.1 trillion including Rs. 56 billion to be spent as fertiliser subsidy.  Government to spend Rs. 30 billion for the free school textbooks program. Separately Rs. 33.6 billion for Thriposha program, school nutrition food program, nutritional food package for expectant mothers.

The Budget is also committing a public investment of Rs. 1.2 trillion, slightly higher than Rs. 1 trillion estimated for 2022. As a percentage of GDP, the proposed amount in 2023 is lower at 4% as against 4.5% in 2022. The Budget deficit is expected to be reduced to 7.9% in 2023 as against 9.8% forecast for 2022. The deficit will be bridged via Rs. 560 billion in net foreign financing and Rs. 1.8 trillion via domestic financing.

The proposals in the 2023 Budget encompassed a range of sectors such as agriculture, trade  and investments, logistics, Green Hydrogen technology, Solar energy/Electric cars, inland fisheries, digital technology, banking and insurance, mineral resources, marine tourism, food safety, transportation, road development, youth engagement, women entrepreneurs, Healthcare and Sanitation facilities education and child nutrition, flood protection etc.

Wickremesinghe implied that the 2023 Budget was to lay the foundation for the future generations. 

“The real national wealth of our country is the youth. Can we be satisfied with the work we have done so far in order to create educational, social and economic opportunities for the youth,” queried the President.

“If we have been successful in providing and protecting our youth, why should they be queuing to leave the country in large numbers? We have failed to pay attention to the youth of the country, the hopes of our future generation receding,” said Wickremesinghe, adding: “These young people hope for a better day, brighter future and a prosperous country. Therefore, new approach, that goes beyond the traditional political engagement involving agitations, struggles and strikes is required.”

Perhaps to reinforce his broader message to legislators, the Government had facilitated the presence of a larger number of students in the public gallery to witness the Budget 2023 presentation. Pointing at them, the President said they “all aspire for a better tomorrow, and a change in systems”.

“Through this budget, the new foundation for the Sri Lankan economy that can create that force is being laid.” He defined the “new economy” as a social market economy, or an “open economic system of social protection”.

In creating this new economy, the President said the focus will be on three main aspects – an export-oriented competitive economy; an environmentally-friendly green and blue economy; and a digital economy.

“Creating such a new economic foundation is a challenging task,” the President acknowledged. He said such a new economy cannot be created merely by making changes in the tax system; rather new sources of revenue need to be found. “New areas of economic activity must be identified. Extensive economic reforms and restructuring to be carried out,” he said.

The President explained that this will be done in two ways; the first will be economic reforms and reorganisation, while the second will focus on modernisation.

“It is essential to establish a common social agreement between various parties for economic management. The Legislature, Executive, Judiciary, professional groups, mass media, religious groups and various social organisations should be involved. This common unity is important in sustaining long-term social harmony, in order to move towards rapid economic growth,” the President said. 

He said the proposals contained in the 2023 Budget are different from the traditional. “We are used to reductions in prices of goods, salary increases, concessions etc. through budget proposals. We like to see budget proposals that appear to be relief oriented even though it means indebtedness. 

“We have lost our way by taking that popular route. Now we can no longer continue to go down such wrong paths. If we build the future through the foundation created by this budget, we will be able to enjoy a prosperous economic environment by the end of 2023,” the President added.

Referring to goals of Budget 2023, he said they include achieving high economic growth of 7 to 8%, increasing international trade as a percentage of GDP by over 100%; annual growth of $ 3 billion from new exports from 2023 to 2032; foreign direct investment of over $ 3 billion in the next 10 years and create an internationally competitive workforce with high skills in the next 10 years.

It was emphasised that the envisaged reforms and reorganisations are what the country has been needing for a long time to build a new economy. “This is a role that many governments have opted to ignore with popularity in mind. We will undertake onerous duty for the country,” he said. 

In that context, the President requested all MPs to join and “support” the journey of bringing positive change to the country through these budget proposals. 

He said the Government is using these suggestions as background for a new economic base. “Let’s reach a common consensus and create a national economic policy framework. Let’s implement that policy framework for the next 25 years. 

“Every five years we can review our progress. Through such a review, we get the opportunity to further develop the policies that will make our journey towards our goal a success,” Wickremesinghe said, adding: “I have now provided this parliament with the necessary background to contribute to this journey.” 

He also said that sectoral committees can play a key role when the budget proposals presented are implemented through the assistance of Government officials. The finance committees can effectively intervene in the exercise of reducing public expenditure, the President requesting the Parliament establish all those committees as soon as possible, creating the space to initiate the new journey.

“Let’s make the best use of that space and join together to create a better future for our true national resource – our youth. I request all of you to proactively contribute to the effort of revitalising the country through the new economic foundation,” the President emphasised.