Thursday, 21 November 2013 00:45
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Today’s Budget 2014 to balance policies and election aspirations
Commitment to lower budget deficit whilst consolidating recent improvements
Long-term path to better macroeconomic fundamentals is the focus
New measures to boost revenue
Fresh support to accelerate five-hub + tourism strategy benefits and boost traditional sectors such as agriculture
Critics claim bankrupt regime eying elections win would opt for populist Budget with fiscal risks; others expect not much cheer for the ordinary people
Officials maintain strong political goodwill negates need for vote-buying Budget
President Mahinda Rajapaksa will present the National Budget for 2014 today, which many expect to be progressive despite an election year whilst critics claimed ordinary people wouldn’t have much to cheer from a bankrupt regime.
The 2014 Budget is the fifth since the end of the conflict and comes when recent GDP data suggests a rebound in the economy and even the IMF acknowledging there aren’t any serious immediate risks.
Most analysts and officials maintained that the Government would demonstrate progressiveness continuing on the past undertaken a few years ago for stronger macroeconomic fundamentals.
“The Government will continue with the rapid development thrust which the country has witnessed since the end of the war and reflected in national growth and increased investments,” a senior official said.
A lower budget deficit of around 5% to 5.3% of GDP from the 2013’s estimated 5.8% and steering the economy to 8% growth are key drivers of Budget 2014.
“The Government will pursue the path that has been clearly articulated in successive previous budgets and the strong political goodwill as well as resilience and safeguards measures in place have made the entire exercise a comfortable one with great conviction,” he said.
The Government plans 2014 expenditure to be at Rs. 2.543 trillion as against the Rs. 2.567 trillion revised estimate for 2013. Maximum total borrowing for 2014 has been revised down to 15.6% to Rs. 1.1 trillion as against 2013’s revised estimate of Rs. 1.3 trillion.
Political analysts are speculating that 2014 will be infested with multiple elections, including presidential. Critics maintain that the Government is bankrupt and will resort to populist measures.
“The Government doesn’t have many options and the system is wearing out. Further burden in terms of expensive debt and corruption will however offer no cheer for the ordinary man,” they added.
President Rajapaksa’s second six-year term does not end until November 2016, but analysts said he may call early presidential poll during 2014 in a bid to consolidate power for the next six years.
The drop in Government revenue in the first half in tandem with a relatively slower growth in the economy has raised fresh concerns and fuelled expectations that more indirect taxes will be included in Budget 2014.
However, officials said the Government has many variables to adjust in achieving the desired budget deficit and recent progress in macroeconomic management has reinvigorated the Government to pursue a path of sustainable high growth with an eye to doubling per capita income to over $ 4,000 by 2016.
“President Rajapaksa enjoys enormous political goodwill. Whilst there is a strong Government and a weak Opposition, there is no need to tinker with the Budget,” pro-Government analysts claimed. “So the focus will be to create the required environment for the economy and the private sector to achieve its true potential,” they added.
In that context, a fresh impetus to fast-track benefits arising from the five hub strategy is envisaged in 2014 Budget, in addition to supporting traditional sectors such as agriculture.
The Department of Census and Statistics last week revealed that the economy in the third quarter bounced back to achieve 7.8% growth whilst indications are that the fourth quarter will be much better, enabling the country to finish 2013 with a GDP growth of 7 and 7.5%.
As exclusively reported by the Daily FT yesterday, IMF Deputy Managing Director N. Shinohara noted that Sri Lanka’s economy doesn’t face any serious immediate risks and the multilateral agency was satisfied with the current macro-economic management policies.
He also said that there was no immediate threat to debt sustainability though Sri Lanka was urged to go for further reduction in public debt, shore up external reserves via higher exports, persist with lower budget deficit and inflation, enhance tax base and collection as well as improve business climate to be stronger to face medium term risks.
The debate on the second reading of the Budget will commence Friday, November 22 and continue till November 29. The Committee Stage debate of the Appropriation Bill will continue till December 20, with the final vote scheduled for that day.
