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large domestic sectors. The Opposition was quick to dismiss the Budget as “empty” in terms of good measures, but warned it would heap additional burdens on the ordinary people.
The 2014 Budget, however, had elements of continued fiscal discipline though some proposals appeared lavish, prompting critics to say the Government was vying to secure a landslide victory in planned or contemplated elections in 2014. If the Opposition assessment is correct, then the Government will become unpopular.
What was noteworthy was the emphasis on agriculture revival, healthcare, education and ICT sectors as well as fresh impetus to the Government’s five hub (maritime, aviation, knowledge, energy and commerce) + tourism strategy, as exclusively reported by the Daily FT yesterday.
There is also a further stimulus to import replacement sectors including food and manufactured products as foreign sourced goods will be expensive.
The revision in special commodity levy and Customs duty in support of local value addition will bring in a sizeable Rs. 12.7 billion to Government coffers. Expanding the tax base (VAT) on supermarkets and trade will bring the biggest haul of Rs. 15 billion. Extending Nation Building Tax on banking and financial services will net Rs. 3.6 billion. These high potential sources of revenue are because the Government needs to shore up its revenue effort though the import levies will be a boost for local suppliers.
President Mahinda Rajapaksa in presenting the 2014 Budget spoke of recent economic, social and international achievements of the country. He said that over 7% economic growth is envisaged in addition to lower budget deficit and inflation.
A closer scrutiny of provisional data of 2013 Budget numbers reflect challenges faced by the Government and plans made last year being partly off track.
A major expenditure proposal is Rs. 20.6 billion for the hike in the cost of living allowance, widely seen as a populist move in an era when the Government has been trumpeting that it has succeeded in keeping inflation at single digit for near 60 months.
The President in his speech was upbeat and passionate. “Our country, which is emerging as a strong middle income economy in the Asian region, has reached a unique crossroad,” he said, listing some of the salient achievements. “Poverty – a social and economic injustice – is fast depleting in our country,” he added.
“The task ahead of us now is to accelerate economic development, to be able to address the emerging aspirations and goals of particularly our low and middle income people,” President said, justifying several of the proposals in healthcare, education, housing, infrastructure, healthy living and resurgence in rural areas.
“I believe that the crossroad we have reached is a unique opportunity for us to take a leap towards fulfilling the aspirations of our people. That is why we cannot afford to let go of this opportunity we have got to create a strong future for our future generations,” President said.
“Although we have defeated terrorism on the ground, the forces that were behind remain to be active. That is a main obstacle for the promotion of peace and national reconciliation and to strengthen international cooperation. Winning future challenges by overcoming these obstacles remains to be our national responsibility. Therefore, on behalf of the future generation, I invite all of you to work together towards social and economic development, while consolidating national unity,” President Rajapaksa said, amidst applause in Parliament.
His Budget speech stated the economic growth of 6.4% registered last year amidst adjustments made due to global instabilities and high oil prices and further challenges due to the severe drought that was experienced has increased to 7.8% in the third quarter of this year. There is confidence that economic growth will exceed 7% this year and move towards 7.5-8% during the medium term of 2014-16, maintaining a growth in the real economy well in excess of the expected 5-6% inflation.
A budget deficit of 5.8% is likely in 2013 and the target for 2014 is 5.2% of GDP and 4.5% in 2015. “We are determined to bring down the budget deficit to 3.8% by 2016 and reduce our Debt/GDP ratio to 65%,” the President said.
A major expenditure proposal is Rs. 20.6 billion for the hike in the cost of living allowance, widely seen as a populist move in an era when the Government has been trumpeting that it has succeeded in keeping inflation at single digit for near 60 months.
The President in his speech was upbeat and passionate. “Our country, which is emerging as a strong middle income economy in the Asian region, has reached a unique crossroad,” he said, listing some of the salient achievements. “Poverty – a social and economic injustice – is fast depleting in our country,” he added.
“The task ahead of us now is to accelerate economic development, to be able to address the emerging aspirations and goals of particularly our low and middle i
ncome people,” President said, justifying several of the proposals in healthcare, education, housing, infrastructure, healthy living and resurgence in rural areas.
“I believe that the crossroad we have reached is a unique opportunity for us to take a leap towards fulfilling the aspirations of our people. That is why we cannot afford to let go of this opportunity we have got to create a strong future for our future generations,” President said.
“Although we have defeated terrorism on the ground, the forces that were behind remain to be active. That is a main obstacle for the promotion of peace and national reconciliation and to strengthen international cooperation. Winning future challenges by overcoming these obstacles remains to be our national responsibility. Therefore, on behalf of the future generation, I invite all of you to work together towards social and economic development, while consolidating national unity,” President Rajapaksa said, amidst applause in Parliament.
His Budget speech stated the economic growth of 6.4% registered last year amidst adjustments made due to global instabilities and high oil prices and further challenges due to the severe drought that was experienced has increased to 7.8% in the third quarter of this year. There is confidence that economic growth will exceed 7% this year and move towards 7.5-8% during the medium term of 2014-16, maintaining a growth in the real economy well in excess of the expected 5-6% inflation.
A budget deficit of 5.8% is likely in 2013 and the target for 2014 is 5.2% of GDP and 4.5% in 2015. “We are determined to bring down the budget deficit to 3.8% by 2016 and reduce our Debt/GDP ratio to 65%,” the President said.
Rs. 20.6 b Cost...
Delivering good news, President in his 2014 Budget speech yesterday proposed to increase the Cost of Living Allowance to all public servants by Rs. 1,200 per month, from January 2014. “I also propose to increase the cost of living allowance to pensioners who retired before 2006 by Rs. 600 and by Rs. 400 to others. I make a request of private sector employers, who do not adjust salaries of employees in line with the Cost of Living Allowance, to suitably increase the wages of their employees,” the President said, amidst applause from Government benches.
The allocation in the Budget for this move is a staggering Rs. 20.6 billion.
In its November Monetary Policy Review, the Central Bank said inflation continued to remain at single digit levels in October 2013 for the 57th consecutive month since February 2009, while recent inflation (y-o-y) figures indicated that inflation volatility has smoothened.
“Going forward, the inflation outlook continues to remain benign, with subdued international commodity prices, reduced domestic supply side pressures and well contained demand driven inflationary pressures. In this background, according to current projections, inflation is expected to remain at mid-single digit levels throughout 2014 as well,” the Central Bank added.
The President said that between 2014 and 2016, inflation is expected to be 5-6%.
SEC Chief...
"The capital raised from the corporate debt market grew by 330% while the unit trust industry witnessed a growth of 77%.The 50% tax reduction for three years for companies listing on the Colombo Stock Exchange is a great opportunity offered in this year’s Budget. It will definitely encourage more IPOs in the future. I hope many companies will make use of this window of opportunity. As it is said, the faster you move, the greater your benefit.”
