‘A future of opportunities’ promises President

Private sector in its initial reaction says Budget 2011 very progressive; Disappointing says Opposition

President and Finance Minster Mahinda Rajapaksa yesterday via a historic Budget promised “a future of opportunities” whilst the initial reaction from the private sector was more favourable though the main Opposition blasted it as serving the rich by depriving the poor.

Given the fact that it was the first Budget since the end of the 30 year old war and President Rajapaksa’s second term, expectations over Budget 2011 had been very high. A significant feature in the Budget is several policy and structure reforms which have been widely commended.

Whilst the full Budget speech was yet to be over, the stock market ended on a negative note yesterday. How Asia’s best performing Bourse performs today given the host of positive incentives to capital markets and private sector will be critical.

Business and industry leaders from the private sector in their initial assessment have welcomed the Budget 2011 with descriptions such as “progressive” or “forward looking” and “very positive.” (See separate story)

The President was emphatic during his Budget 2011 presentation. “We have to be futuristic. Our sole responsibility is to manage the present to build a better future. That should be a future with opportunities. Let us leave our differences aside and place the country first. Let us place the future of our children first. My policy strategy, commitment and leadership aims at building a prosperous future for our children. Their future lies in a knowledge economy. Let us join hands to make our country the Emerging Wonder of Asia,” the President said in conclusion of his speech.

Treasury Secretary Dr. P.B. Jayasundera last night further reinforced the merits of the Government’s fiscal policy strategy. He told an Inland Revenue Department post-Budget seminar “Adapt the Budget to your own working environment in order to help yourselves and be a part of an emerging middle income country.” “The previous complaints of how successive governments could never provide the support required by the private sector as they had to deal with high fiscal deficits can no longer be made. The current Government is managing a deficit at 6.8% which is tolerable and has provided the private sector with a much more promising environment.”

The total revenue in 2011 is projected at Rs. 963 billion. Recurrent expenditure is likely to be Rs.1,017 billion. “Therefore the basic deficit in our Budget is around Rs. 54 billion. As our major investments in infrastructure, human resources, rural development and social security will be over this deficit, the Budget deficit will amount to Rs. 434 billion which is 6.8 percent of GDP in 2011.

Our medium term objective is to eliminate our basic deficit and move towards a budget deficit of around of 5 percent of GDP. Neo liberal ideologists must understand that this deficit is not to bailout failed bankrupt companies. This deficit involves provisions for free services, social security and development expenditure,” President said during the presentation of the Budget.

“My attempt in this Budget is to sustain our achievements and manage future risks in our economy. We have achieved an economic growth rate of near 8 percent. Inflation has stabilised at around 6 percent. Poverty has come down to 7.6 percent and unemployment to 5 percent. These are all achievements within 5 years,” he added.

“Our collective effort now onwards must be to maintain these positive trends in our economy over the medium term,” he stressed.