Opportunities to all!

Monday, 22 November 2010 02:03 -     - {{hitsCtrl.values.hits}}

Final touches to finer things ?

President Mahinda Rajapaksa who is also Finance Minister along with Treasury Secretary Dr. P.B. Jayasundera was busy over the weekend finalising the Budget 2011 to be presented today in Parliament. Here the duo read through the draft at the President’s House - Pic by Nalin Hewapathirana

Govt. says expect relief and development in Budget 2011 to be presented by President today

Drawing strength from the unprecedented advantage of end of war and a sound macro-economic policy framework, the 2011 Budget, to be presented by President Mahinda Rajapaksa today afternoon, is expected to be a landmark with emphasis on creating opportunities to all.

Presidential sources said that Budget 2011 will be development oriented in addition to bringing relief for all whilst Finance Ministry sources said emphasis will be on creating new and higher economic and income opportunities for the country and people.

“The Appropriation Bill to be presented in parliament is to provide relief to the people, focused on reducing the cost of living, improving the public and private sector, continuing with infrastructure development, providing relief to people affected by the conflict, uplifting the rural sector and bringing further progress to the urban sector,” said the President’s office. President Rajapaksa who was sworn-in on Friday for his second term of office has pledged to make the country the hub of development in the five-fold areas of naval, aviation, commerce and trade, power and energy, and knowledge.

Most private sector analysts expect Budget 2011 to focus on stimulating the country at large towards maximising the potential Sri Lanka has in achieving these five hubs. It will also deal with unleashing investments and growth in traditional economic/product sectors as well as those which hitherto had been untapped due to the near 30 year old conflict such as fisheries.

The Budget 2011 is the inaugural in President’s second term in addition to being the first fully fledged since the end of war in mid-2009 with this year’s being only a vote on account.

Finance Ministry sources admitted that expectations from Budget 2011 have risen dramatically post-war. They noted that private sector and other stakeholders need to treat the end of war, as the best enabling environment the Government has created for higher economic growth to take place. “The fight to eradicate terrorism required a massive investment by the Government and dividends of such effort must be reaped fully whilst having to service the cost,” they added.  This is reflected as per the 20% Government expenditure or Rs. 215.2 billion earmarked for defence out of a total estimated Rs. 1.08 trillion of the Appropriation Bill.

Whilst corporate and personal income tax cuts are expected from Budget 2011, Finance Ministry sources said that the private sector needs to change their mindsets to operate their businesses differently in post-war Sri Lanka.

It was pointed out that with the Government having invested substantially in fighting and winning the war, it cannot be expected to endlessly compensate private sector inefficiencies and deficiencies.

“There is an urgent need to improve productivity, technology, marketing as part of doing business differently and moving up in the value chain,” they said adding “This is critical as Sri Lanka prepares to meet future socio-economic challenges.”  

It was pointed out that global recovery is still fragile as Europe and US remaining weak whilst upward pressure of oil prices being the other external challenge. However the only silver lining is growth and dynamism in Asia and this increases competition for Lankan products globally.

In the 2011 Budget the Government is expected to continue with its focus on improving infrastructure hence a higher public investment program is envisaged. This together with reforms is expected to further stimulate the enabling environment for private sector to do business better.

The Daily FT learns that the Government will also focus further reducing the cost of funding for the private sector and Budget 2011 is likely to have several proposals that will achieve this whilst the banking sector will also be expected to improve its own efficiencies and pricing. This push will be consolidated by pursuing a low and single digit inflation regime and a committed shift towards 5% Budget deficit in the medium term by the Government.

The second reading debate will be held from 22 - 27 November while the third reading is scheduled to be held from 29 November to 20 December.

New Ministers to be sworn in today; Fresh appointments to key public sector posts

A new Cabinet of ministers will be sworn in today morning at the Presidential Secretariat before President Mahinda Rajapaksa.

Secretaries to the Ministries will be appointed anew as well along with heads of state sector institutions who are appointed by the President. Most expect reappointments as well as changes in both categories.

Popular expectations

Following are some of common broader expectations of private sector from 2011 Budget

  • Reduction in personal and corporate income tax with emphasis on wider compliance
  • A revamped/restructured incentives regime to boost private sector investments in traditional and new economic sectors in addition to maximising potential of Sri Lanka in creating five hubs in maritime, aviation, commerce and trade, power and energy, and knowledge.
  • Measures to further reduce cost of bank borrowing
  • Relaxation of exchange control regulations
  • Measures to boost capital markets
  • Higher public investment programme
  • Public sector reforms
  • Lower Budget deficit with a pragmatic and certain shift towards a Budget deficit of 5% in the medium term
  • Low and single digit inflation regime