Govt. reiterates LG polls amidst crisis will jeopardise economic revival process 

Saturday, 21 January 2023 00:00 -     - {{hitsCtrl.values.hits}}

  • State Finance Minister Ranjith Siyambalapitiya insists crucial to avoid blowing the only opportunity to stabilise economy via IMF bailout package
  • Says imperative to uphold political stability to obtain bailout package, implement economic reforms 
  • Explains Govt. struggle to make ends meet, expects a budget deficit of Rs. 6.66 t in 2023
  • Asserts Customs and Excise Departments inform inability to meet revenue targets amidst dwindling purchasing power 
  • Opines SL likely to have a positive economy only in 2025

By Charumini de Silva

The Government yesterday reiterated any decision to hold Local Government polls amidst poor financial position could worsen the ongoing economic crisis.  

“The Treasury is faced with an extremely dire financial situation. The Government is grappling to allocate funds to make ends meet where the State revenue is insufficient to secure funds for the essential requirements. Against this challenging economic backdrop, the reality of the Government coffers was explained to the Supreme Court also to make a fair decision,” State Finance Minister Ranjith Siyambalapitiya told journalists.

On Thursday, the Treasury Secretary informed the Supreme Court via an affidavit that any decision to hold the Local Government polls would worsen the economic crisis. The affidavit was submitted in response to a writ application filed by retired Army Colonel W.M.R. Wijesundara seeking a court order to defer the Local Government Election.

The State Minister said Sri Lanka needed to avoid blowing its only opportunity to stabilise the economy through a bailout program from the International Monetary Fund, by holding Local Government polls to intensify the ongoing economic crisis.

“Sri Lanka had sought IMF assistance 16 times before. However, this time we have reached out to them in a totally different avatar. We approached after the country declared the suspension of repayment of all external debt and one year after the due timeline. Thus, it is important to uphold the political stability to obtain the IMF assistance and to successfully implement the key economic reforms to put the country back on track,” he emphasised.

In 2022, the Government’s revenue and expenditure difference were as high as 256% or Rs. 3058 billion, Siyambalapitiya said, adding that they expect a Budget deficit of Rs. 6.66 trillion by end of the year as well.  

 “We are no longer in a position where we can borrow funds from the international market and print money. The Treasury is managing the economy in an extremely cautious manner to ensure that the country does not fall back from the path the recovery. 

“The Government expect the revenue to be Rs. 3.45 trillion, while the expenditure will go up to Rs. 10 trillion, incurring a deficit of Rs. 6.66 trillion for the year. Thus financial discipline is indispensable to run the economy,” he said.

The Government this week fine-tuned cuts in budgetary allocations with an additional 1% from all ministries to purchase essential medicines. Previously it was decided to deduct 5% of the allocated funds. It was also decided to pay the State employee salaries in two phases as Government struggles to make ends meet with its revenue.

Siyambalapitiya said the State coffers estimated an income of Rs. 145 billion from tax revenue for the month, but the collection was unlikely. 

“As of 18 January, the Government has collected Rs. 78 billion and after paying for loans and interests there will be a deficit of 530%. This is the reality of the Government coffers,” he added. 

He also noted that the Customs has informed the Department is likely to fall short of Rs. 7 billion from the target of Rs. 62 billion for the month, while the Excise Department also conveyed that they would incur a shortage of Rs. 4 billion from the monthly target of Rs. 17 billion as the purchasing power of alcohol consumers have dropped by 30%.

“The economy is running on a negative trajectory. Last year the economy declined by 8.5% and we anticipate negative growth this year too, but not as bad as last year. Sri Lanka is likely to see a positive economy two years from now,” the State Minister added.  

Acknowledging that the current economic circumstances are the result of short-sighted financial mismanagement policies by successive Governments, Siyambalapitiya said the Treasury is doing its utmost to ensure State employee salaries, pension, Samurdhi, medicine, fertiliser and other essential expenses.