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By Ravi Ladduwahetty

The Government has called for proposals from the private sector, the business community and the academia aimed at incorporating some of them in the 2003 Budget which is billed to be presented in Parliament by Finance Minister K.N. Choksy on November 6.

There is a serious financial crisis in the country and the only way to bridge the deficit is to devise revenue generating methods while decreasing expenditure and the Government has called upon the private sector and the academia to formulate proposals to meet these ends, Minister of Rural Economy and Deputy Minister of Finance Bandula Gunawardena told the Daily News in an interview yesterday.

The aim of the Government is to keep the budget deficit at around 7.5 to 8 percent of GDP by non-inflationary methods. This is the only manner in which the Government could maintain the cost of living at desirable levels, he said.

Government borrowings are estimated at Rs. 350 billion for 2003 and this is not the time to be shouting political slogans, he said.

The Government has targeted revenue for 2003 to be Rs. 317 billion. The total estimated Government revenue is insufficient for the payment of the loan instalments and the interest of the PA Government which has matured and this has amounted to Rs. 327 billion.

The crisis which was prevalent in the economy last year also prevails this year which has been for the first time in independent Sri Lanka and it is important that there is a national debate on this, he said.

This follows Minister Gunawardena tabling the Rs.656 billion Draft Appropriation Bill for the year 2003 at last Wednesday's Cabinet meeting on behalf of Finance Minister K.N. Choksy who is away in London as the leader of the four-member Sri Lankan delegation to the Commonwealth Finance Ministers' Conference in London and the Annual Joint meetings of the World Bank and the International Monetary Fund in Washington.

Minister Gunawardena has explained to President Chandrika Bandaranaike Kumaratunga that the year 2002/2003 would be the worst in the economic history of the country and added that the loans taken by the previous regime had also reached maturity.

Minister Gunawardena has pointed out to Cabinet that despite Government expenditure being estimated at Rs. 656 billion, estimated Government revenue for 2003 was Rs. 317 billion inclusive of grants whereas the loan instalments and interest attributable due to borrowings made during the PA regime amount to Rs. 327 billion Thus, Government borrowings have been estimated at Rs. 349 billion. Rs. 130 billion has to be apportioned for domestic and foreign borrowings, the Deputy Finance Minister has explained to the President.

Allocations for loan instalments is Rs. 197 billion, Minister Gunawardena has told Cabinet.

Explaining the seriousness of the situation, the Deputy Finance Minister has told Cabinet that the remainder for the payment of salaries of public servants and the Samurdhi allocations will have to be from the Rs. 317 billion and that the catastrophic situation had to be overcome.

Meanwhile, Finance Minister K.N. Choksy told the Joint Annual Meetings of the Executive Boards of the World Bank and the International Monetary Fund (IMF) in Washington on Sunday that economic prospects for Sri Lanka have improved considerably with the peace process moving forward and the strengthening of the Government's economic reforms.

"Our Government's view on reforms also tallies with the observations made by the Executive Boards of the IMF and Deputy Managing Director Shigemitsu Sugisaki at the conclusion of Article IV Consultation earlier this month. We intend moving towards deeper structural reforms and prudent management of the country's monetary policy," the Sri Lankan Finance Minister told the two Brettonwoods institutions.

The Government has ensured private sector led economic growth with the economic reforms by freeing the business and industry from excessive bureaucratic controls rationalisation of Customs and Tariffs, the introduction of Value Added Tax (VAT) and the establishment of the Revenue Authority, he said.

"Country experiences have shown that there are no alternatives to sound fiscal and improved policies and improved governance to face these challenges. For many low income countries, notwithstanding their own efforts, there are the other problems such as the capacity limitations, severe resource constraints inclusive of market access limitations.

Ckoksy said that he shares the view that the role of the IMF needs to be re-assessed in the context of the increased complexities of the global economy.

He said:" While the financial base of the IMF needs to be enlargened in terms of its financial base, both the World Bank and the IMF needs to redouble their efforts to help the promotion of growth and poverty alleviation in support of the Millennium Development Goals (MDG) strengthening of the partnership of the rest of the donor community.

The Minister also congratulated the World Bank and the IMF for their innovative role in seeking solutions to the new problems those have emerged.

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