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By Shirajiv Sirimane

The Government would be able to reduce the national debt by Rs. 9 billion by end 2004 due to good fiscal management, Deputy Minister of Finance and Rural Economy Bandula Gunawardena told a news conference

The Minister said that the government had to spend Rs. 130 billion as interest and as installments for loans that were taken in the previous years. "These loans were from foreign countries and from the Central Bank and Commercial Bank borrowings. However with a focused economic policy the government will pay only Rs. 121 billion towards this debt next year which is a saving of Rs. 9 billion."

He said that part of these savings would be utilised to increase wages in the public sector and for other expenses. He said that Rs. 48.5 billion was printed in 2001 but since this government office no money was printed.

The Minister said that only with a reduction in the size of the national debt can additional funds be freed for delivering goods and services, such as health, education, and transportation to the people of Sri Lanka."

"Debt servicing costs reduce the funds available to provide goods and services for the public. Debt services cost must be brought down through debt reduction. Debt services costs will fall from a high of 71.5% of the budget in 2002, as a result of previous deficits, to an estimated 41.1% in 2006 - a reduction of 43% in just four years."

He said that the budget deficit too is being reduced. "The government is planning a reduction in the national debt to GDP ratio of 85% by 2006 and 60% by 2013. Another target is to have a deficit that does not exceed 5% of GDP by 2006."

The Minister said that the projected expenses for next year would be Rs. 666. 6 billion and out of this Rs. 314.4, which is 47.2%, would be for general public services and Debt servicing . "A further 81.2 billion (12.2%) would be allocated for general public services and Rs. 75.8 billion (11.4%) for Economic affairs."

The Government has to spend Rs. 100 billion as wages and pensions for the public sector and this is the highest in Asia. "A global study has shown that in countries such as Bangladesh and India there are around 20 public servants to service 1000 members of the public while in Sri Lanka this ratio is 60 to 1,000."

He said that the Presidential Commission on Salaries and Wages headed by Tissa Devendra had suggested that this number should be reduced and the Government is seriously studying this proposal. "This is a timely suggestion since the government has to spend one-third of the budget expenditure to pay the public servants as the total number of employees are still too high. The Government needs to assure the public that public employees are fairly compensated. The 2004 budget will address this problem."

The Minister said that all these targets could be achieved provided that peace prevails in the country and world energy prices, world economy and inflation caused by unrealistic labour demands do not have a major impact. Though there is no war Sri Lanka has to still maintain its defence expenditure. "The Singapore government spends over 15% from their budget on Defence despite not having a war." he said.

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