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| Thursday, 20 November 2003 |
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A Budget for all by Steve Morrell, Rajmi Manatunga, Sudarshana Perera and Chamitha Kuruppu The proposals have focussed on the overall well-being of the citizens of the country. Finance Minister K.N. Choksy has presented a budget that addresses some core issues such as poverty alleviation, wages, infrastructure development, tax administration and improvement of quality of life of the rural poor. The major impact on focus of poverty alleviation is the welcome increase in wages for public servants of not less than 10% or over Rs 1,250.00 which is greater. Coupled with the increase in public sector wages, this budget has brought relief for pensioners who have always been an ignored entity in almost all previous budgets. Development of infrastructure has been spelt out in specific terms. On the face of the budget declaration, the plans which would have received priority are the Colombo-Kandy Highway, Matara-Colombo Expressway and BIA development project. Rural electrification will be a priority area for progressive action which would also see positive development in generation of the coal power project. Concurrently this action would also address an anticipated power shortage because of the rural electrification. Considering the infrastructure development modernising the road network would have their salutary impact on efficiency and productivity creating an effective incentive structure to attract foreign investments. The noteworthy feature of this budget has been definite plans for development of the Southern ports namely Hambantota. What this would mean is that Southern development would have its telling effect on the grassroot level population, which in consequence would promote prosperity. The budget also has addressed the deficiencies in the present tax administration introducing single unified 15% VAT rate. 'Balanced and progressive' The broadbased tax proposals attracted discussion by some leading business personalities at the budget forum at Lake House yesterday. Their collective view was that budget 2004 is 'balanced and progressive'. The proviso being that the government continues with its financial discipline and policies. They also stressed the importance of peace, political stability and infrastructure development for the country's economic growth. Personal Income Tax Personal Income Tax was a positive measure in giving relief to the middle class wage earner who was in previous budgets ignored by and large. In this sense the all-around relief projected would benefit a greater segment of the wage earning workforce both blue and white collar categories. This coupled with the public service wage increase would generate individual spending power leading to family prosperity. Value Added Tax The critical aspects highlighted by the business community was that although the salutary aspects of this budget were to streamline administration there were the negative effects as well which will in the long term affect the cost-of-living. The VAT although has been unified to a reduced rate of 15% would still be exposed on the prices of essential goods which might escape the expected benefits. The tax benefit of 10% simultaneous read with wage increase for public servants would not quite have a pronounced effect on accruable benefit envisaged in this budget. Public service wage increase The consensus was that although the wage increase would benefit the public service this had no bearing on the private sector. Having said that they made the point that eventually the private sector specifically the plantation would essentially have to follow in enhancing wages. The important aspect in consequence to the wage increase should be linked to productivity although on the face of this proposal an immediate reaction would sound negative. Commenting on the Voluntary Retirement Scheme (VRS) for government servants they expressed optimism that the reduction of personnel will increase efficiency. Advancement in Information Technology did not receive importance, they said. Infrastructure Development Although this budget promised improvement in infrastructure the end result should be an achievement equation comparable to other countries in the region particularly Malaysia and a few other South East Asian nations. If this was the future focus then it was imperative that rather than state as much in the budget it was now time for action. Finance and environment issues were pointed out as being restrictive points which required examination in the long term. This was not brought out within the content of the budget. It was important that this aspect should receive attention. Development of the road network leading to the northern territory did not receive the importance it deserved. However, extension of work to cover this area as well would be provided for the ongoing program. The proposals put forward would cover a three-year time frame. Budget observations The business community said that analytical performance of finance management of the economy should be an importance aspect in portraying the performances outlined as a major issue in stating achievements. This was lacking in Sri Lankan's budgetary proposals. The Tokyo Donor Conference pledged a sum in excess of US $ 4.5 billion for financial realisation over three years. As pointed out by the Finance Minister the progress made in achieving the pledged aid would not be forthcoming unless and until political stability was restored. |
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