Budget expected to ensure growth momentum

BUDGET: President Mahinda Rajapaksa as the Minister of Finance, will present his second budget to Parliament on November 16, 2006.

This year's budget is expected to show a further improvement in the process of moving towards a comprehensive medium-term approach in the preparation of the budget.

Such an approach is necessary in view of major development plans that cannot be looked at within a one-year time frame.

Routine operational expenditure, salaries, pensions etc. will be captured within an annual framework.

Looking at 2006, what is encouraging to note is that amidst many challenges faced by the country such as security risks and high international oil prices the economy has generated an 8 percent growth against a targeted growth rate of 6 percent.

The last recorded growth of this magnitude was in 1978, almost 30 years ago.

The growth has been diverse particularly in areas such as agriculture, livestock, manufacturing, construction and small and medium term activities.

Regional development programmes under the Mahinda Chintana and provision of greater support to the farming community, the SME sector as well as post tsunami recovery and rehabilitation activities have contributed to this achievement.

The Budget 2007 is expected to ensure a sustainability of this growth momentum.

In 2006 the unemployment rate has dropped to 7 percent from 8.3 in 2004 and 7.7 percent in 2005. Further, despite a heavy drain of foreign exchange on account of the oil bill and higher prices for imports, the country's reserves have been maintained at a level sufficient to cover three months of imports supported by continuous flow of worker remittances and higher receipts from tourism activities.

A noteworthy feature in the trade was the substantial increase in the importation of capital and intermediate goods reflecting an expansion of economic activity in the country while exports have also recorded a notable growth.

Meanwhile, the country has experienced some pressure on consumer prices mainly due to that impact of high oil prices resulting in higher electricity and transportation costs. 2006 has also experienced an expansion of bank credit to the private sector resulting increased demand, pushing prices upwards.