Budget 2008: Accent on development

Rohan Mathes and Irangika Range

President Mahinda Rajapaksa presented the third Budget of his administration yesterday, with emphasis on the development of the local economy and relief measures for the public.

Presenting the Budget 2008 proposals in Parliament yesterday, President Rajapaksa said the Budget was based on four priorities: Infrastructure development, relief to low income groups, reawakening of local enterprises and the improvement of local products.

“This Budget is being presented amidst many challenges. However, the progress made in the national security front, and the national priority that has been accorded to protect our Motherland should not be compromised to any challenge,” the President told Members on both sides of the House.

“I invite all to join hands to generate an economic growth in excess of 7.5 per cent during 2008, by expediting all key development projects, to create a prosperous country in line with Api Vavamu - Rata Nagamu, the national food production drive taking advantage of favourable weather conditions, increasing local investment and production in the backdrop of the enthusiasm created in the private sector, and the notable progress made in the national security front,” the President said.

He said a revenue surplus of Rs. 38 billion was expected from the 2008 Budget. “We attempted to change the 30-year long practice of financing a part of day-to-day expenditure from borrowings.

The overall Budget deficit of Rs. 297 billion which is 7 per cent of GDP in 2008, is entirely on account of capital expenditure. This demonstrates that we mobilised borrowings only for development activities which in turn generate income to service debt repayments.”

The development process should necessarily include an infrastructure network that provides opportunities for people living in remote areas to benefit from the economic growth, the President observed.

The Mahinda Chinthana: Vision for a new Sri Lanka - a ten-year horizon development framework has created a new approach for this meaningful development, he added.

He said the Government has been able to sustain a high average economic growth rate of 7 per cent over the last two years. It is in fact the highest growth rate recorded in our country in 30 years. “Our 10 year Development Framework highlighted the importance of prioritising infrastructure development, if we are to achieve an economic growth in excess of 8 per cent.”

In this backdrop, without permitting security conditions or financial constraints to be a barrier, we took up the challenge to build new power plants, highways, drinking water schemes, ports and airports, irrigation schemes and to strengthen railway and transport facilities.

One of the main highlights of the budget is the array of concessions granted to the co-operative system. The President proposed to link over 300 Co-operative Societies scattered islandwide to Lak Sathosa outlets. A maximum of Rs. 1 million each will be granted to all Co-operative Societies to modernise outlets. The Budget also proposed to write-off all long term loans and interest due, and also to write-off all unpaid taxes of Co-operative Societies.

In order to promote the distribution of essential items at affordable prices, it was proposed to exempt Co-operative Societies from Income Tax, VAT, Debit Tax, including Withholding Tax on interest, for a period of 5 years.

Another notable proposal was increasing the number of year 5 scholarships from 10,000 to 15,000 to facilitate education of children of low income groups.

The Budget also introduced an Environment Conservation Levy Act ensuring environment conservation. Individuals, business or items considered as harmful to the environment will be subject to this levy. A permanent household, with a vehicle and a telephone and electricity connections will be liable to this environment levy of Rs. 20 per month through the Act.

He proposed to raise Rs. 9,400 million by amending Excise Duty on motor vehicles and non essential imports, by increasing import and export license fees, by increasing the surcharge on Import Duty to 15 per cent and by revising the Cess on imports which have local substitutions.

It is also expected to increase revenue by a further Rs. 4,700 million by increasing provincial infrastructure development levy with is based on motor vehicles, by increasing the telecommunication licence fees and by extending the 10 per cent tax levied on mobiles to wireless phones.

Eastern resurgence will be given priority, with a 5 year tax holiday for any investment that exceeds Rs. 50 million and generates employment for 50 people. In order to encourage foreign earnings of Sri Lankan individuals and enterprises, income such as salaries, fees and divided will be exempted from income tax provided such income is remitted to Sri Lanka through the Sri Lankan banking system.

“Although the prices of certain essential commodities are likely to remain high due to soaring international prices, it is indeed a blessing in disguise to promote local substitutes.

Although we are likely to face many challenges in carrying out national security operations and in implementing development projects, we should treat them as tasks essential in the interest of our motherland and our future generation.

I invite the entire public service to mobilise the working class, the entrepreneurs and the taxpayers to work towards country’s development,” the President said.

See also