Faster economic growth a priority for Government

Minister of Finance and State Revenue and Deputy Minister of Finance and Planning Ranjith Siyambalapitiya outlines the Government's plans to develop the economy under the Mahinda Chinthanaya concept in an exclusive interview with the Daily News. The Minister also touches on the rising cost of living, streamlining tax collection and financial accountability and transparency, among other issues.

Hiran H.Senewiratne

Q: Sri Lanka's inflation has risen during the last several months. Due to that the cost of living in the country has increased. What is your comment on that?

A: There is a trend towards increasing inflationary trends. Today we see there is a trend of escalation of prices of essential food items, international oil prices and changing consumer patterns in emerging economies.

These have affected almost all the countries in the world. Therefore, it is beyond our control. Further, other factors like the drought in Australia led to an increase in prices of dairy products. Therefore the only alternative is to increase productivity in every sector.

Q: During the past years the Government's expenditure has been higher the revenue. As the Minister in charge of this subject how do you look at that ?

A: In 2008 we were able to cover recurrent expenditure form the Government revenue after two decades. The Government has taken a policy decision to obtain loans only for development purposes.

Q: Any strategic plans to curtail the high cost of living?

A: With the harvesting season in the next few months rice prices will come down considerably. We have also amended the Consumer Price Index by removing certain items like liquor under "Mathata Titha" programme.

One of the problems we are encountered with is the escalating war expenditure in the country, which is approximately Rs 177 billion.

Q: Some accuse the Government of excessive printing of money. What is your comment on that?

A: The Central Bank has the sole authority on printing money. Normally they decide one year ahead by evaluating the economic growth in the decided year based on the GDP growth. In 2006 the Central Bank supplied Rs 30 billion worth of legal tender by anticipating a 6 per cent growth in the country.

In that particular year our growth rate exceeded more than six and half per cent. Therefore the Central Bank issued Rs 42 billion worth of legal tender into the country with the reaching of more than seven per cent growth.

Therefore, in 2007 those excess Rs eight billion added to the 2007 to control inflationary pressure. I can firmly say that we have not printed or issued money to the country for the sake of printing money.

Q: How does the Government strengthen the fiscal policy management under the Mahinda Chintanya ?

A: We have now strengthened Value Added Tax (VAT) collection and we collect them every three months. Now that process is progressing well with no complaints. I would like to highlight the VAT scam. Dr P.B. Jayasundera was the first person who reported at the Finance Ministry progress evaluation meeting to President and complained to the Police. Now that case is going on.

We are now managing VAT collection in an efficient manner by issuing certificates and receipts. The VAT refund is Rs 2 billion, which is now happening every month.

Q: What steps are being taken by the Government to strengthen Sri Lanka's revenue generating entities?

A: We have linked up three main revenue generating entities namely Sri Lanka Customs, Inland Revenue and the Registrar of Motor Vehicles (RMV). Today the whole culture is changed and we recognise all taxpayers as assets. Currently 40 per cent of revenue is generated by direct taxes and 60 per cent by indirect taxes.

Our objective is to increase the direct tax component in the next few years. In 2007 we opened more than 8,000 new tax files.

This year also we are in the process of increasing the number of new tax files to increase the direct tax ratio in the country. We have recruited young graduates to address the shortage in the workforce.

Sri Lanka Customs is going to a modern building with ultra modern computerised systems. Where the Excise Department is concerned we have given a lot of powers to Exercise Commissioner to contain the illicit liquor issue and restrict liquor consumption.

Q: Some elements accuse the Government of trying to sweep the COPE Report under the carpet. What is its current status ?

A: The President appointed the Committee and it has been submitted to the Speaker. It will take its own cause without any influence. The Government always maintains transparency and accountability in the case of public funds.

Q: What is the economic growth the Government is anticipating for 2008 ?

A: This year we expect to achieve a GDP growth of more than seven per cent. Most infrastructure projects are progressing well despite challenges. We are also putting macro-economic fundamentals in place.