Intellectuals applaud Budget 2010:

Budget deficit lowest in 18 yrs

Rasika SOMARATHNA

The 2011 Budget has been designed with long-term goals to maintain low inflation, encourage investments, reduce tax distortion, enhance private - public sector partnerships to promote economic growth, a group of intellectuals said yesterday.

Central Bank Economic Research Director K D Ranasinghe said Sri Lanka today was enjoying the dividends of peace in the form of economic gains and the 2011 budget proposals in this backdrop has been designed to sustain the momentum and build on the achievements.

“Sri Lanka’s inflation today has come down to 5-6 percent, foreign reserves has grown to over US $ 07 billion, unemployment rate is less than 05 percent. The budget proposals are intended at providing the necessary impetus to build on the above achievements,” he noted.

He said that Sri Lanka was also targeting the lowest budget deficit(6.8 percent) in 18 years to supplement growth.

Ranasinghe said several taxes were removed, making way for a less complicated and stable tax structure.

He was of the opinion that this would help bring the prices and cost of living down while enabling authorities to maintain inflation at a stable level.

Commenting on Salary increases he said that if high increments had been proposed in line with opposition demands, this would have been made worthless due to high inflation.

He said that the country after many years had got to inflation of 5 to 6 percent,. “The country is also growing at 8.0 percent. The government has set increases taking into account such factors,” he added.

He said that this budget had not resorted to providing short-term benefits with so-called ‘people friendly’ deficit budgets which later generated high inflation.

Sri Lanka Foundation Institute Chairman Prof.Ranjith Bandara said the budget proposals were well designed to meet an economic growth of around 08-10 percent and to supplements Government’s goal of raising the per capita income over US $ 4000 by 2016.

To achieve this the budget has proposed necessary institutional and structural changes among other measures. In this regard correct steps have been taken to restructure the Board of Investment and convert it as a one stop shop for all investor needs, he added. The proposed relief measures to the public and efforts at human resource development too came in for high praise from Prof Bandara.

The CEO and Managing Director of the Caltex Ltd. Kishu Gomes said that the 2011 budget had given the private sector the necessary impetus to rise as the engine of economic growth.

He said that the budget proposals clearly indicated the Government’s confidence in the private sector. He noted that during the last one and half years local industries had blossomed with the dawn of peace. “with low inflation our expenditure went down and earnings increased. Tax benefits too helped a great deal. New investments increased during the period”. “Due to all these productivity and competition increased. And as a result the prices of goods and services went down,” he said. In this back drop the 2011 budget proposals has given the private sector the necessary platform to sustain the momentum and enable rapid growth, he added. The budget proposals that brought up tax cuts from 35 percent to 28 percent to banks and corporate sector too was hailed by Gomes as a positive step.

”Tax cuts are good for business, which in turn could transfer the benefits we earn to the end consumer” he said adding the removal of taxes including Debits Tax, Social Responsibility Levy (SRL) on income, Construction Industry Guarantee Fund Levy (CIGFL) for special projects and Turnover Tax (TT), Regional Infrastructures Development Levy (RIDL) will spur growth.

He was of the opinion that budget had also encouraged private-public partnerships. It is clear that the Government’s aim is to enhance productivity in the State sector while encouraging growth in the private sector. This is a very healthy sign for overall economic growth, he noted.

The group of intellectuals aired the above comments during a discussion with the media which was organized by the Ministry of Mass Media and Information and held at the Government Information Department yesterday.