Heading In The Right Direction

  • Budget 2016

By Hasitha Ayeshmantha

The first reading of the Budget 2016 came to a conclusion with the new government announcing a further reduction in prices of food items, amidst much debate and speculation. Many parties, both from the government and the opposition commended the new government’s maiden Budget, while other parties, mainly from the Mahinda Rajapaksa camp, raised several issues concerning the Budget 2016.

On the other hand, many parties from the financial sectors of the country have also expressed alot of interest in the blue-green government’s maiden Budget and have expressed mixed emotions on the matter. One of the major concerns which were raised was that certain parties finding unclear as to what revenue generation model the new government has planned to adopt in their way forward. In response to that, Finance Minister Ravi Karunanayake’s budget speech states that the country looks to further strengthen the local investment sector performance and promoting local start-ups. It’s also stated that the government intends to increase investor attraction to local state sector and private sector ventures and to get foreign investments to local start-ups as well. Whatever said and done, it is evident that the public is also having mixed feelings on the matter and they have arrived at a point where they do not understand what and who to believe. Therefore, with the intention of getting various opinions, views, criticism and analysis on the maiden Budget, this time The Sunday Leader Economy focuses on evaluating the content of Budget 2016.

Speaking to The Sunday Leader, Economist Dr. Sirimal Abeyrane said that when looking at the Budget 2016 in an overall aspect, it looks as if things are heading in the right direction. Further emphasising on his remark, Dr. Abeyratne said that due attention has been given to promote a market-oriented economic model and that it is noteworthy that the government has changed certain components that needed to be changed. He believes that the reduction in certain taxes and the implementation of market oriented policy reforms within the current economic structure of the country are two very wise statements made during the Budget presentation.

He also added that the necessary steps have been taken to address several key issues which have been ‘nagging’ the country’s financial sector and commended the effort exerted by the new government to encompass all the key areas through their maiden Budget.

However, highlighting some concerns he said that the Budget certainly looks luxurious from the top, but he stressed that when considering each factors individually, several inconsistencies and rationality issues will be prone to surface during the execution part of the strategy. Adding to his remarks, Dr. Abeyratne maintained that even though the current setting of the Budget looks comfortable, certain aspects of the Budget 2016 are not within a budgetary framework.

It was understood that unless a solid and bold set of policy reforms are implemented within the financial framework of the local economy, the expected economic growth would be a tough task to achieve. As Dr. Sirimal Abeyratne suggests, if the necessary policy reforms come into place together with the implementation of the aforementioned Budget, it would further strengthen the outcome of this favourable Budget.

Elaborating on the price reduction of several food items, he said that when comparing the South Asian region the prices of food items in Sri Lanka are high. Therefore, he believes that the measures taken by the government to further reduce the prices of ten more food items, would be greatly appreciated by the public.

Commenting on the new Budget from the government perspective, Minister of Finance Ravi Karunanayake said that it was the ideals of the President Maithripala Sirisena and the Prime Minister Ranil Wickremesinghe that were converted into practice through the budget- 2016.

The minister made this observation when he met a representative’s gathering of Sri Lankan blue chip companies and other private sector entrepreneurs at a Colombo Hotel recently.

Minister Karunanayake speaking at this post budget interactive session said that this year’s budget is an unprecedented move to change the landscape of the country through increased public investment and the public private partnership in many sectors of the economy.

Karunanayake further added that the Budget – 2016 is full of benefits and opportunities for both the general public and the private sector. The Minister said that as he had predicted addressing several pre-budget sessions, the first budget of the Good Governance government of President and the Prime Minister the budget – 2016 is capital oriented and the life of everybody has been made in easy.

“Now the Government has delivered as it promised. Therefore it is up to you all – the private sector to seize this golden opportunity to be in the saddle of economic drive as the engine of growth,” said the Minister explaining the opportunities available for the private sector.

The Minister explaining the facilities that were made available for the Public Private Partnership Projects (PPP) said that impediments that were on the path of developments have been significantly removed.

The Minister said that the Government targets creating one million jobs with PPPs. Our laws are archaic and the budget proposed to do away with all such laws. We take all restrictions away to ensure that the private sector plays a pivotal role in economic development.

Clarifying a statement that was in the budget proposal, he said that there were no fee involved for the introduction of Residence Visas to foreign investors. He said that those foreign investors who bring an investment of USD 250,000 will be given a residence visa for a period of three years and those bring USD 05 million would be given permanent residence visa with the approval of the Cabinet of Ministers.

Finance Minister Karunanayake stressing the need of the hour to emulate the Benchmark practices of other developed economies said that geographically Sri Lanka is in the best location, so the government was giving the best opportunity to make the maximum out of it. The government has opened up new sectors, and  given the chance for foreign investors with or without local collaboration to invest in our economy rather than investing elsewhere. Even for those who maintain deposits in foreign countries with no returns we will ensure 02- 03 percent returns if it channelled through banks.The proposed financial hub would be a key component of the Budget and Minister Karunanayake encouraged key business leaders and other stakeholders present at this post budget session to make use of the most of these fresh opportunities offered by the Budget.

The government is focusing on getting this moving by April, “we already have 37 banks and we believe there will be another 10 – 15 banks coming in and that will be a vibrant offshore banking as well as financial hub. We have opened up our services sector. We want tourism numbers to increase and that is why we are planning to open shopping malls and introduce competitive pricing,” the Finance Minister said.

Talking  about the government restricting the import of electric vehicles in the absence of a proper public transport system the minister defending the government’s move said that the budget has allocated initially Rs. 1000 milliion under a proposed “Park and Ride” to facilitate the commuters in the country in terms of comfort and cost. Under this the Minister said that railway and bus transport in selected towns such as Ja-ela, Avissawella, Panadura, Kadawatha and Piliyandala will be improved.The Finance Minister also recently declared that the 2016 budget has paved the way for Sri Lanka to be among the best and lowest taxpaying regimes in the world.

The Minister who was part of a panel discussion also elaborated that the taxation system that was in place was non-motivational and archaic and hence the new government took steps to ensure higher compliance while increasing revenue but incorporating innovative approaches.

“Very few were paying taxes, so the new innovative approach adopted by the government helps cover the slippages we have had in the past, and gives our tax payers the opportunity to be absorbed into the tax net to ensure higher compliance,” Karunanayake said.

“We have now positioned ourselves as one of the best and lowest taxpaying regimes in the world,” the Minister declared.

He also called upon the Inland Revenue to be more effective and proactive in helping the government reach its goals. “However, implementation will be the biggest challenge, but we will be bringing 10 to 15 from the professional sector to help and guide the government so that we reach our destination,” Karunanayake added.

He also noted that the country can have a completely new revival if every company increases its capital spending from Rs. 05 to 10 million, which will propel a completely new revival. “We are not going after huge investments, we don’t want a single company to invest US$ 03 to 05 billion, but instead we are promoting where 15 to 20 companies can bring in US$ 02 billion. This is our target, and this will be the revival that will make Sri Lanka the game changer,” Minister Karunanayake added.


Budget 2016 Pros:

Market oriented Budget.

Relief for the public.

Reduction in taxes.

Opportunities paved for local startups.

Promotion of the local investment trade.

Covering all key areas.

Diversification of the local market.

Bold policy reforms.


Budget 2016 Concerns:

Sri Lankan market being small to survive on its own.

Challenges within the budgetary framework.

Need of a proper revenue generating model.

Expansion of the local market.

Government debt.

Creating a sustainable income through foreign income.


1 Comment for “Heading In The Right Direction”

  1. I Udarath Wanigasekara

    Good budget for middle class

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