report highlights cost of instability
Finance Ministry, Charitha Ratwatte released the Pre-Election
Budgetary Report last Friday, in terms of Section 16 of the Fiscal
Management (Responsibility) Act.
to the report, the increased expenditure and the reduction in revenue
are likely to result in an increase in the proposed budget deficit for
2004 from 6.8% to 7.3% of Gross Domestic Production (GDP).
report states that in terms of expenditure, the relief package
approved by the government in January this year for households in
drought stricken areas will cost around Rs. 900 million, while
rectification of salary anomalies in the health sector and the
adjustment to pensions is likely to cost Rs. 1.7 billion.
granted on LP gas and wheat flour to domestic consumers, amounts to Rs.
1.5 billion and the delay in the restructuring process caused by
litigation in the bus transportation sector and in the adjustment to
postal rates has resulted in an additional cost of Rs. 1.8 billion.
cost of the general elections, for which no provision has been made in
the budget, would add a sum of Rs. 800 million to recurrent
expenditure. The political instability and the delays in foreign
funding are likely to reduce capital expenditure by around Rs. 7
billion and this position would partly offset the increased recurrent
expenditure. The report states that the expected revenue from the
Value Added Tax (VAT) and that of income tax in the budget 2004 would
addition, revenue estimates were made on the basis that the economy
will, following the trend shown in 2003, continue to grow at a higher
rate of 6% in the current year. The legislation to establish the
Revenue Authority has had to be postponed due to the dissolution of
parliament. Introduction of an economic service charge and amendments
to the Inland Revenue Act have had to be deferred and will come into
effect only in the second half of the year with the retrospective
effect from January 1 or April 1, this year, as applicable.
relief package introduced to reduce the cost of living including the
reduction of Customs duty on several essential food items is estimated
to result in a revenue loss of Rs. 250 million per month. Consequent
to these factors, the revenue estimate for 2004 has been revised
downwards by Rs. 12 billion to Rs. 319 billion.
some of the donor funding that was expected in the budget is likely to
be delayed. As a result net borrowings from the domestic market are
estimated to be about Rs. 87 billion in the current year, which is
within the estimated availability of domestic resources.
to the Fiscal Management (Responsibility) Act, the secretary to the
Finance Ministry is required to present to the public, within three
weeks of the proclamation requiring the holding of a general election,
a Pre-Election Budgetary Position Report containing information on the
fiscal position of the country.
exports record growth
imports and exports recorded a growth in 2003. Exports, in US dollar
terms, increased by 9% in 2003 in contrast to a decline of 2% in 2002.
exports, dominated by garment exports, made a significant contribution
of 80% to this improvement. Agricultural exports also contributed to
this growth, due to favourable tea and rubber prices.
export earnings of US$ 495 million recorded in December 2003 were the
highest monthly earnings recorded during the year. Of these earnings,
79% were from industrial exports and 19% from agricultural exports.
The cumulative export earnings during the year 2003 were US$ 5,133
million, compared with US$ 4,699 million in 2002.
trade deficit in 2003 increased to US$ 1,539 million, which was US$
133 million higher than in 2002. Nevertheless, increased foreign
exchange inflows due to the growth in tourism, port services, private
transfers and capital account inflows increased foreign exchange
liquidity and reduced the pressure on the exchange rate.
imports too increased by 9% in 2003 with increases in all three major
for intermediate goods increased due to the recovery in exports and
domestic industrial activities, while demand for investment and
non-food consumer goods increased responding to enhanced domestic
economic activities, particularly in construction and transport
imports increased only marginally due to lower imports of rice, wheat
and sugar, which offset the increases in other food items.
on imports (US$ 755 million) increased by 20% in December 2003, over
imports in December 2002 (US$ 627 million). The expenditure on imports
during the year 2003 was US$ 6,672 million, reflecting an increase of
9% over the imports of US$ 6,105 million during 2002.
major categories of imports showed significant increases in December
2003 over December 2002. This was partly a reflection of importers'
anticipation of upward revisions of tariffs and Value Added Tax (VAT)
in this year's budget.
imports increased by 40% due to high imports of sugar, wheat, milk
products and other consumer products.
of rupee raises concern
continuing devaluation of the rupee against the US dollar is causing
concern among the business community.
selling rate of the US dollar on the day before the dissolution of
parliament (February 6) was Rs. 97.88. However on Friday, February 27,
the rate of the dollar was Rs. 99.22.
Minister K.N. Choksy speaking to The Sunday Leader said that the
government cannot control or intervene in the money market to control
the value of the rupee since the rupee is in the floating exchange
rate system. He said the government cannot have any policies regarding
the control of the value of the rupee since it is determined by market
Choksy says the main reason for the rupee to devalue is the political
uncertainty that was created last November and the economic situation
in the country. According to him, the devaluation of the rupee will
have a direct impact on the economy and the cost of all essential and
non-essential items would increase.
says when the rupee devalues against the dollar the prices of all
imported items would increase, which includes all food products
creating an added burden to the public. He added that investor
confidence would also decrease and foreign investment to the country
will fall and may cause serious problems to the current economic
LMD-ACNielsen Business Confidence Index (BCI) has nosedived by an
alarming 40 basis points since President Chandrika Kumaratunga first
dissolved parliament on November 4. So observes the latest edition of
the index, published in the March edition of LMD, out tomorrow.
March BCI's free fall below the psychological barrier of 152 (the
11-month low in July last year), to 138, reflects the sombre mood of
the nation's business community, LMD observes.
survey was completed three days after Kumaratunga called a snap
general election on February 7.
month, the business magazine noted, "The writing is on the wall,
for the shorter term at least. The unceremonious events of last
November and the political wrangling that has followed will take many
months to recover from - if and when our politicians start acting in
the national interest."
further comments that as far as business sentiments go, the April 2
poll is being viewed as a waste of time and money - and the prospect
of yet another hung parliament does not augur well for business
confidence in the near term. The BCI, therefore, is destined to slump
even further, LMD predicts.
'investment climate in the country' is now being viewed with even more
pessimism, with only 52% of those polled stating that our prospects
are either "good" or "fair." Almost 90% said so in
November, whilst two-thirds were positive about the same issue in
January. Those who feel that the climate is "poor" now
account for as much as 43% percent of ACNielsen's sample.
medium-term economic outlook, too, is being viewed with caution, LMD
claims. Only 21% of those surveyed expect "the economy, in
general, to improve in the coming 12 months." This is down from
44% in the previous month and almost 60% last November.
only good news is that a clear majority of businesspeople (60%)
continue to acknowledge that their "company's business" (or
sales volumes) increased from 12 months ago, and almost half of those
who participated in the opinion poll expect business "to get
better in the next year."
Bank records highest operating profit
People's Bank issued its financial performance report for the year
2003 last week. According to the accounts, the bank has recorded the
highest operating profit in its history of Rs. 1.555 billion - a
growth of 54.7% over the last year's profit level. Treasury income
grew by 58% due to the successful treasury operations. The bank's
total assets increased from Rs. 181.7 million to Rs. 200.7 million
over the last year.
to the media, Chairman, People's Bank, Lal Nanayakkara said the bank
was able to achieve its goals for the year 2003 due to staff
motivation and he also said he is happy to produce the annual report
faster than the previous year. He added that low income deposits are
on the rise, which is a strength to the bank. The bank has been able
to reduce the bad debts from last year's 25% to 21% this year.
initiative to protect marine resources
'Our Nation and the Sea' Initiative (ONS), a joint venture between the
public and private sector has been organised with a view to widen
awareness of the sea, its resources and potential to contribute to Sri
Lanka's development. The objectives of the ONS include creating
awareness among professionals with regard to the Law of the Sea,
harnessing resources, undertaking capacity building and formulating
policies and strategies for implementation to be submitted to the
National Aquatic Resources, Research and Development Agency (NARA),
the principal national agency responsible for marine resources in Sri
Lanka, and its regional counterpart, the Indian Ocean Marine Affairs
Cooperation (IOMAC) have come together to convene the ONS, the
inauguration of which will be held on March 3 at the BMICH and will be
followed by a series of workshops.
panel of speakers on the inaugural day will include the Chief Justice
Sarath N. Silva, Attorney General K.C. Kamalasabayson, former
Registrar, Law of the Sea Tribunal, Kumar Chitty, Secretary General,
IOMAC, Dr. Hiran Jayewardene, the sixth Chairman, NARA, Razik Zarook
and Additional Solicitor General, P.A. Ratnayake, P.C. Details
regarding participation could be obtained from the Conference Bureau
at the Ocean Centre IOMAC Secretariat Suite BMICH (e-mail email@example.com).
linked to peace
pressing question which every voter has to mull over at this moment of
time - is development possible without durable peace? What now of
development? The economists have advocated the 'trickle down'
approach, with the government mobilising all the savings and capital
which can be borrowed and letting the group of entrepreneurs invest
them in infrastructure, industry and commerce productively to churn
out goods and services that people in the country and in other
countries will want and pay for.
increase in capital and value to companies leading to competitive
advantage has to necessarily leave the working classes to make
sacrifices and be happy with the pittance coming their way, until the
wealth that is accumulating trickles down to them. This approach
certainly has lost its supporters.
set of development economists advocate the alleviation of poverty,
total human development and equity as the government's primary goal
with decentralisation of government, privatisation of public
enterprise, quality education and training of people, technological
upgrading, and 'private sector as the engine of growth' as its
approach also encourages the participation of the private sector,
voluntary organisations and other key institutions in implementing the
government's policies and programmes.
the government has achieved during this interim period of 25 months -
64 key projects - needs to be looked at in perspective. Some of them
repair and rehabilitation of the existing road and highway network,
including rural and provincial roads.
Southern Highway under construction
Expressway: being negotiated
Expressway: in the preparation stage
South harbour: preparations for tender underway
seaport development, including coal fired power plant agreements being
developed and work expected to commence this year
International Airport: first phase upgrading will be getting underway
airport in Wellawaya: tenders being prepared and bids have been
II: new industrial zone: land allocated and will be opened in 2004
Region 'Megapolis' major urban development plan almost completed
development programs - Bentota II, Maskeliya, Puttalam and Kalpitya
Mahamevuna Park: work to preserve this sacred area is underway.
infrastructure developments have two direct benefits - they create
jobs and more important, they create the vital linkage between the
cities / regional hubs and the villages. This in turn improves the
access to 'enabling technologies' for the people in villages.
'disabling' question is whether all this is possible with an aberrant
economy, under the constant threat of exploding bombs (human or
otherwise) and sporadic attacks on civilian communities ? However if
the ceasefire holds, one can hope to see most of these mega projects
nearing completion. They certainly will bring the ray of hope to our
younger generation who have not seen much of any form of development,
since the beginning of the 20 year conflict.
is some thing else which irks the common man - the unbalanced spending
on non food imports, for example the imports of non essentials which
had increased by 34% and motor vehicles by 134 %, at a time when we
are still struggling to put in place our infrastructure. We need to
make sacrifices. However, sacrifices which we have to make in order to
create the future of our younger generation will be wasted in the
aftermath of scattered peace initiative and resumption of hostilities.
A most forbidding scenario for us to think of.
is another issue which is more on our collective lips than in reality.
We lag far behind even our regional neighbours in terms of
you imagine what a nation that had not thought of inculcating
productivity and work ethics even in better times will find itself in
when confronted with the growing uncertainty of life and property ? We
must be bold enough to challenge ourselves in meeting higher goals and
add greater value. The private sector as much as the public sector has
a stake in this dilemma confronting all of us.
improvement in process methodology, research and development and
worker training, while conserving energy and economising on luxuries,
so that capitol accumulation is rapid will help us vindicate ourselves
in the eyes of our future generations. We need to create more jobs, be
conscientious about our work ethic and ultimately be able to buy more
goods for our salaries. Certainly all this is not possible with the
peace process in disarray .
and middle-income groups have been the most adversely hit when one
considers urban and non-urban housing.
government by lowering interest rates to single digit has facilitated
the movement of funds to support housing construction.
the Western Province, three joint venture pilot housing projects are
being introduced as pilot programmes where the UDA provides the land
and private sector partners provide financial capital. Additional land
will be released to the private sector through an open tender process
for housing construction.
Galle a project with Malaysian support is getting underway to develop
housing for public servants.
conditions can only serve to push these investments further back, with
the ultimate result of deferring the relief available for these income
groups, who will never be able to realise their dreams of owning their
own homes - be it a flat or house within their lifetimes. This is
destroying the dreams of people. Do you have the conscience to usher
in an era, sans hope?
answer to this question is now with the people of Sri Lanka. Helping
strengthen an administration which will deliver on their promise is
the only way to ensure that our hopes stay alive!
at LB Finance
Finance (LBF) Ltd. has undergone a structural change with ownership
and the controlling interest being passed on to entrepreneur Dammika
Perera with the divestiture of the interest of Vanik Incorporation
Ltd. and its management by it. At present Perera holds 73% of the
issued capital of LBF.
new board of directors and senior management were introduced at a
media briefing held in Colombo last week. "Certain structural
changes have taken place within the company and we want the public to
be informed of such changes of the board and management," said
Chairman of the reconstituted board, LBF, B.M. Amarasekera, setting
out the purpose of the briefing.
emphasis is on good corporate governance and we are committed to abide
by and adopt the Code of Best Corporate Practices published by the
Institute of Chartered Accountants of Sri Lanka (ICASL)," said
Amarasekera addressing the media.
has consolidated its position as number three amongst financial
companies in terms of its deposit base, which amounts to Rs. 2
VRS to continue
a protest by around 50 persons last Wednesday in front of the
Presidential Secretariat, President Chandrika Kumaratunga made an
order to stop the Voluntary Retirement Scheme (VRS) offered to the
employees of Sathosa. The petition submitted by the protestors charged
that employees were being forcibly made to retire and requested the
President to take necessary action.
60-65 days ago the employees of Sathosa themselves made a request to
provide them with a retiring scheme. Acting on this request we took
necessary steps to formulate a retiring scheme and obtained cabinet
approval for it," stated Commerce Minister Ravi Karunanayake,
stressing that no employee is being made to retire by force and that
they have done so of their own free will. The VRS scheme had already
received cabinet approval and the President herself as the head of the
cabinet has given her approval to it.
spite of the President's order, 10 employees who had requested for the
VRS received their monies last Thursday at the Commerce Ministry from
Chairman, Sathosa Wholesale, Lal Wickrematunge. According to
Wickrematunge, around 2,000 employees have requested for the VRS so
far. However, they were to make submissions for it before February 27.
short what we wish to bring to the notice of the public is that
Sathosa has indeed come a long way from where it was two years ago to
where it is now. Through the restructuring of loans outstanding
exceeding Rs. 13,000 million and bringing about other necessary
structural changes we have been able to turn the situation
around," stated Wickrematunge.
added, "We refute the charges made by certain persons that
Sathosa is bankrupt and had not paid the employees their monthly
salaries. I challenge Ministers Kingsley T. Wickremeratne and Reggie
Ranatunga to meet me at an open forum to prove the various accusatory
statements made by them about Sathosa and its operations."