Yesterday, the
Ministry of Finance said the fiscal deficit could be as high as 7% of GDP in
2019 due to plunging revenue caused by slow growth and the Easter Sunday
attacks. However, it assured that the government would "recalibrate"
operations to improve fiscal discipline and reduce the deficit to 4% in the
medium term.
In a statement,
the ministry said many steps were in the pipeline to ensure that the
government's machinery retained strict fiscal discipline. The ministry wishes
to ensure the efficient use of public resources to provide financial
responsibility.
The projected
fiscal deficit for 2019 will be higher than the estimation. It could reach
around 7% of GDP due to both a significant revenue decline than expected,
mainly due to slow growth and an increase in election-related expenditure.
The Government
will, therefore, make a concerted effort to recalibrate its operations on a
sustainable path of deficit reduction to 4% of GDP in the medium term, along
with rationalizing the debt inventory to manageable levels.
The statement
focused on the stimulus package unveiled last week by the government and
emphasized that it would be carried out within a framework to ensure that the
economy would not be overheated. The government will introduce such policy
initiatives within a coherent policy structure in line with crucial other
reform goals. The aim is to control public spending, develop state-owned
businesses, and simplify administrative processes and procedures to deliver
quality governance.
The Ministry of
Finance, led by Prime Minister Mahinda Rajapaksa, also made an important
statement.
He assured that such
efforts would complement the ongoing relationship with international financial
institutions and development partners dedicated to the development and
prosperity of Sri Lanka. The government has already stated that it will hold
talks with the International Monetary Fund (IMF) to advance the $1.5 billion
Facility for the External Fund (EFF), to be completed by mid-2020.
The Government's
decision to streamline the Cabinet of Ministers and its public spending
constraints reflects, at the outset, its commitment to a responsible financial
management system. The statement said the Cabinet had already given orders to
all ministries, departments, state-owned enterprises, and other entities to
take action to regulate their spending.
The report went
on to say that arrangements were also in place to make appointments to key
positions at State-Owned Enterprises (SOEs).
Appointments
will be made through a selection process led by a select committee to find
qualified and talented staff to turn loss-making SOEs into profitable entities.
As favorable
weather arrived for the 2019/2020 Maha season, the government is no doubt
capitalizing on this opportunity, marking it as an immediate priority.
The government
aims to raise the agricultural sector to full capacity to boost the farming
community's livelihood and ensure food security.
Experts expect
that incentives provided for the following will drive the economy with price
stability:
Tourism,
information technology and enabling services, the building and property market,
exports and professional-earning rural agriculture, and overseas employment.
OSL Take: The
statement by the Finance Minister of Sri Lanka adds to the confidence levels of
foreign companies looking at doing business with the island nation. Despite the
blow to the country’s economy following the Easter Sunday attacks, the goodwill
among the international community towards Sri Lanka, as well as the support
extended by Sri Lanka’s neighboring India has undoubtedly helped the country to
return to normalcy. The government of Sri Lanka has also introduced incentives
for investors. Therefore, foreign businesses/investors could explore
business/investment opportunities in Sri Lanka with confidence.
VBS/AT/20200102/Z_TB3
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