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by Elmo Leonard

The 2006 budget presented in Parliament Thursday, last was based on achieving strong economic growth and thus, the National Chamber of Commerce of Sri Lanka (NCCSL) concluded that the budget was drawn up with the perception that peace in the troubled north and east of the island will hold.

While the budget proposals were commendable and noteworthy in terms of its focus, its effective implementation within a sound macro- economic framework will be the key challenge to the government of the new president, NCCSL president, Nirmalie Samaratunge told the media yesterday.

The Chamber observed that the proposals of the budget presented in November have been largely retained, with greater emphasis on the reduction of regional growth disparities and providing support to the marginalised sectors of the population. The budget incorporates the Mahinda Chinthanaya policies which is the framework for the six year development plan of the country, NCCSL senior deputy president, D. Easwaran said.

The budget proposals will necessarily increase the government recurrent expenditure and reduce the fiscal space within which the government will have to operate, Samaratunge said. This will impose a key challenge to government, to ensure that the revenue growth targeted, mainly through the proposed fiscal measures are achieved, so that the 7.3 percent of GDP, budget deficit envisaged, is maintained.

The chamber welcomed the specific and strong alignment with the Millennium Development Goals, which is meant to help the country, to reduce its level of poverty over time, the chamber's deputy president, Lal de Alwis said.

NCCSL welcomed the moves to provide support to the marginalised sectors of the population. Also, as positive, the specific incentives provided for investment in rural Sri Lanka. However, the practicality of implementation will need to be demonstrated, the chamber said.

The proposal to give tax exemptions to financial institutions that provide loans to set up regional businesses was seen as positive. But, mechanisms should be in place to ensure that such benefit will pass on to the borrowers who invest in rural Sri Lanka, and not to the large and prime borrowers of financial institutions.

The chamber sees as positive, the focus to provide support to selected industry and service sectors the chamber's secretary general, E M Wijetilleke said.

The importance of the agricultural sector to the Sri Lankan economy had also been recognised in a big way. Also, the reduction of tax for small businesses.

The commitment to get the large power projects going, with mention of the Norochcholai and Upper Kotmale schemes was much appreciated.

The chamber saw as negative the increases of the rates of taxes, but, the context in which these increases were brought into the budget was recognised. Answering questions, Samaratunge said that it was a challenge to businesses to meet the increased taxes.

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