Govt aims to increase revenue without curtailing development

The government plans to economise to the maximum and prioritise spending without curtailing development as the government wants to increase the revenue and go ahead with development activities, said Treasury Secretary Dr. P. B. Jayasundera at a discussion held after presenting the mid-year fiscal position report.

According to the report though imports have grown at a faster rate than exports due to increased costs of petroleum products and higher imports of intermediate and investment goods the balance of payments recorded an overall surplus of US$ 151 million during the first quarter of 2006.

It was supported by increased worker remittances and income from increased tourist arrivals. According to the report it is likely that the overall balance of payments would show a surplus of around US$216 million during the first half of this year.

Both fiscal and monetary policy actions have been taken to reduce demand pressures and adjust domestic prices in line with high international oil prices.

On the fiscal side steps have been taken to improve revenue administration to increase revenue collection. In addition steps have been taken to implement tax proposals announced in the budget.

Adjusting customs tariff and increasing domestic prices of petroleum products are expected to ease the pressure on the budget. The policy interest rates were also increased by 25 basis points in May to curtail credit growth which is expanding at 22%.

The report says that the expenditure programs have to be cautiously managed to minimise undue expansionary pressure in the coming months so that fiscal deficit excluding post-tsunami rehabilitation and reconstruction expenditure is curtailed below 8% of GDP in 2006 so that the prevailing growth momentum would be sustainable while reducing inflationary pressure on the economy.

The excessively high oil price is also a major challenge which exerts pressure on the balance of payments and the financial position of CPC and CEB which depends heavily on imports.

(SG)