Fiscal consolidation - focal point of Budget

by Lalin Fernandopulle

The government has taken steps on fiscal management with specific targets for a three-year period to spur economic development in the country, Deputy Finance Minister Dr. Sarath Amunugama told a panel discussion on Budget 2014 conducted by the Ceylon Chamber of Commerce last week.

He said the budget is not only a document on the economy but also a reflection of the stability of the government. If there is a stable government there will be economic growth.

The 2014 Budget presented last week met with mixed views from diverse sectors. The Opposition while recognising and commending the government on the steps taken to bridge the budget deficit has called upon policy makers to boost revenue sources with a long-term strategic plan.

Dr. Amunugama said that the Budget was prepared following consultations with trade unions, private and public sector representatives, think tanks and various organisations.Fiscal consolidation has been a focal point of the 2014 Budget which should be commended. In the past, many knew the prescription but did not know how to administer the medicine. The 1977 government had higher budget deficits than the this government’s deficit level, Dr. Amunigama said.Opposition MP Dr. Harsha de Silva said that while the government should be commended for proposing measures to bridge the budget deficit it has to focus on boosting revenue through strategic investments.

Countering the Opposition view, Dr. Amunugama said that the government has a clear strategy to reduce the budget deficit by 5.2 percent next year, 4.5 percent in 2015, 3.8 percent by 2016 and the debt to GDP by 65 percent the same year.

He said that these targets is an indication how well the government has fashioned the country's future.

The progressive reduction in the budget deficit, the debt to GDP ratio, controlling inflation, and a flexible exchange rate.

Dr. Amunugama cited comments of the International Monetary Fund, Deputy Managing Director Naoyuki Shinohara who commended the steps taken by the government to reduce budget deficit, maintain a flexible exchange rate and control inflation.

Shinohara who was on a brief visit to the country last week said that the IMF has no serious concern in the short-term growth of the Sri Lankan economy.

“Sri Lanka is enjoying the fruits of peace and stability with room for growth. The macro economy is good with the narrowing of the current account. We are happy with it and like to see further narrowing,” he said.

Dr. Amunugama said that Sri Lanka has done well compared to some countries in the region with a high GDP growth rate during the past three years.

He said that the government has focused on rural-centric development in the Budget with an emphasis on food security. The government has allocated a large amount of funds for irrigation. Sri Lanka is now self-sufficient in rice.

“Village development, concessions for small plantations, more investments in health and education and collaboration with the private sector to boost export growth are some of the Budget proposals to accelerate growth,” Dr. Amunugama said.

JVP MP Sunil Hadunnetti said that steps should be taken to reduce oil imports and launch a plan for public transportation and manage city traffic.