Budget - 2015

President Mahinda Rajapaksa presented the tenth Budget - Budget 2015 last Friday which was a development oriented Budget focussing on the needs of all citizens alike. The Budget presentation received a thundering ovation in Parliament while the people of this country were also overwhelmed with it. A salary increase of Rs 3000 upto Rs 30,000 is envisaged for those with low salaries enabling them to earn a monthly salary of Rs 30,000.

Highlights of the Budget Speech are given below.

*Preserving and protecting a free health care system is also an important priority in the Mahinda Chintana Development Framework. Our Government recruited the required specialists, medical personnel, nurses and para-medical staff, revised their emoluments and incentives, an increased expenditure for pharmaceutical drugs, ambulances, and medical equipment to develop hospital facilities. Nearly 50,000 persons were recruited to the Health Sector alone. The Government has also expanded its capacity to manufacture essential drugs in addition to encouraging local pharmaceutical manufactures to increase their production capacity so that the cost of these drugs will reduce while also saving foreign exchange. The total annual expenditure for the provision of free health services as of now is nearly Rs. 150 billion.

*The provision of fertiliser at Rs. 350 per 50 kg bag from 2006 to date for paddy and at Rs. 1,200 per 50 kg bag for other crops, popularizing the cultivation of maize, onion, potato, green beans, vegetable and fruits, as well as promoting poultry and aquaculture, processing dry – fish and engaging in small industries have helped low income people to expand their livelihood opportunities. Micro financing facilities have been expanded through Divi Neguma community banking societies and agrarian banking. The provisions in the annual Budget for Divi Neguma/ Samurdi cash allowances have been increased. Over 100,000 motorcycles have been distributed among field level officers at villages giving new recognition to government services at rural level. The Farmer?s Pension Scheme was restored and crop insurance and compensation coverage for wild life related destructions were expanded.

*The income growth and improved living standards among low income people are shown from the decline in people below poverty line. The number of people living below the National Poverty Line has declined from 15.7 percent in 2006/07 to 8.7 percent in 2012/13. Rural poverty has declined from 15.7 percent to 7.6 percent while poverty in the plantation sector has declined from 32 percent to 10.9 percent. People below US$ 2 per day income have declined from 28.3 percent to 18.9 percent. Maternal mortality has declined from 12.1 per 100,000 live births in 2004 to 7.2 in 2013. The nation has approached malaria free status.

The number of children attending primary schools has increased to 98 percent while the number attending secondary schools have increased to 84 percent. Rural unemployment has also declined from 7.8 percent to 4.5 percent. Unemployment among youth in the age group of 18-30 has declined from 15.8 percent to 13.1 percent.

*Export industries have picked up showing a 12 percent growth. The apparel industry has shown a 15 percent growth and is expected to generate US$ 5,000 million export earnings this year. Value added tea, rubber and cinnamon products have increased exports earnings to US$ 3,000 million. Software, gem and jewelry, handloom and confectionary industries have gained momentum. Export earnings are expected to generate US$. 11,500 million this year.

*Sustaining an employment level at 97 percent of the labour force remains our employment goal for 2020. Our vision is to engage students after reaching GCE Ordinary Level and Advanced Level standards, either in higher education for graduate studies or in the vocational stream of education to drive the economy making optimum use of knowledge and skills of our work force, is the overall target of our employment strategy. Maintaining youth employment at 95 percent is a special target of our employment strategy.

*A National Drug Policy has been formulated for the regulation of drug usage, clinical trials and research activities in specialized hospitals. Parallel to these developments, we propose to expand the subject areas of the Postgraduate Institute of Medicine and also to double the intake for postgraduate studies in medicine. The Post Graduate Institute of Medicine will be transformed over the next 3 years, as a state-of-the-art facility that would connect neighbouring teaching hospitals to engage in postgraduate research and advanced studies and increase medical specialists capable of treating kidney ailments, malnutrition and similar contemporary challenges faced by our society.

*The Government’s effort over the last 8 years to promote IT as a major industry is expected to raise foreign earnings to about US$ 1 billion by 2016, while creating around 100,000 well-paid employment opportunities.

Our vision is to lift Sri Lanka to be among the Top 30 IT destinations in the world over the next three years and to raise foreign earnings to US$ 5 billion and make it a major employment generation sector for youth, by 2022.

The ICT Zone at Hambantota offers facilities of global standards for IT/BPO services, to transform Sri Lanka as the emerging ICT Hub in South Asia.

*We have set our export target at US$ 20 billion in 2020. Our aim is to raise export earnings of high value tea, apparel, handlooms and rubber products to US$ 15 billion by 2020. Our vision for tea, apparel and cinnamon exports is to position Sri Lanka among the Top 10 high quality product manufacturing countries in the world by 2020. Natural rubber, cinnamon and spices while being exports capable of securing premium value, will also protect our environment and bio diversity interests in development.

We have requested the World Trade Organization to declare Ceylon Cinnamon as a specific product based on a geographical identification.

These will pass on broad based benefits of development to a majority of our people, who are predominantly smallholders. Our desire is also to promote fruits, vegetable, foliage and poultry also as exports, since our producers have developed such products to a level that meets international standards.

The promotion of pineapple, mango, papaya, banana, dragon fruit and strawberry as export earning sources, are expected to earn US$ 500 million by 2020.

*The Government is committed to gain a higher Investment Grade by reducing debt to GDP to below 60 percent, further strengthening country’s already strong macro economic environment by 2020 to consolidate country’s economic strength. In the backdrop of this direction, the overall investment to GDP is expected to rise to 40 percent. The total Gross Domestic Production is expected to exceed US$ 165 billion at a rate of around 13 percent growth.

Taking the process of transforming the economy from a less developed economy with a per capita income of less than US$ 1,200 prior to 2005 to a US$ 4,000 per capita economy by 2015 - moving further forward we plan to surpass US$ 7,500 per capita income for our people, as a high middle income country is our national income goal by 2020.

*With all these measures that have been taken, the Budget deficit has been reduced to 5 percent of GDP in 2014 and will target 4.6 percent in 2015. We are determined to raise a surplus in the revenue account gradually towards 2.5 percent of GDP and bring down the Budget deficit to 3.8 percent by 2016 and 3 percent by 2017, underscoring our commitment to limit borrowings only for capital formation and not for consumption. We will reduce the Debt /GDP ratio to 65 percent.

We have paid back almost half of IMF debt of US$ 2.5 billion, which we obtained through a Stand By Arrangement in 2009 to stabilize our economy. We will provide a strong National Budget that is capable of servicing all such debt of our country promptly, to maintain the creditworthiness of our nation.

*The Government revenue in 2015 is likely to be around Rs. 1,600 billion and current expenditure will be around Rs. 1,400 billion.

This will secure payment of salaries, pensions, the fertilizer subsidy, for pharmaceutical drugs, welfare expenditure and interest cost of debt. Further, the Budget will maintain public investments of Rs. 730 billion to expand infrastructure, human resources development and economic activities.

*I propose to fix the maximum PAYE tax rate at 16 percent to ease the burden of wage earning employees and professionals. It is proposed to reduce the Value Added Tax to 11 percent.

*The Inland Revenue Department is being computerized to link all relevant agencies to improve tax administration and to enable the use of a Personnel Identification Number to co-ordinate all transactions. I am pleased to announce that with effect from tomorrow the Inland Revenue and Customs will go online to simplify income tax registration and export and import transaction related payments.

*The Central Bank manages the Employees Provident Fund, which has an asset base of Rs. 1 trillion. Central Bank in recent years has invested about 10 percent of its assets in income earning commercial assets, which has gained capital appreciation of around Rs. 10 billion this year.

I therefore propose to distribute dividend to members of Provident Fund who has over 10 years of active accounts.

This is the first ever dividend distribution by the EPF and I see this as a special benefit to members.

In addition, the Fund has got stronger to pay all members of the fund an interest income in excess of 10 percent each year.

*As maternity care should be given special attention, I propose to allocate Rs. 1,500 million to develop Karapitiya, Colombo, Kandy and Anuradapura maternity hospitals as super centers in maternity care and develop Badulla and Beliatta hospitals as maternity and child care specialized centers. Steps have also been taken to accelerate the modernization of the two national children’s hospitals as centers of excellence capable of providing the next 10 year pediatric care needs of our country as well as medical research on pediatric care. The OPD treatment and ancillary facilities of the Colombo National Hospital expanding its outdoor patient care capacity, will be completed by 2017.

*I propose to allocate Rs. 500 million to implement accelerated medical examinations of all citizens through mobile medical clinics and expand testing related facilities to strengthen preventive health care. I seek the support of all religious places of worship to give leadership in organizing such clinics in each Grama Niladari division. I propose to commence a mobile ambulance service in all main hospitals through the National Insurance Trust Fund to provide emergency care at their doorsteps to persons who fall ill suddenly, to be taken to hospital safely.

*I propose to allocate Rs. 500 million for the rehabilitation of Ayurvedic Hospitals and promotion indigenous medical research. I also propose to grant a monthly allowance of Rs. 5,000 for indigenous medical doctors who serve in government Ayurvedic Hospitals. I propose to implement a loan scheme for indigenous medical practitioners be able to draw upto Rs.500,000 at 6 percent interest, to improve their dispensaries and to process required medicinal treatment.

*In order to incentivise vocational education, I propose to implement a new student scholarship scheme for 50,000 students per year from low income families who pass ordinary level and advance level examinations but are unable to enter universities or other advance institutes for further studies. Each student will be given a Rs. 3,000 monthly student allowance. This scheme will bring about Diploma and Certificate holders above level V of the National Vocational Qualification, in employable fields.

I also propose to increase the number of student scholarships to 50,000 per year and grant a student allowance of Rs. 3,000 per month to those studying at technical university colleges.

*As part of broadening horizons of our higher education, I propose to set up a school of Economics and Development Engineering that offers arts, commerce and science students qualifying from GCE A/L exam to learn multi disciplinary subjects such as economics, law, engineering, science and mathematics being subject options in a single degree.

Further, I propose to allocate Rs. 500 million for research on cancer by the Colombo University, on kidney diceases by the Peradeniya and Rajarata universities and on diabetics by the Ruhuna University and another Rs. 500 million to the National Research Council for research on other fields.

*I propose to allocate Rs. 500 million for the provision of nutritious food for children, to improve nutritional standards of mothers and children by engaging nutritional specialists in each district and to carry out community level mobile clinics to distribute Threeposha and Samaposha nutrition supplements to all lactating and pregnant mothers and for the provision of meals to children attending pre schools. The Divi Neguma/Samurdi programs are directed to popularise consumption of homegrown vegetables, milk and eggs towards improving nutrition.

I promoting breast feeding through these initiatives. I also propose to give infant milk food at concessional prices through Lanka Sathosa outlets. Since infant milk food is totally free from taxes, I request all super markets and traders to reduce the price of infant milk food.

*I propose to grant dual citizenship or 5 year work visas to young Sri Lankans living abroad and do not have a Resident Visa to that permits them to serve their motherland.

I also propose to grant concessionary duty permits similar to those given to public servants to high income earning Sri Lankans working overseas for the importation of a motor vehicle to the value of 60 percent of foreign exchange they remit to Sri Lankan banks.

* To ease the burden of small land owners speccialy in urban areas in having to pay a heavy lease rentals to the State, I propose to exempt those earning less than Rs. 25,000 per month or Rs. 300,000 per year from having to pay any such lease rentals. Further, I propose that introduce a sliding scale ranging from 0.5 percent to 4 percent for each income slabs of Rs. 100,000 in excess of Rs. 300,000. The 4 per cent slab will only if the income is in excess of Rs. 600,000 per year.

* I propose to provide lands on long term leases to set up 300 factories in every divisional secretary area in the background of improved prospects for export and import competing industries. Provisions will be made to permit lump sum depreciation for the importation of plant and machinery in addition to exempting them from dividend tax and providing a half tax holiday for a period of 3 years.

I also propose to provide modern machinery and equipment for small and medium handloom industries to expand this industry to cater global markets. Investors undertaking new investments in excess of Rs. 500 million will be given a 7 year half tax holiday provided such investments are registered with the Inland Revenue Department before end of 2015.

* I propose to increase the Rs.1,000 allowance granted to elderly people to Rs. 2,000 from January 2015. Elderly clubs will be set up in all Grama Niladari areas to create an enabling environment for elderly people to spend their leisure time watching TV, reading and being engaged in other facilities available at day centers. Medical clinics will also be organized at these centers. An accelerated program will be carried out to ensure eye care as well as primary health care of the elderly. I also propose to allocate Rs. 250 million to provide financial assistance to reputed social organizations, which promote elderly care in our society. Rs. 200 million will be allocated to rehabilitate elderly homes at Saliyapura, Katharagama, Mirigama and Jaffna. I also propose to allocate Rs.100 million to provide financial grants to film producers and artists to make films and teledrams promoting success stories of traditional family values towards elders.

* The coordinated effort of Sri Lanka Women?s Bureau, Child Protection Authority and Sri Lanka Police have reduced child abuse and violence against women, considerably.

I propose to allocate Rs.300 million to strengthen field level officers at Divisional Secretariats to expand awareness programs in schools through parents - teachers associations, Divi Neguma community based organizations and to engage retired public servants in family counseling.

* The new Pay Commission, which I appointed last year, has recommended some changes to the salary structure introduced in 2006.

Therefore, I propose to introduce a new pay structure with effect from January 2015. Accordingly, the special allowance given to public servants will be absorbed to the salary structure and raise the minimum salary to Rs. 15,000 per month. I propose to maintain a salary ratio of 1: 4.25 between minor employees and Secretaries to accommodate higher annual increments. I also propose to raise the Cost of Living Allowance by Rs. 2,200 to Rs. 10,000 per month from January 2015 to all public servants. Accordingly, the minimum monthly income of a public servant will increase to Rs. 25,000.

*The new salary structure, allowances and other salary related benefits will provide public servants a pay increase of Rs.3,500 to 15,000 per month from January 2015 with a minimum monthly income of Rs. 30,000 to lowest rank employees. I also propose to allow public servants to borrow up to 40 percent from of their gross salary, including all allowances. Grade 5 and Mahapola Scholarships will be extended to children of public servants as well.

All public servants will be given a bank card with a credit limit of Rs. 10,000 on interest free basis to be paid in 10 installments, to meet festival advances. This credit facility will be guarantee by the National Insurance Trust Fund. I also propose to increase the insurance coverage under Agrahara Scheme for surgical operations from Rs. 350,000 to Rs. 500,000.

* I propose to place pensioners' salaries not on the 2006 salary structure as was requested by all pensioners but on the proposed 2015 salary structure to once and for all correct the inherent anomalies affecting pensioners when salaries of public servants are revised.All pension payments will be adjusted in accordance with the 2015 new salary structure and hence there will be no pension anomalies hereafter.

* Therefore, I propose to raise the minimum wage of the private sector employees to Rs. 10,000 per month from January 2015 and to increase all minimum wages above that threshold at least by Rs. 500 per month.

As new sectors have been emerged in the economy, I propose to extend Minimum Wage Boards to those sectors within a rational economic cluster arrangement.

I also propose to increase the employer contribution to EPF by 2 percent to 14 percent so that each employee will have 22 percent savings from their salaries.