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| Sunday, 1 December 2002 |
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IMF Representative stresses need for fiscal discipline Increasing growth is the way to reduce poverty. we want to work together as we believe that the self-help method is the way forward. Supporting good governance and accountability in developing countries are also among our priorities. These views were aired by Resident Representative of the International Monetary Fund (IMF) Sri Lanka Jeremy Carter, addressing a seminar on Fiscal consolidation for development, organised by the Sri Lanka Institute of Taxation. He said the government should play the role of facilitator and promote development and poverty relief. "Take a fee and provide services that cannot be provided by others as well as helping the people who need support, but the government should never take on the responsibility of providing employment by managing State enterprises or control pension funds as it leads to high deficits." High deficits result in low growth, high inflation as well as high interest rates leave little money to spend for development and growth. In the Sri Lankan context, high deficits are a result of recurrent expenditure which is consumption. He said that if the money was utilised for capital expenditure, the benefits can be reaped even after several years. Therefore, to reduce high deficits, cutting down on wasteful expenditure and making a choice are essential. The best way to move from high deficits is fiscal consolidation. Consistent spending, appropriate taxing and financing methods are needed to tackle the budget deficit which is skyrocketing due to more current spending rather than capital spending. The debt exceeds 100 per cent of GDP and the donors are not ready to finance any more projects related to recurrent expenditure unless it is essential. Airing his views on tax, he said that tax rates in Sri Lanka are high enough, but collection and coverage are questionable. Therefore, the solution is to reduce the deficit by fiscal consolidation which will result in many positive effects such as low inflation, low interest rates and low cost of living. He said: "People should demand and question every cent that is spent and ask the question 'Could it not have been spent better?' With the peace initiative, an overwhelming restructuring process has to be undertaken. Therefore, the time is now opportune to take some tough decisions." He said that Sri Lanka cannot have everything and somebody should take the decision and make the choice be it education or health. Every need should be prioritised. Speaking on the role of donors, Carter said that they should reward recipients who do well without ordering policy decisions. P. Guruge, Adviser (Fiscal Policy) Ministry of Finance made a critical analysis of the Budget. Ajantha Madurapperuma, President Association of Primary Dealers spoke on the current fiscal environment and investment opportunities while D.C. Jayakuru, tax consultant spoke on exoneration of tax offenses - why and how. |
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