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| Sunday, 29 August 2004 |
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Exchange rate stabilising by Gamini Warushamana Interest rates would not change while the exchange rate is stabilising. The refore growth rate will not reduce sharply, Treasury Secretary Dr. P.B.Jayasundara said. Although the oil shock and drought have hit the country's economy,the government will be able to maintain the budget deficit at 7% of the GDP. The drought has already hit the agriculture sector. Yala season paddy harvest will be 20% lower than expected, he added. Rs.1.5-1.8 billion have to be spent for drought relief, but tea, rubber and coconut sectors, tourism and service sectors are stable. Exports are growing at 10% while in the past six months imports too have also increased and most of them are investment goods, Dr. Jayasundara said addressing journalists on Monday (23). Oil prices have gone up to unexpected high levels. The government is not in a position to subsidise diesel and petrol. However, subsidies will be given to kerosene while diesel and petrol prices will be adjusted in the future. Since the use of thermal power as well as the cost of a unit of thermal power have increased electricity fares will have to be increased. Domestic electricity tariffs will be increased by 5% within the next two weeks. However industrial and commercial electricity rates will not change. Government will have discussions with OPEC regarding the possibility of financial aid to cushion the impact and not simply for fuel subsidies. Train and state bus fares also have to be increased to adjust to the increased fuel prices. An 8 percent increase will be slapped on existing fares. It will be increased by 8%. Government is studying ways to provide relief packages for people who genuinely need them. Dr. Jayasundara was optimistic that the increase in the cost of living (COL) is temporary since the oil shock and the drought is temporary. Government and the private sector should revise cost structures and use energy-saving measures and energy conservation methods to face the oil shock, he stated. The maiden budget of the UPFA government will be presented on November 10. Budget division of the Treasury is discussing with the line ministries to decide expenditure ceilings. Treasury is encouraging line ministries to come with their own budgets. Government is also inviting specific budget proposals from civil society, public servants, trade unions, financial institutions and academics Dr. Jayasundara said. |
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