Budget 2012 tomorrow :

Govt aims at containing budget deficit at 6.2 percent of GDP

By Lalin FERNANDOPULLE

The 2012 Budget will ensure stable economic growth while maintaining low inflation, Finance Ministry sources said. He said the government had succeeded in maintaining economic growth of eight percent this year and reducing inflation from 11 percent to 5.7 percent and was a major achievement.

Around 60 pre-budget meetings were held with representatives from various sectors seeking input to draft the final budget.” The objective of the meetings is to formulate a realistic budget to divert resources for priority areas identified in the Mahinda Chinthana and phased out in the Medium Term Expenditure Frame Work 2012 - 2014”, sources said.

Priority will be given to ongoing development programs before allocating resources for new projects.

The government aims at containing the budget deficit at 6.2 percent of the GDP to ensure economic development, is maintained at 8 percent and the rate of annual inflation at 6 to 7 percent.

The total estimated expenditure for 2012 is Rs. 2,220 billion, increasing Recurrent Expenditure from Rs. 1,029 billion in 2011 to Rs. 1,109 billion in 2012, and the Capital Expenditure from Rs. 938 billion to Rs. 1,111 billion. Revenue for 2012 will be Rs. 1,115 billion.

Public Investment has increased from Rs. 453 billion in 2011 to Rs. 541 billion in 2012 to maintain the momentum in the growth rate of 8 percent.

Central Bank Governor, Ajith Nivard Cabraal said that the 2012 Budget will be development-oriented and will help spur the growth momentum.

He said the next budget will promote inclusivity to ensure all sectors benefit from development.

“The business community will benefit from the growth momentum and the sound macro-economic fundamentals”, he said.

The Central Bank said the economic outlook in Sri Lanka remains positive with the economy continuing along with a year-on-year change in the Colombo Consumer Price Index (CCPI) (2006/07= 100) declining substantially from 6.4 percent in September to 5.1 percent in October this year.

“The annual average inflation dropped from 7.2 percent in September to 7.1 percent in October. Further core inflation on a year-on-year basis declined from 6.9 percent in September to 5.5 percent in October”, the bank said.

“Fuel price adjustments in October and corresponding adjustments of costs relating to public and goods transportation could cause a marginal upward movement in prices”,a Central Bank release stated.

Cabraal said that poverty reduction will continue and added that the focus on inclusivity will help all segments of society to benefit from economic growth.

Financial experts said that large-scale investments are needed to spur economic growth and added that the takeover of private entities and assets will discourage investors who are keen to set up ventures in Sri Lanka.

LIRNEasia Lead Economist and MP, Dr. Harsha De Silva said that interest on borrowings is around Rs. 314 billion which is ten times the education budget for next year.

He said that decline in investments will lead to more borrowings which will increase the interest component for the country.

The Ceylon Chamber of Commerce (CCC) has called upon the government to simplify the tax system and broaden the tax base to enhance revenue for development.

The Chamber has further called upon officials to promote exports and restructure the Temporary Importation for Export Processing scheme to benefit the SME sector exporters.

Concessionary tax rate for value-added exports and encouraging export market diversification, reduction in the cost of packaging to increase value-added exports are some of the major budget proposals of the Chamber.

The Sri Lanka Chamber of Small Industries President Aloy Jayawardene said that problems of the SME sector enterprises are not properly looked into and added that there were more incentives for SME sector development.

Many SME sector industries are unable to sustain businesses due to the high cost of energy and labour which has made exports uncompetitive.

The 2012 Budget will be presented tomorrow.