Sri Lanka’s Finance Minister yesterday disputed the second quarter (2Q16) growth statistics published by the Census and Statistics Department last week, and said that the economy is on track to achieve a growth of 5 to 5.5 percent of the gross domestic product (GDP) this year.
“The growth of the last quarter is a completely distorted one, I’m sure. Even the people who have done it have said that there is an error,” Ravi Karunanayake yesterday told a media briefing at the Ministry of Finance, which he promised would be held every fortnight going forward.
He noted that there had been increased investments and higher rates of electricity consumption during the 3 months, which does not correspond to the 2.2 percent growth recorded, mainly due to the combination of droughts and floods experienced during the period, coupled with a high base in 2015.
According to the Public Utilities Commission of Sri Lanka, the Ceylon Electricity Board’s electricity consumption figures for 2Q16 had been 3,508 gigawatt hours, compared to 2,896 gigawatt hours a year ago.
However, when Mirror Business contacted the Director General of Department of Census and Statistics (DCS) Dr. A. J. Satharasinghe, he said he cannot comment on the published figure without contacting the Finance Ministry first.
DCS had earlier this month revised down the first quarter growth from 5.5 percent to 5.2 percent.
The Census and Statistics Department operates within the National Policy and Economic Affairs Ministry, which is under the purview of the Prime Minister.
Karunanayake confirmed the 5-5.5 percent growth rate projection for 2016 that was communicated by the Central Bank Governor this week, but said that growth would be higher in 2017.
“We find that there is a serious increase in the areas of investment, foreign and local. So spending of some form or other obviously reflects in the GDP. We find the agriculture sector awakening, we find the industrial sector really moving up, and the service sector has been competitive and aggressive all the way,” he said.
However, Karunanayake later said that despite the reduction of rice imports compared to last year as requested by many, the productivity of the local farmers hasn’t improved this year, raising questions about their ability.
Central Bank Governor Dr. Indrajit Coomaraswamy hadn’t contested the 2Q16 GDP growth figure, but said that the low growth base in the final quarter of 2015, coupled with increased business confidence and the pickup of the Purchasing Managers’ Index did show a growth above 5 percent for the year.
When asked if the budget for 2017 will move away from the trend of protectionist measures such as price controls and subsidies, Karunanayake said that “We’ll look at it after the budget”.
While the local government elections are coming up next year, Karunanayake noted that there are no election goodies in the budget.
“Our policy is not on a per election basis. It’s going with the people’s mandate,” he said, and noted that he has taken into consideration proposals with wide consensus for the next budget from the grass root level and converted them into national policies which will have benefits for all.
He added that the 5.9 percent budget deficit target for 2016 is on track—which was reflected on the first half interim Treasury report—and the government is aiming for a 4.7 percent budget deficit for 2017, and noted that all targets so far set by the new government have been achieved.
When asked about the evident deterioration of the 2015 budget targets which the Central Bank earlier this year had mainly attributed to the public sector wage increases, Karunanayake said that the past sins of the Rajapaksa government which had appeared in the form of debt repayments had caused targets to be missed.
Meanwhile, he added that of the 410 budget proposals for 2016, over 100 had been fully implemented, 10-15 proposals of significance like the VAT amendment are under development, and the rest are being implemented according to schedule.
He added that the main challenges the government will face going forward are the external turbulences, which it would tackle “one-by-one”.