- Says Budget 2021 is pro-growth and aimed at getting country’s macro fundamentals in order
- Points out conscious effort was made to keep tax policy unchanged to create policy stability
Budget 2021 provides the “bedrock” for the development work planned by the government years ahead while getting the country’s macroeconomic fundamental in order and ensuring accelerated growth, Money, Capital Markets and State Enterprise Reforms State Minister Ajith Nivard Cabraal said.
“This budget is the foundation of the development work planned by the government. It is the bedrock. It is a growth-oriented budget that strives to get our macroeconomic fundamentals right while ensuring higher growth,” Cabraal told a post-budget webinar organised by the advisory firm, KPMG.
He said a conscious effort was made to continue with the tax policy that was initiated in January 2020, which would give the country’s business community as well as the foreign investors that the government is serious about maintaining policy stability.
Sri Lanka slashed both corporate and personal taxes considerably in the earlier part of this year, to revitalise the stalled economy, which was battered by austerity policies and the Easter Sunday attacks in April 2019.
However, with the outbreak of COVID-19 in March in the country, it was speculated that the government would resort to jack up the reduced taxes, given the higher expenditure required to fighting the pathogen and the expanding budget deficit.
However, Cabraal made it clear that the government aims to generate more tax revenue through expanding the economy and not by slapping higher taxes on businesses and individuals, which would particularly be detrimental at a time like this, where state support is required to stage a recovery.
Cabraal said Budget 2021 focused on three main items—providing clean drinking water to people, improving the road network and minimising the human-elephant conflict. Budget 2021 allocated Rs.1 trillion on the ‘Water for All’ national plan for the 2021-2024 period, where 171 major projects aimed at enhancing the production capacity, 1,000 community water projects and new water supply schemes, are planned. At present, only 54 percent of the population have access to pipe-borne safe drinking water.
Meanwhile, allocating large sums of moneys to develop the country’s urban and rural road networks, Budget 2021 paid special attention towards minimising the human-elephant conflict, which appears to be a deeper issue that requires immediate remedies.
According to Cabraal, 14 districts of the country are affected by the human-elephant conflict and as a result, the economic and social activities of the people living in those districts have been impacted.
“We will allocate, Rs.3,000 million to establish elephant fencing and trenches and also to construct tanks in the wildlife areas while meeting the requirement for food of the animals, protecting wildlife habitats, also to empower the communities to engage in community safeguard mechanisms, with a view to mitigate the loss of property and life that arises due to the human elephant conflict,” Budget 2021 said.
Meanwhile, Cabraal stressed that Budget 2021 provides a host of incentives to key identified sectors in the economy to develop the country’s industrial base and promote exports. He also pointed out that Sri Lanka would rely more on local and non-revenue sources to borrow going forward, as part of the government’s strategy to managing the country’s elevated debt and said that’s why the government imposed curtailments on non-core imports to preserve the value of the rupee.
“To balance our debt situation, the local and foreign debt composition should be clawed back to 60:40 levels from the current 50:50 levels,” Cabraal said.