Published on: August 30, 2022

Interim budget aimed at resolving current economic crisis, changing economic pattern, presented to Parliament

The 2022 Interim Budget, which lays the foundation for changing the current economic pattern of the country, was presented to Parliament this afternoon (30) by President Ranil Wickremesinghe as the Minister of Finance, Economic Stabilization and National Policy Affairs. The President introduced the budget as the basic basis for formulating a national economic policy that is compatible with global trends and said that the process of building a new economy will begin with the next year's (2023) budget.
President Wickremesinghe said, “In order to solve this economic crisis, one of the basic tasks that we need is to extricate from our traditional political perspectives and impartially appraise the reality of the ground situation in the context of the global environment.” Quoting a recent statement made by JVP Parliamentarian Sunil Handunneththi he said, “The Government should make policies. The Government does not have a role to engage in commercial ventures.”
Hence, he added, “We nourish our minds with creative thoughts, according to the current trends of the modern world, then we can solve the economic crisis.” He said that this interim budget is a foundation to achieve the goals of ensuring a surplus in the primary budget, raising the economic growth rate to a stable state, and controlling the public debt by 2025.
The President stated that if the national economic policy is followed, it is possible for Sri Lanka to become a fully developed country by 2048 when it celebrates its 100th independence anniversary. A summary of President Ranil Wickremesinghe’s interim budget speech is as follows;

By 2025 Government revenue expected to grow to around 15 percent of GDP from 8.2 percent.

The government targeting a primary surplus of more than 2 percent of GDP in 2025 with expectations to improve further.

Government intends to reduce public sector debt from around 110 percent of GDP as at 2021, to no more than 100 percent of GDP in the medium term.

VAT rate will be increased to 15 percent from the current rate of 12 percent with effect from 1st September 2022.

Propose to introduce compulsory tax registration for all residents over 18 without considering their annual income and tax-free thresholds.

The government is committed to implement the recommendations in the Final Report of the “Presidential Commission of Inquiry into Sri Lanka Customs”.

Measures will be taken to enhance non-tax revenue, including royalties received for government assets.

Required laws to establish a system similar to USA, tasked with ensuring government expenditure system is working efficiently. The IG will be empowered to protect the integrity of the government by detecting and preventing fraud, waste, and abuse in government institutions.

A comprehensive study of movable and immovable properties, including government owned buildings, lands and vehicles will be conducted with a view to optimize the utilization and to identify potential real estate for income generating activities.

In order to provide a better service to the public, it was proposed to merge selected Pradeshiya Sabhas with a Municipal Council or an Urban Council adjacent to them and 22 Pradeshiya Sabhas were selected for this program.

Online revenue collection program to be implemented in all local government authorities before the end of 2022.

Due to unrest among unemployed youth, the government decided to reduce the retirement age of public sector and semi-governmental employees to 60 years. Those currently employed beyond 60 years in the government and semi government sectors will be retired as of 31.12.2022.

The purchase of fossil fuel-based vehicles for public sector will be suspended from hereafter as a government policy. Only electric-powered vehicles will be purchased for the use of the public sector in the future and the private sector will also be encouraged to use electric vehicles by 01st January 2026.

A review on our defence strategy, “National Security – 2030” to develop capabilities and knowledge of our security forces that would be required in the modern and evolving world.

It is proposed to establish the “State-Owned Enterprise Restructuring Unit” to facilitate restructuring of government owned business entities. Rs. 200 million has been allocated to implement this proposal.

A “Parliamentary Committee on Ways and Means” to be established to closely deal with issues and make proposals in raising government revenue.

A committee consisting of three government officials including Comptroller General of the General Treasury will be appointed to supervise and implement the entire process of the
disposal of scrap.

A national agency will be established for the purpose of identifying and facilitating investment to be undertaken in partnership with the public and private sector. Rs. 250 million has been allocated for its implementation.

The new Central Bank Act will be implemented as a key legislation to strengthen the monetary sector in the country.

Depositors and staff of banks will be allotted 20 percent shares in state banks.

It was also proposed to provide additional monthly allowance of Rs. 2,500 for pregnant mothers in addition to Rs. 20,000 already provided for them.

There are about 61,000 food insecure families, which need urgent assistance. I will provide Rs. 10,000 per family for a period of further four months.

For all the above programs, Rs. 46,600 million has been allocated for a period of 4 months.

Rs. 133 billion has been allocated under the World Bank loan assistance for the implementation of programs with the view of reducing the impact of the current economic crisis and restoring social stability.

Accordingly, the monthly Samurdhi allowance has been increased to an amount ranging between Rs. 5,000 to Rs. 7,500 per month for approximately 1.7 million currently Samurdhi receiving families. Apart from that, an assistance of Rs. 5,000 was provided per month temporarily to around 726,000 families who were in the waiting list for expecting
Samurdhi benefits.

Also, the allowance paid for the elderly, disabled, and kidney patients was increased to an amount ranging between Rs. 5,000 to Rs. 7,500. Further, the temporary assistance of Rs. 5,000 was arranged for the people who are in the waiting lists in anticipation of receiving this assistance.

In addition to the above concessions US dollars 110 million (Rs. 40 billion) has been allocated for the import of Urea required for paddy cultivation in the 2022/2023 “Maha” season, and fertilizer procurement is already underway.

Government to discuss with all stakeholders to introduce a more realistic mechanism than Termination of Employment of Workman Act (TEWA) to handle employees who lose
their jobs due to the crisis.

Aimed at strengthening of the farmers and freeing them from debt burden, actions are being taken to write off the outstanding loan amounting to Rs. 688 million (excluding interest) which is currently in default to the state banks. Rs. 350 million has been allocated for the implementation of this proposal.

Youth Agriculture Companies will be established and linked with 331 Divisional Federation of Youth Clubs to get maximum results. Rs. 250 million will be allocated for this proposal.

There is a strong need to enhance domestic dairy production. Therefore, Rs. 200 million was allocated for this purpose.

Since there is a shortage of seeds and planting material it was proposed to allocate Rs. 400 million to the Department of Agriculture to produce the necessary seeds and planting materials.

With the aim of efficiently and productively using government land for agriculture and livestock , 20 acres of land will be allotted to currently unemployed youth groups (groups of about 10 members) in the area where the identified lands are located for the purpose, and Rs. 50 million has been allocated to implement this proposal.

A “National Food Security Program” was proposed to be established covering broad areas, including the enhancement of production, collection, storage, and distribution of food, as well the provision of food to those who do not have the capacity, to ensure food security and implement the same as a national priority.

A sum of Rs. 100 million has been allocated to establish a mechanism to promote Research &Development and commercialize the same, particularly with the startup culture, with the assistance of local universities and technological institutes.

In order to attract more tourists from September this year, the Ministry of Tourism should organize special programs with the support of the Tourist Board and other institutions related to the tourism industry. By the end of 2023, the number of tourist arrivals per year should be increased to more than 2.5 million as the target.

Ministry in charge of environment should prepare a suitable program and obtain necessary support from the Climate Fund and implement a mitigation program accordingly

Sri Lanka needs to encourage private investment to provide educational opportunities to foreign students focusing on Science, Technology, Engineering and Mathematics (STEM), finance, information technology and medicine. Scholarships will also be provided to Sri Lankan students to study in these universities.

Proposals were also made to facilitate the opening of a branch campus of the Kotalawala Defence University (KDU) in Kurunegala.

In order to provide more training and qualification to the Sri Lankan labor market, training will be provided to train and provide NVQ certificates from the selected vocational training institutes (Youth Corps, VTA, NAITA,) and TVEC, which is the regulatory body in the vocational training sector. Rs. 200 million has been allocated for
the implementation of this proposal.

Many people in the community living in urban and rural areas are engaged in micro-scale self-employment / livelihood occupations. A community unit will be established in every Vocational Training Center providing training in food and beverage preparation, fish drying and vegetable dehydrating, sewing knitting, beeralu weaving, brass industry and Black Smithing as livelihood around the training center, online self-employments based on the Gig economy and other life occupations. Rs. 200 million has been allocated to implement this proposal.

The transport of 21 goods, including vegetables, fruits, flowers and tea products from the upland areas to Colombo and urban areas by railway has been initiated from Hali Ela to Colombo Fort. Cargo Rs. 200 million has been allocated to implement this proposal. It is also expected to develop the Kelaniweli train service as a pilot project. The selection of investor/s will be based on competitive bidding process.

The Government will facilitate the expansion of renewable energy sources to enhance availability and reduce the cost of energy generation in Sri Lanka by allocation of
necessary land and through the necessary operational restructuring of the CEB.

It was also proposed to establish an “Office for Overseas Sri Lankans”, which will act as a central point of coordination to obtain the support of Sri Lankans who are living abroad and an “Overseas Sri Lankan’s Fund” will also be established to obtain the support of all Sinhala, Tamil, Muslim, Burgher and other Sri Lankans who live abroad.

Manufacturing of electric bicycles should be encouraged as a local industry with a view to reducing fossil fuel consumption.

Therefore, tax concessions will be provided for imported accessories/parts required in the manufacture of electric bicycles locally with more than 50 percent value addition.

Further, it was proposed to promote technology infused systems to eliminate grounds for corruption and create transparency.

President Ranil Wickremesinghe called upon all parliamentarians and citizens of the country, to put aside their personal political goals and unite in the context of the national cause of rebuilding the country and the nation. “If we all come together, we will be able to uplift our Motherland, and create a nation that competes and moves forward with the ever-changing world. If we miss these opportunities, we will be marginalized globally,” he added.

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