Sri Lanka's budget gap is expected to be narrowed with the recent increases in taxes and levies as well as through foreign and domestic borrowings.
The total targeted revenue of around Rs. 830.8 billion for 2010 is insufficient to meet expenditure running at over Rs. 1.78 trillion, a senior Finance Ministry official said.
The 2010 Budget will be presented in Parliament by Prime Minister D.M. Jayaratne on Tuesday, contrary to earlier plans of President Mahinda Rajapaksa making the presentation. The President, who also handles the finance portfolio, departs to Ukraine on Tuesday, the same day the Budget is being presented.
The official noted that revenues are picking up with the Government already taking prudent fiscal policy measures to strictly control current public expenses. Total revenues were in the region of Rs.182.7 billion in the three months from January to March while expenses were around Rs. 247.5 billion, according to official data published by the Central Bank. The Government is expected to announce how it plans to fulfil the pledge of a Rs.2,500 monthly salary hike for the public sector but the official declined to comment as to whether this proposal will be included in the 2010 Budget or the 2011 Budget (due later November).
The Government has already increased levies on sugar imports by five rupees, while the cigarette tax goes up by a rupee and taxes on a litre of spirits would rise by another Rs. 50, he said. However, he said the price increase on a retail litre of alcohol would be less than the tax increase. The Government is slapping new taxes on consumer goods to increase State revenue which is far too short to cover Government expenditure that has led to ballooning budget deficits, the official added.
Excise taxes generated from cigarette, liquor, motor vehicles, petroleum and selected consumer durables which totalled Rs. 98.8 billion in 2009 are expected to increase by at least 30% with the revision of these taxes this year, he said.
Meanwhile Deputy Finance Minister Chandrasiri Gajadeera said that the Government will grant relief to the people by removing taxes on several essential commodities. Taxes on sprats, potatoes, red onions, big onions, garlic, Watana dhal, gram, green gram, dhal, and dried chillies are to be further reduced or totally removed.