President Mahinda Rajapaksa, who is also the Minister of Finance, wants to give a pay raise to state sector employees and has told the Treasury it should be in the range of five to ten per cent, a senior Finance Ministry officials said.
He said President Rajapaksa had directed the Treasury to make allocations to grant such a salary hike in the November 15 budget considering the escalating cost of living.
Trade unions have repeatedly demanded a salary hike of Rs.10,000 but this was turned down by Treasury Secretary P.B. Jayasundara at a preparatory meeting of the budget recently, the official said.
The Government’s 2012 budget would spell out several measures to boost local and foreign investment by granting more concessions
and introducing new revenue proposals. The substantial salary hike for public-sector employees was being considered to harness maximum productivity from them, the official said.
Macro economic policies had been included in the budget proposals aimed at making Sri Lanka the main emerging economy in Asia. The country’s postal service would be revamped providing modern technology and the construction and tourism sectors will be provided concessions to boost the economy, he said.
The senior official said the Treasury was also considering an increase in the Cost of Living allowance for nearly 1.3 million public servants and 450,000 pensioners. The Treasury would have to allocate around Rs 70 billion if the Government is to grant a 10 percent salary increase to public servants and pensioners, he said.
This would be a heavy financial constraint for the budget, he added. There would be slightly higher taxes on the rich, and revenue raising measures that affected everyone, including the poor. These measures would include price hikes in electricity, postal, petroleum and rail transport along with VAT increases, he disclosed.
Local investors would get new concessions in the 2012 budget and tax holidays would be granted only for foreign investment while direct taxes are to be further reduced, he said.
The largest ever health budget in Sri Lanka of more than Rs 100 billion would be allocated for 2012. This year’s national health budget is a projected Rs. 92 billion, up from Rs. 74 billion in 2010.
In 2009 the national health budget was Rs. 64 billion.
The Ministry estimates that next year’s (2012) defence budget would be about Rs 223 billion, up from Rs. 210 billion in 2011.
Accordingly, Rs 217 billion would be set aside as recurrent expenditure. According to these estimates, next year’s capital expenditure would be about Rs. 6000 million. It is intended to allocate this sum as capital expenditure for new technology to be used for security, the development of infrastructure facilities for the Army, the Navy and the Air Force.