The Treasury is taking stringent measures to curtail government spending by restricting ministries from obtaining extra money over and above the budgetary allocations for various needs including purchasing vehicles, computers, and other equipment building rents, etc through supplementary estimates. Treasury Secretary Dr. P.B. Jayasundera said that they will strictly stick to the planned 6.2 % budget deficit this year without deviating from the borrowing programme approved by parliament.
At a media conference this week, he disclosed that the government revenue was on target although there was a shortfall between estimates and actual revenue of about Rs. 2 billion up to April and expenditure has recorded an increase of around Rs.6 billion.
According to official sources, the Sri Lankan government follows a practice of presenting supplementary estimates amounting to billions of rupees to parliament for approval. This money had to be allocated from the Budgetary Support Services and Contingency Liabilities project of the Department of National Budget.
Dr Jayasundera said that the government was not in a position to grant a pay hike for public sector employees as demanded by opposition parties and trade unions in the face of the rising cost of living. The public sector was given a wage hike from January this year, he said, adding that the country's inflation was at a single digit rate of 6-7% whilst food prices had been fairly reasonable.
He reiterated that the rupee will stabilize at below Rs.125 per dollar as the country is maintaining its economic fundamentals correctly.
"There is no reason for the currency to depreciate beyond that level," he said adding that the recent fall of the rupee to Rs 133 last Wednesday before recovering to Rs 130 on Friday was due to speculation. He noted that recent policy measures will strengthen the fundamentals and the depreciation of the rupee is beneficial for the country to a certain extent as it supports exports, the import substitution sector and energy conservation. Foreign Direct Investments are also expected to increase this year with top contributions from tourism, apparel, steel, telecom, ports, property development, dairy and manufacturing sectors.
These sectors as well as agriculture are also drawing local investments, he said. He revealed that a major portion of the US$450 million investment in the new Colombo Container Terminal would be realised this year. Referring to taxes on vehicle imports, he said that the Treasury will not give any waver for importers, even if they had opened Letters of Credit before the 31st March (when the increased taxes were imposed). He also said that the cost of vehicle imports, which amounted to $ 1.7 billion in 2011, is forecast to dip to around $700 million this year following the tax hike.