Economic Development Minister Basil Rajapaksa yesterday warned the state sector not to expect a major pay rise but declared that the government would continue with the fertiliser subsidy, Samurdhi benefits as well as allocations for the health sector in next year’s Budget. “When preparing the Budget, the Government faced several challenges such as the sanctions [...]

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No major pay hikes, tough times ahead

Basil says fertiliser subsidy and Samurdhi benefits will be maintained in Budget
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Economic Development Minister Basil Rajapaksa yesterday warned the state sector not to expect a major pay rise but declared that the government would continue with the fertiliser subsidy, Samurdhi benefits as well as allocations for the health sector in next year’s Budget.

“When preparing the Budget, the Government faced several challenges such as the sanctions on oil imports from Iran and the drought,” the Minister told the Sunday Times in what seems a forecast of difficult times ahead.

He admitted there was a strain on the Treasury, but said that starting from next year, the Government would launch a three-year plan aimed at reducing imports.

Treasury officials said fiscal targets had already gone awry, and the Government would present the 2013 Budget with subdued revenues, high fiscal deficit, sticky expenses, optimistic projections and heavy local and foreign borrowings.

Sri Lanka’s economy is set to grow at 6.8 per cent this year and improve to 7.5 per cent next year, officials said.

The Government was also finding it difficult to provide more relief to public sector employees as the total cost of salaries, pensions and allowances would be more than Rs. 38 billion, officials added.
Minister Rajapaksa said there would be a focus on ‘Gama Neguma’, ‘Pura Neguma’ village upliftment programmes and boosting the tourism sector.

A senior Finance Ministry official said steps would be taken in the Budget to reduce recurrent expenditure, broaden the revenue base and improve the efficiency of state-owned enterprises, reduce public debt and keep the fiscal deficit within the forecast of 6.5 per cent of GDP.

According to budget plans, the Government is no longer sacrificing much needed investments to develop infrastructure to meet recurrent expenditure obligations.

The official explained that the budget was formulated under “trying conditions”, with the “global economic slump expected to impact Sri Lanka’s external balance and revenue,” while a severe drought affected tea and paddy production.

He said that to encourage local value-added industries, the cess would be increased or imposed on import of electrical appliances such as refrigerators and table fans and items such as canned food, pharmaceuticals, dairy products, sugar, textile and apparels.

With a view to encourage large investment projects, a 6-to-12-year tax holiday and other tax incentives would be given to large investments, he said. Incentives to encourage the expansion of existing enterprises would also be granted.




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