News
Tough austerity measures, more taxes and cuts on subsidies
The Government, faced with a worsening budget deficit crisis, is to go in for deeper austerity measures and for the first time consider resorting to twin measures of cutting subsidies and increasing taxes to rein in rising costs. The all-round austerity measures also include further curbing public expenditure while increasing taxes and reducing subsidies or doing both. This came as debt servicing costs rose by three per cent more than state revenue, a senior government official told the Sunday Times.
If the new measures were not resorted to, the Treasury would be forced to go for more borrowings to cover government expenditure which would then lead to more debt servicing, the official added. Sri Lanka’s exports have declined drastically and the revenue has come down by three per cent to Rs. 509.4 billion while expenditure has increased by 3.3 per cent to Rs. 861.6 billion during the first half of this year compared to statistics last year, according to Finance Ministry data.
In the face of high recruitment to public sector institutions and the provision of most services free of charge, it was challenging for the Government to raise sufficient revenue to bridge its expenditure gap, the official disclosed. There are 1.4 million public sector employees, meaning one public sector employee in every four households.
The official who did not wish to be named said the Government was finding it difficult to maintain free welfare services and measures would be taken to curtail these services although it was difficult politically. The Treasury was considering direct and indirect tax increases on commodities and services under a periodical tax revision system as it had decided to stop short cut methods and go for hard austerity measures, he said
The excise duty on tobacco, cigarettes, liquor and ethyl alcohol was increased from July 31 as per the periodical tax revisions, which are made annually to ensure
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