Sri Lanka needs to get fundamentals right
View(s):While there was all-round praise for the ‘new’ Sri Lanka, speakers at this week’s economic forum also had words of caution in the country’s effort to speed development.Among the issues raised was the need for consistent policies and getting the fundamentals right in the economy, particularly tax revenue. Another point raised was that the crisis in China and a shift of funds to the US could result in fewer funds coming to Asia.
Montek Singh Ahluwalia, economist and former Deputy Chairman of the Indian Planning Commission, said the tax revenue as per GDP was 12 per cent when it should be 20 per cent and urged Sri Lanka to get its fundamentals right.Economists said that low tax earnings means the country has no money not only for recurrent spending but also for infrastructure which then has to come from costly borrowings.
Annual tax revenue has been barely able to meet debt servicing. The gradual reduction to a policy where tax revenue fell to 12 per cent tax from 20 per cent came during the tenure of Treasury Secretary P.B. Jayasundera, a strategy that has had grave repercussions for the country.