Sri Lanka Budget 2010

8/8/2019 Sri Lanka Budget 2010

1/10

DIPM108 ASSIGNMENT 02

ANDREW CYRIL

Table of Contents

INTRODUCTION................................................................................................................................... 2

The parliament of Sri Lanka..................................................................................................................... 3

The budget 2010 of Sri Lanka .................................................................................................................. 3

Tax Reduction of the Budget 2010 ........................................................................................................... 4

A comparison of the Income and Expenditure of Budget 2009 and 2010 .............................. .................... 4

Budget Overview and areas of allocation.............................................................................................. 6

Recommendations on how to earn the deficit of the budget ...................................................................... 8

A Project Managers role to assist the budget ............................................................................................ 9

CONCLUSION ....................................................................................................................................... 9

REFERENCE........................................................................................................................................ 10


2/10


ANDREW CYRIL

INTRODUCTION

A parliament is where a number of democratically elected people represent the country and its

people and decide upon laws, budget and reforms. The Sri Lankan parliament has always been a

main focus of all the people of our nation. The budget 2010 has played a significant role in 2010as a mini budget as it introduced many reforms. The report will discuss on the activities of the

parliament and on the budget 2010 with a comparison of the previous year budget with the

present one.


3/10


ANDREW CYRIL

The parliament of Sri Lanka

The parliament of Sri Lanka which is the heart beat of the Sri Lankan economy decides upon the

expenditures and the methods of income for fiscal years. The proposed budget for the fiscal year

2010 had an expenditure of LKR 1200 billion (Budget, 2010). According to the budget (2010) a

majority of the expenditures was allocated for agriculture, defense and infrastructure. However,

experts state that the allocation of a majority of funds for defense is baseless as the country does

not have an ongoing war against terrorism.

Once the parliament has been adjourned the speaker states the matters which needs to be

discussed and passed. For an example emergency laws, current affairs, issues that are internal

and external and much more which affects the socio and economical status of the state. The

parliament is a model of the British Parliament system except the head of state is the president

rather than a King or a Queen. The parliament is represented by the government who should

have a majority and the opposition.

The budget 2010 of Sri Lanka

The Sri Lankan government presented the appropriation budget 2010 on the 29th

June 2010. The

budget was presented to the speaker of the parliament by the finance minister. The budget

proposed an appropriation expenditure of Rs 974.748 billion as for the remainder of the fiscal

year 2010. According to the Acting Finance Minister Sarath Amunugama (2010) the budget

2010 aims at reducing the fiscal deficit, introducing tax reforms, and providing incentives for

investments while targeting a major growth in the future.

The government targets a budget deficit of 8% GDP by 2011 and to reduce it further to 5% by

2012while reducing the debt limit to 70% which is as of now 80%. The government is also

planning on investing in the agricultural sector, mainly on 40,000 hectares of paddy fields in

order to increase the paddy harvest. The budget has also proposed USD 2 billion for the

reconstruction of North and East war stricken areas which is mainly focused on developing the

A9 road. Furthermore, the budget has also proposed to spend more on tourism since postwar will

attract more tourist which will increase the level of foreign exchange of the country.


4/10


ANDREW CYRIL

Tax Reduction of the Budget 2010

The Budget 2010 slashed taxes on imports and simplified its whole tax system. Prior to the

reduction the Sri Lankan tax on vehicles were prohibitive and discouraging imports and

government revenues. Sri Lankas ordinary citizens were paying a heavy amount on taxes and inmost cases 200% of the total value of the vehicle was paid in as taxes.

However, once the taxes have been slashed on the imports of vehicles, analysts have witnessed

an alarming growth on the imports and vehicle purchases within the country. The opposition

however, states that the tax reduction is only targeted on the rich class of Sri Lanka and the poor

class has become even poorer due to this act. Nevertheless, the author does not agree with the

statement as the reduction in taxes has helped many of the jobless and the local businesses to

boost as the amount of money spent on purchasing vehicles has decreased which has therefore,

increased the amount of investment and saving. As an example the tariff on petrol cars has been

reduced from 187% to 90% which is over half a reduction than the previous number.

A comparison of the Income and Expenditure of Budget 2009 and 2010

The latest budget should ensure that the island maintains macroeconomic stability that would

assist to accelerate economic growth, the IMF (International Monetary Fund) states that the key

element is in ensuring macro-economic conditions such as inflation, interest rates and the

exchange rates to remain stable in order to create an environment for growth, investment and

increase employment (IMF, 2010).

The 2010 budget was presented with the wake of IMFs third tranche of USD407.8 million being

disbursed, which considerably strengthened the governments reserves. According to the Sri

Lanka Equity Analytics (2010) regardless of the one billion rupee reduction on expenditure for

defense and public security and seventeen bullion rupee reduction on other goods and services

mainly due to the decrease in national security, the recurrent expenses are expected to rise by

5.5% to LKR928.3 billion mainly due to expected increases in salaries and wages, interest

expenditure and subsidies and transfers.


5/10


ANDREW CYRIL

According to the budget the total expenditure is expected to grow by 6.5% to LKR1,279.8 billion

whilst total revenue is expected to grow at a faster 16.9% to LKR817.8 billion capping the target

deficit at 8% of projected GDP (Daily News, 2010). However, the author believes that a 15%

growth in revenue could be an ascending task given the present tax regime nevertheless a 24.6%

growth seen in the first months of the year is an assuring factor. The image below

(Sri Lanka Equity Analytics, 2010) is a comparison of the 2009 and 2010 Sri Lankan budgets

and an overview from the source will assist the reader to understand the whole budget in a

nutshell.


6/10


ANDREW CYRIL

Budget Overview and areas of allocation

This Budget protects a total provision of Rs. 7,363 million for the provision of freetext books, nutritional food, school uniforms, subsidized transport and scholarships to

around 3 million school children Rs. 2,500 million has been provided, in support of nutritional improvement of

around 74,000 expectant mothers and infants,

For around 25,000 displaced people living in welfare centers Rs. 7,500 millionis provided for dry rations and food

Rs. 9,300 million has been provided to extend income support for the total of lowincome families benefitting under the Samurdhi programme

Social security availed by way of retirement benefits for around 450,000 publicservants and allowances for around 6,000 disabled soldiers, is provided with Rs. 102, 500

million

In support of the farming community with a total number of beneficiaries of around2 million farmers involved in higher agricultural production, Rs. 35,000 million is

provided to meet expenditure in respect of fertilizer subsidies, subsidize credit and

procurement of paddy at the guaranteed price

In keeping with the commitment to provide free health, Rs 13,300 million is securedto supply drugs and pharmaceuticals to around 50 million in and outdoor patients

using government healthcare facilities

Budgetary support of Rs. 6,650 million is earmarked in respect of subsidized transportto meet expenditure of Sri Lanka Railways and Ceylon Transport Board 85

Budgetary provisions in support of public investment in water supply will ensure 100,000new water connections in 2010 and to be augmented to 150,000 per year thereafter

250,000 new electricity connections in 2010 and 300,000 new connections perannum thereafter will be available under public investment expenditure for the powersector


7/10


ANDREW CYRIL

The ongoing road rehabilitation programme will add 530 km of rehabilitatednational roads, 34 new bridges and 300 km of rehabilitated provincial roads in 2010.

Further, 720 km of rural roads will be upgraded with nearly 200 km thereof being

concreted. 181 km of express ways, 104 bridges and 1, 500 km national roads will be

upgraded in the next 3 years. 1,800 km of provincial roads are supported by the public

investment programme . A further 15,000 km of upgraded rural roads will be added in the

medium term

The road map provides investment opportunities to the private sector in a wide rangeof areas including resort hotels and tourism related facilities, construction, IT and

Business Process Outsourcing, skills development, clinical trials and research,

plantations, urban development, industrial townships, international shopping facilities,

renewable energy , higher education , medical facilities, agriculture, livestock, and a wide

range of value added manufacturing and services

The ongoing public investment in support of creating new capacity in powergeneration and distribution and port facilities, highways, irrigation and drinking and

industrial water supply is bound to improve the investment climate and business

development with enhanced competition in exports and import substitution

High investment to accelerate our growth beyond the 8 percent target.


8/10


ANDREW CYRIL

Recommendations on how to earn the deficit of the budget

The author whilst analyzing papers and documents of the Sri Lankan budget and its deficits have

understood that the government should focus on three areas which will assist the nation to

overcome the budget deficit.

Focus more on inflation, interest rates and foreign reserves which will assist thegovernment to strengthen the rupee further and decrease the amount of cash outflow

whilst paying interest for borrowings and imports.

Reduce heavy taxes on exports and imports and create an environment which willincrease the level of investment in the country. More focus should be given to the local

businesses so that it will create more employment opportunities which will eventually

result an increase in tax payments and government revenues as the economy will

strengthen further.

Reduce heavy expenditure of government institutions and members. A considerable proportion of the whole budget is spent on inefficient government institutes and

members. The reduced expenditure will allow the budget to invest the money on revenue

friendly endeavors.

According to an expert of Economic Analysis in Sri Lanka the personal income tax ratewhich is 35% as of present should be cut to boost consumption


9/10


ANDREW CYRIL

A Project Managers role to assist the budget

A project manager is an individual who foresees the success of projects. To ensure that the

project meets all its objectives and goals. Even though there are many project managers in most

companies the impact of the persons role on the budget is less spoken of. The following aremethods on how a Project Manager could assist the nations budget.

Ensuring that all time lines are met and that the project does not take longer than itsrequired. As time equals cost and quality.

Ensuring that the project stays within the allocated cost. Ensuring that the quality of the project is checked throughout to avoid disastrous errors

and bugs which will result project failure.

Foreign projects should be handled with more care and focus as these are the mainsources of income of the nation.

Resource allocation should be optimized and well managed inorder to avoid resourcewaste.

Most importantly avoiding knowledge drain in Sri Lanka by not leaving the nation toassist other countries of the world.

CONCLUSION

The Budget 2010 has been focused on reforming the country after the war which raged for over

two decades. Sri Lanka has witnessed a major slash in taxes and expenditure on public security.

However, the inflation rates have still risen which has weakened the rupee against the US Dollar

and according to the IMF which funded Sri Lanka with USD 2.6 billion has advised the

government to reduce government spending even further in order to reduce the budget deficit and

pay off many of the debts which has been taken by the government.

The government of Sri Lanka expects the economy to strengthen even further in 2012 by

introducing more tax and fiscal reforms which will attract more foreign investors to the country.

And also the government is targeting on boosting the agriculture (paddy) sector, Tourism and

Infrastructure investment which will bring in more revenue for the government.


10/10


ANDREW CYRIL

REFERENCE

1. Analytics, S.L.E., 2010. Sri Lanka Budget 2010. Sri Lanka Equity Analytics.2. Desk, C.P.N., 2010. Sri Lanka's Budget 2010 aims to reduce deficit, promotes investment

and tourism. Colombo Page, p.3.

3. Fund, I.M., 2010. Sri Lanka and the IMF. In Fox, J., ed. International Monetory Fund.New York, 2010.

4. Gunesakera, P., 2010. Sri Lanka's latest tax reduction. Daily News, 24 June.

Documents

Sri Lanka Budget 2010