Government’s revenue proposals for 2022 appears to be more of a stop-gap move rather than one that sets out a framework on how revenues will continue to be mobilised and deficit financing requirements met over time. IPS economic expert Dr Dushni Weerakoon disclosed. ,
It seems that the government is hedging its bets on economic growth creating revenues, but with inflation set to rise in the coming months, and government fiscal financing from the banking sector set to be even higher at 2.7% of GDP compared to 2.2% of GDP in 2021, this is calling for monetary authorities to step in with higher interest rates.
It will threaten the forecasted growth, weaken tax revenue, and leave less room for investment. In the face of the fiscal stresses, it would have made sense to make structural changes to our tax system and ask for greater sacrifices from those with more ability to pay.
The government t focuses on rural development by allocating R s 19,894 million to 335 divisional secretariat divisions to commence rural livelihood development programmes,. Dr Nisha Arunatilake IPS resecher said.
It has also allocated other funds aimed at reviving the rural economy. For example, Rs 5,000 mn for developing small and medium-scale industries,Rs 5,000 mn for modernising agriculture, and Rs 5,000 mn for improving infrastructure in product investment zones.
Many other countries in the world are also making public investments to help the post-COVID-19 recovery process and create jobs. This could be a potentially good investment if money is spent according to well researched strategic plans to help revive the rural economy.
It has also proposed reforms to the Samurdhi programme – (1) to transform it as a rural development movement to ensure economic revival and food security without just confining it to a poor-relief programme and (2) to select Samurdhi beneficiaries using a rational and scientific mechanism.
The second proposal is necessary to minimise the prevailing exclusion and inclusion errors as well as to reduce the rising budget of the Samurdhi cash transfer programme.
Government revenue has improved marginally in the first nine months despite the effects of the pandemic on the economy.
As per latest Central Bank data, Government revenue amounted to Rs. 1.05 trillion between January and September 2021 as against Rs. 1.02 trillion in the corresponding period of last year.
During the first nine months total expenditure and net lending increased to Rs. 2.38 trillion up from Rs. 2.18 trillion a year ago.
The overall budget deficit rose to Rs. 1.32 trillion from Rs. 1.15 trillion.
Central Bank data also showed that domestic financing rose to Rs. 1.45 trillion from Rs. 1.32 trillion. Foreign financing recorded a net repayment of Rs. 124.7 billion as against Rs. 172 billion.
Outstanding central Government debt increased to Rs. 17 trillion by end September 2021 from Rs. 15.1 trillion as at end September last year. By the end August, the central Government debt was Rs. 17.22 trillion.
Total outstanding domestic debt increased by 16.9% to Rs. 10.6 trillion. By the end of August it was Rs. 10.46 trillion. The rupee value of total outstanding foreign debt increased by 6.6% to Rs. 6.4 trillion by end September 2021. At end August the latter was Rs. 6 trillion.