View from Colombo: Business community has fingers crossed over annual budget

The much talked about annual budget, due for announcement on last Wednesday but which has been in the doldrums after President Chandrika Kumaratunga fired three key ministers and suspended parliament on November 4, is expected to be announced on Wednesday, November 19, when the parliament is expected to meet.

Last week's unexpected political developments caused serious concern and confusion among the business community which expressed fears that the growing economy may be affected, especially with the booming stock market crashing overnight.

These developments came at a time when the government was preparing to announce a three-year economic development programme to broad base Sri Lanka's economy and enhance investor confidence in its third annual budget.

There were frequent complaints from the poor, low income and the middle class groups about the government not doing much to help them in the first two budgets. They justified this by pointing out the tax amnesty and other benefits offered to the business community and other wealthy elements. The unrest continued for months and ended in government employees demanding a salary increase promised during the last elections, going onstrikes and crippling many sectors, including health and railway services.

Refuting these charges, Minister K.N. Choksy claimed that the first two budgets were development-oriented to uplift the country's economy and the benefits of which to the poor are to be announced in the third budget.

To calm the worsening situation, Choksy announced a four figure salary increase at a hastily summoned press briefing on November 7, and he is also expected to call upon the private sector to follow suit and meet its own commitments. But the response to such a call is not expected to be warm from many private establishments.

Special emphasis

The government spends Rs130 billion as interest and loan installments which will be reduced to Rs121 billion, saving Rs9 billion. The money thus saved will be used to give a salary increase to public sector employees .The government spends Rs100 billion as wages and pensions for the public sector as Sri Lanka is home to the highest ratio of public sector employees to population in Asia.

Highlighting the situation, a senior minister stated here that difficult decisions have to be made in next year's budget which will address the interests of all sections besides hoping to reduce the deficit to 6.8 per cent of the GDP from 8.9 per cent last year and 10.8 per cent in 2001.

The estimated total expenditure will be Rs666.6 billion out of which Rs314.4 billion, or 47.2 per cent, will be allocated for general public services and debt servicing.

The budget is also expected to outline a series of incentives for the development of all sectors of the economy, with special emphasis on industry, agriculture, trade, tourism and plantations, besides increasing welfare expenditure for health, education and housing.

Meanwhile, the business community, representing the views of leading businessmen from 35 affiliated associations, has put forward proposals to optimise tax revenue and other measures to help various sectors, besides suggesting means to create a tax-compliance culture. They also urged the government to reintroduce the Investment Support Scheme introduced in 1984 but withdrawn in 1992 to boost the non-traditional export sector.

The uncertainty continues and the business community and others are hoping and praying that the current impasse will end soon.

The writer is Sri Lanka-based journalist