Sri Lanka introduced an Interim Budget on Tuesday (30), in order to counter the economic crisis.
The following are some of the key points in the Interim Budget 2022 presented by President Ranil Wickremesinghe, in his capacity as the Finance Minister of Sri Lanka.
The purchase of fossil fuel-based vehicles for the public sector will be suspended hereafter as a government policy.
As per this policy, only electric-powered vehicles will be purchased for the use of the public sector in the future and the private sector will also be encouraged to use electric vehicles.
In purchasing vehicles for the public sector, suitable categories of vehicles are decided on the basis of the efficiency and prices of the vehicles. This proposal will be implemented step by step and will be completed by 01st January 2026.
Manufacturing of electric bicycles should be encouraged as a local industry with a view to reducing fossil fuel consumption.
Therefore, tax concessions will be provided for imported accessories/parts required in the manufacture of electric bicycles locally with more than 50 percent value addition.
Provide an additional monthly allowance of Rs. 2,500 for pregnant mothers in addition to Rs. 20,000 already provided for them.
About 61,000 food insecure families, which need urgent assistance will be provided Rs. 10,000 per family for a period of further four months.
A subsidy will be awarded to owners of small boats which are used for the fishing industry and for those in plantation areas that have no electricity services, due to the recent increase in kerosene prices.
The monthly Samurdhi allowance has been increased to an amount ranging between Rs. 5,000 to Rs. 7,500 per month for approximately 1.7 million currently Samurdhi receiving families.
An assistance of Rs. 5,000 was provided per month temporarily to around 726,000 families who were on the waiting list for expecting Samurdhi benefits.
The allowance paid for the elderly, disabled, and kidney patients was increased to an amount ranging from Rs. 5,000 to Rs. 7,500. Further, the temporary assistance of Rs. 5,000 was arranged for the people who are on the waiting lists in anticipation of receiving this assistance.
“National Food Security Programme” to be introduced covering broad areas, including the enhancement of production, collection, storage, and distribution of food, as well the provision of food to those who do not have the capacity, to ensure food security and implement the same as a national priority.
The number of paddy farmers with 2 hectares or less who are in repayment arrears of cultivation loans given by the state banks as of 31.05.2022 due to the decrease in harvest, lack of fertilizers, agro-chemicals and inputs, abandonment of cultivation, etc., was 28,259. Aimed at strengthening the farmers and freeing them from debt burden, actions are being taken to write off the outstanding loan amounting to Rs. 688 million (excluding interest) which is currently in default to the state banks. The money to be written off will be paid back to the respective banks in two years in a phased manner so
as not to put added pressure on the cash flow of the General Treasury.
VAT will be increased to 15 percent from the current rate of 12 percent with effect from 1st September 2022.
Compulsory tax registration for all residents who are above 18 years of age without considering their annual income and tax-free thresholds.
An online revenue collection programme should be implemented in all local government authorities before the end of 2022.
Reduce the retirement age of public sector and semi-governmental employees to 60 years.
Earlier, the government decided to raise the mandatory retirement age of public sector employees to 65 years and that of semi-governmental employees to 62 years.
Those who have been employed beyond 60 years of age at present in the government and semi-government sectors will be retired as of 31.12.2022.
State Owned Enterprises:
It is proposed to establish the “State-Owned Enterprise Restructuring Unit” to facilitate the restructuring of government-owned business entities, and to allocate Rs. 200 million to implement this proposal.
Re-activate the Statement of Corporate Intent (SCI) process for key 50 SOEs, excluding CEB, CPC, and Sri Lankan Airlines, as they are under different efforts to restructure, to closely monitor the set targets.
A committee consisting of three government officials including the Controller General of the General Treasury will be appointed to supervise and implement the entire process of the disposal of scrap materials accumulated in public sector institutions.
Allotment of 20 percent shareholding in state banks to the depositors and staff of those banks
• In order to meet recapitalization requirements borne out due to increasing in interest rates, rising NPLs, loan settlement issues faced by businesses due to economic crisis, and liquidity issues faced by the state banks, it is proposed to allow 20 percent of shareholding of the Bank of Ceylon and People’s Bank by their depositors and staff.
• It is noted that the government’s ability to provide additional capital at this stage to the state banks is very limited given the lack of fiscal space.
Debt & Debt Management:
An independent National Debt Management Agency (NDMA) will be set up to pay special attention to the management of public debt.
The government debt management-related activities are carried out by the Central Bank of Sri Lanka, External Resources Department, National Budget Department, and the Treasury Operations Department at present.
A national agency named the National Agency for Public Private Partnership will be established for the purpose of identifying and facilitating investment to be undertaken in partnership with the public and private sectors, and it is proposed to allocate Rs. 250 million for the implementation of this proposal.