The log of phone calls listed at the Bond Commission shook Parliament yesterday with several UNP lawmakers, who were also members of the Committee on Public Enterprise that had investigated the controversial bond issuance, denying any illegal links with Perpetual Treasuries owner Arjun Aloysius, and calling for Parliamentary privileges to be safeguarded.
State Finance Minister Eran Wickramaratne this week said that budgets alone could not change the destiny of a country, insisting that there were many hard and soft factors involved in changing the ecosystem of an economy
Asian markets built on the previous day’s gains and headed into the weekend on a positive note yesterday as traders were buoyed by news that Donald Trump’s tax cuts had moved a step closer.
House Republicans pushed through a landmark overhaul of the tax system on Thursday, providing the
The Shangri-La Hotel in Colombo was ceremoniously opened yesterday by President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe, other ministers and officials from Shangri-La.
Testifying before the Presidential Commission of Inquiry on the controversial bond issuance yesterday, a CID official said that former Director of Perpetual Treasuries Ltd.
Sri Lanka’s economy is heading towards a tumultuous ride in the next three years as widespread policy uncertainty and macroeconomic imbalances will slowdown the economy, push up prices and scare away the investors.
According to an independent analysis by senior economist Prof. S.S. Colombage, Sri Lanka will overshoot the budget deficit consecutively during the three years to 2020, as fiscal slippage is inevitable, given the fragile revenues and unimaginable recurrent expenses.
Finance Minister Mangala Samaraweera last week presented his maiden budget and the third by the coalition government, which aimed at bringing down the fiscal deficit to below 4.8 percent and to bring it to further down to 3.5 percent by 2020.
But Colombage, based on his own computations, said the government would continuously overshoot the targets and record over 5.0 percent deficits as a result of the macroeconomic imbalances in almost all sectors of the economy.
“Future outlook is not very bright. I have calculated the average GDP growth of around 4.9 percent for the next three years from 2017 to 2020.
Exports to GDP will come down from 16 percent in 2017 to 13 percent in 2020 and the import to GDP ratio will remain around 25 percent. That means we will continue to run deficits in our current account of the balance of payment.
And the budget deficit is most likely to be over 5.0 percent of GDP from 2017 to 2020.
So, all in all, the macroeconomic imbalances will continue to remain in the near future. So, it will be difficult to attract foreign direct investments (FDI),” Colombage said speaking at the recently concluded Sri Lanka Economic Association Annual Sessions in Colombo.
Sri Lanka is undergoing a prolonged drought of FDIs and he questioned as to how the country could attract the investors amid these macroeconomic imbalances and corruption at ministerial levels.
Colombage’s bleak outlook of the economy is an unflattering verdict on the performance of the coalition regime, which has been in power for close to three years.
While calling the government’s medium-term economic policy ‘Vision 2025’ as a mere wish list, he said the government had not achieved much so far.
“The government has completed half of its term. I don’t know whether they will be re-elected.”
His doubts over the achievement of the fiscal deficit target is based on the fact that Samaraweera hasn’t made any attempt to support the Central Bank’s inflation targeting framework from the budget.
Thus, he suspects the budget will continue to pump excess liquidity into the economy fuelling inflation.
This happens when the government resorts to borrow from the banking system and more so from the Central Bank as printed money.
Budget 2018 targets to borrow as much as Rs.120 billion from the banking system, which accounts for about 18 percent of the budget deficit.
But Colombage expects the government to overshoot this amount.
In 2017, the government has borrowed as much as Rs.170 billion although the original estimated borrowings were only Rs.32 billion.
Ceylon Petroleum Corporation (CPC) officials of the were at fault for the recent fuel crisis faced by the country, the report of the Cabinet Subcommittee appointed by the President to investigate the issue, has found.
- Says his ministry nor industry stakeholders consulted
- “It is a wrong proposal and I am totally against it”
- Says would only allow it if foreigners willing to invest heavily
- But praises Mangala for presenting non-populist budget
Ports and Shipping Minister Mahinda Samarasinghe said he was broadsided by Finance Minister Mangala Samaraweera’s budget proposal to liberalize foreign ownership in the shipping and freight forwarding industries, which Samarasinghe said that he would not allow to take place unless foreigners invest heavily.
“I don’t know who proposed this from the Finance Ministry. It is a wrong proposal and I am totally against it. I will inform parliament. I will not sign this gazette. I don’t want to sign a gazette that will send over 500 local company owners and employees home,” Samarasinghe said during an interview on a state-owned television channel.
He noted that Samaraweera had not consulted with neither him nor the Ports and Shipping Ministry with respect to the proposed changes to remove the 40 percent limit on foreign parties to owning shipping agencies and freight forwarding companies.
“How can they amend a gazette issued by our ministry in 1992 without having discussed it with me? Who else can amend a gazette like this? The Finance Ministry cannot do that. If they do that, someone can file a case against it since by law, I, as the Ports and Shipping Minister, have the authority to do any amendment. Not anyone else,” Samarasinghe said.
The communication dynamics between the United National Party and Sri Lanka Freedom Party (SLFP), which form the national unity government—which the ruling politicians claim is positive for the economy—were also exposed during this interview. “This is a coalition government. The SLFP is part of this government. Therefore, if they are bringing a proposal like this and if an SLFP minister is in charge of that subject matter, they need to specially talk to the minister and his ministry.
But they did not do so,” Samarasinghe said.
He went on to say that Samaraweera had not discussed the planned liberalization with the industry stakeholders.
“We are talking about an industry that earns US $ 800 million in foreign income. This foreign income is all kept within the country. They also invest part of this income. These stakeholders should have been engaged but they had not been engaged,” Samarasinghe said.
He said that he had informed these viewpoints to Samaraweera immediately following the budget speech and that further discussions will take place with Samaraweera to convince him of the arguments made by the local shipping industry and the SLFP and to maybe allow foreigners to fully-own local shipping agencies only if there are big investments.
“If the foreigners can invest at least US $ 100 million, then I can tell the local industrialist that this is good for the country and that they should compete. Otherwise, I will not allow our local companies and industry to be strangled, destroyed and handed over to the foreigners,” Samarasinghe said although adding that foreign investments to the industry would most likely not be forthcoming.
However, Samarasinghe praised Samaraweera for presenting a forward-looking, non-populist, fundamentally strong budget to bring in foreign direct investments, which are required for the country’s development.
“Minister Mangala Samaraweera is an experienced and practical minister. He brought various bureaucrats and industries to the table and gave them leadership,” Samarasinghe had also said.
The finance minister, who had spoken at a post-budget forum, had said that although the shipping industry had informed him of their displeasure with the proposal, Sri Lanka cannot continue to be a ‘nanny state’ and the locals must compete with foreigners.
Seeking to fast-track payment from the $ 1.12 billion handover of the Hambantota Port, Cabinet has approved amending the Concession Agreement (CA) to revise the payment schedule between the Government and the Chinese investor and bring it forward, co-Cabinet spokesman Minister Dayasiri Jayasekara said yesterday.
- Finance Minister says cost of capital biggest barrier to small biz
- Says will also set up SME guarantee fund to lend without collateral
The government will allocate Rs.15 billion under the Budget 2018 to create a credit scheme for small businesses in targeted sectors, Finance and Mass Media Minister Mangala Samaraweera said.
The credit scheme will allow small businesses to borrow at a concessionary rate of 6.5 percent and in some cases as low as 3.3 percent. According to Samaraweera, the cost of capital is the biggest obstacle faced by small businesses when starting a business.
Along with the credit scheme, he said a Small and Medium Enterprise (SME) guarantee fund will also be set up to enable SMEs with sound business plans to access credit
“These new initiatives will change the entire landscape of Sri Lankan enterprises,” he said.
Sri Lanka requires technical and vocational training centres, as only a small number of students find places in state universities. Minister Samaraweera said it is important that the government also invests in the majority who are left behind, to enable them to stand on their own and contribute to the country’s economic development.
He said the archaic laws that restrict entrepreneurship will be amended and an enabling environment, particularly for small businesses, will be created.
“We are working with the German and Swiss governments to expand German technical schools, having 5 new schools around Sri Lanka.
The skill development programmes will be conducted in close collaboration with the private sector to ensure relevance,” he said.