Sri Lanka: Country is not facing a ‘massive economic crisis’ - Minister Siyambalapitiya
Friday, 20 June 2008
Ranjith Siyambalapitiya, Deputy Minister of Finance, making a special statement in Parliament today (June 20), said that contrary to claims made by certain quarters, there is not massive economic crisis in the country.
"While it is true that Sri Lanka has certain challenges before her in view of certain trends that have emerged globally and also within the country, we have still managed to maintain an economical growth rate of 6.5-7.0% continuously for three years and this has never been achieved since Independence.
"Unemployment is an issue is gradually being resolved and today has come down to 6%. We have managed the economy in such a way that the exchange rate has stabilized between Rs.107-108 per dollar. The interest rate of Treasury Bills has come down to 17%. We expect commercial interest rates also to come down correspondingly.”
He said that all this has been achieved despite the heavy challenge country facing both locally and internationally.
He explained that the increase in the inflation rate is due to a global phenomenon and added that prices of food have gone up internationally simultaneously with the fuel prices.
"This is a global trend, the food prices have gone up in 42% and the respective charges for 'Goods and Services' have increased in 11%," Minister added.
"I must mention that the rise in the cost of living is not due to any policy errors. We have to keep in mind that fuel and food prices have risen globally. There is a limit to what a Government can do in cushioning external shocks. We can offer subsidies. This is only temporary relief. Where does one find the money? We have to increase taxes. If this option is put aside, we have to borrow. This only adds further inflationary pressure.”
Minister Siymabalapitiya elaborated that Sri Lanka being a small nation has only a limited role to play in controlling the burden that occurs due to external factors. "Price control" and "providing commodities at a compensated price" are the two methods that the Government can adopt into in order to reduce the public burden immediately, the Minister said.
"These two systems have adverse impact on a country's economy, 'price control' can lead to a scarcity of foods in the market while 'compensating' is only a short-term remedy," he said.
"If the fuel prices were not revised, the Treasury will have to bear a loss of Rs. 49 billion, indicating high inflation rate and creating a towering budget deficit. Benefits of the 'fuel subsidy' are enjoyed by the high income earners," he clarified.
"Tax earned through Petrol is utilized to subsidize Diesel and Kerosene Oil," he added.
The Minister went onto say that the Government has taken additional measures (both short term and long term) to face the challenges of the soaring fuel prices. He said that the lack of extended storage facilities for fuel is also a key contributor to this situation.
Minister Siyambalapitiya said that several steps have been taken to bring down the prices of rice including the subtraction of existed levy of Rs. 20/= per rice kilo on rice importation.
"Rice is now being imported and the Government has imposed restrictions on rice exports. All these measures are taken to ensure sufficient stocks of rice at the local market and bring the prices down to an affordable level" Minister added.
Speaking about the achievements of the country in the during the past few years with relates to the reducing of poverty level Minister Siyambalapitiya said that poverty which stood at 22.7% in 2002 has now come down to 15.2% by the year 2004.
He said that accordingly the country has stepped into the path of achieving the expected Millennium Development Goals by the year 2015 to halve poverty.
"The Government has increased the allocations for rural development five-fold in 2007 withRs.15,000 million being set aside for the fertilizer subsidy," he said.
"Prompt action has been taken to probe the massive VAT fraud that occurred during the 2002-2004 period while new legislative and administrative provisions to prevent the occurrence of such incidents in the future have also been initiated."
The Government is tagging only a single taxation system on 10 imported essential commodities excluding the previous system of taxation, which has resulted in a loss of Rs. 5 billion to the Government.
(Courtesy : Department of Information )
Last Updated ( Monday, 02 February 2009 )