No more space for cuts to healthcare, education – CB
Sri Lanka is at the point where it must intensify tax collection efforts, as there is no more space for spending cuts, which have historically targetted areas such as healthcare and education, according to the country's Central Bank Deputy Governor Nandaal Weerasinghe.
He also said that, even if one were willing to pay taxes, the process was so overly complicated that it was not conducive to improving collections. As such, a simplification of the tax system, in addition to broadening the tax base, to reduce over-independence on indirect taxation, as well as minimising exemptions and strengthening administration, was the Central Bank's recommendation to whichever government was incoming, for better revenue generation.
Speaking at a recent discussion entitled "Post- War, Post- Election: Is the Sri Lankan economy ready to make the much-needed break?", organised by the Ceylon Chamber of Commerce in Colombo, Mr. Weerasinghe also commented that, following the country's recent rebasing initiative, it would be a challenge to see 6 per cent GDP growth based on the numbers being seen now.
Adding to this, he also noted that it would be a mistake to compare these new estimates with previous ones, as both used different bases. He also signalled that this re-basing was a technical exer- cise that stretched back to 2011, which the IMF had advised. However, he indicated that it took longer than was expected, but was important because it took account of new and emerging sectors, not represented in the previous 2002 base year.
Commenting further, Mr. Weerasinghe also revealed that the number that the Central Bank was mainly concerned with was the budget deficit, which had increased marginally, to 5.7 per cent, from 5.4 per cent the year before. He also said this was not so bad when compared to what was seen in other, similarly categorised countries. On the other hand, it also emerged that Sri Lanka's GDP to Debt ratio was at around 72 per cent, which was worse than others.
In addition, he stated that the Central Bank was not so concerned about the monetary policy part, as they were confident they could maintain low inflation as well as low interest rates going forward.