Sri Lanka Budget 2011

Skimming through Sri Lanka budget speech;

-I undertook a Pre Budget Review of all 25 districts and provincial level work. I wish to share some evidence of progress. Sri Lanka’s poverty which was 15.2 percent in 2006 has declined to 7.6 percent in 2010. Most important development is that poverty in rural areas has declined from 15.7 percent to 7.6 percent while in the estate areas, it has declined from 32 percent to 9.2 percent. We will direct our strategies to reduce poverty below 5 percent within the next 5 years...

-All island unemployment which was 7.2 percent in 2005 has dropped to 5.8
percent by 2009. In addition, earnings of our farmers and the labour force have increased. In 2005, farmers could not secure even Rs.10 for a kilo of paddy they produced. We managed to maintain it in the range of Rs. 24 – 28 per kilo.

-Our country is ranked first in the world in the health and survival indicators, sixth in the political empowerment indicators and among the top 20 in the world in gender equality indicators as well as a location attractive for outsourcing. Our performance in education and health is above average.

-The export potential of value added, branded exports has been estimated in excess of US$ 5 billion over the medium term.

-Tourism should be a billion dollar business. Although
tourist arrivals have picked up and expected to be around 600,000 this year, earnings from tourism shows only a moderate increase. This is largely because the industry as a whole is underpriced. Therefore, I propose to impose a levy of US$ 20 per bed on all five star hotels which charge a room rate that is less than US$ 125 per night from January 2011 in order to compel all hotels to charge better rates.

-We must get ready to facilitate 2.5 million high spending tourists by 2016. Tourists must see our richness and diversity. Over the next few years the capacity of this industry need to be tripled from the current level of around 15,000 rooms.

-Sri Lanka is fast emerging as a niche global destination attracting outsourcing of IT and BPO services. It has become the fifth largest exporter. At present, the country is ranked seventh among the 50 best emerging global cities that attract outsourcing...The Government has launched various programs to increase ICT literacy to 75 percent by 2016.Our aim is to make this industry a US$ 2 billion export activity by 2016.

-our key goal in this decade of development is to improve our productivity by 5-6 percent per annum.

-SriLankan Airline and Mihin Lanka will be expanded with new aircrafts to increase the fleet to 30 by 2012. I propose to exempt SriLankan and Mihin Lanka from all taxes for a period of 10 years to strengthen the two enterprise

-nearly 3 million Sri Lankans are engaged in overseas employment.
The remittance income to the country is expected to be nearly US$ 4 billion this year. However, there is no proper social security system for these people when they reach old age. Therefore, I propose to set up an Overseas Employees’ Pension Fund (OEPF).

-My attempt in this Budget is to sustain our achievements and manage future risks in our economy. We have achieved an economic growth rate of near 8 percent. Inflation has stabilized at around 6 percent. Poverty has come down to 7.6 percent and unemployment to 5 percent. These are all achievements within 5 years. This argues well in favour of our development strategy. The Central Bank has built up US$7 billion reserves. Our banking system has a further US$ 1.5 billion. So the economy has sufficient external assets. All these are achievements that all of us must be proud of. A low rate of inflation of around 5-6 percent, economic growth rate of around 7-8 percent and a society free from poverty are our medium term targets.

-raising income beyond US$ 4,000 per capita is not the only objective in our strategy. People need equitable opportunities to enjoy such high income.

For Discussion: How do you rate this budget speech?

Related:
Budget Speech 2011

2011 budget to introduce fiscal reforms

"The 7.5 percent budget deficit target should be achieved comfortably
as the expenditure would be the same like last year and the revenue is
picking up," Jayasundera said. He said economic growth would be close
to 7 percent, as earlier forecast.

"The reserves are more than the IMF target. I am optimistic of the IMF
releasing both the third and fourth tranche together," he said.

Jayasundara said he expects tourism revenue to grow to $1 billion
annually from its present $400 million, and foreign direct investment
to boom to $1.5-2 billion annually from around $600 million now.

He said foreign investment inflows should put upward pressure on the
rupee currency. "I see a higher probability for appreciation than
depreciation," he said.

The six areas where the budget speech has to deliver

Core public goods are international relations, defence, police and judiciary. These are the foundations of civilised existence. They are pure public goods in that everyone benefits when these are done properly. When law and order conditions are good, a new born child benefits from these without imposing any new cost upon the country.