Micro, Small and Medium industries grouping says Budget is well-planned cosmetic exercise

• Lacks strategy, direction and coherence, opines Confederation of Micro, Small and Medium Industries Sri Lanka
• Little prospect of achieving financial stability and fostering economic recovery
• Uncertainty looming over MSME sector

Confederation of Micro, Small and Medium Industries Sri Lanka (COSMI) President Nawaz Rajabdeen

Confederation of Micro, Small and Medium Industries Sri Lanka (COSMI) President Nawaz Rajabdeen yesterday said the Budget 2022, although presented in extremely difficult and exceptional circumstances, it lacks smart

thinking, touch of ground realities and is seen largely as a cosmetic exercise in desperate times.

“It is the very circumstances that made 2022 Budget onerous, such as the sharp revenue shortfall, rising expenditure and excess money printing, etc. that should have been effectively addressed rather than taking a political and unscientific approach towards addressing them. The Government must take the ‘bull by horns’,” the veteran Chamber Chief said.

“We do not see the key-most challenges such as the rising unemployment and poverty, threatening food security, widening trade deficit and fast declining foreign reserves have been effectively addressed with a clear strategy in the Budget 2022. The pre-Budget market confusion and economic uncertainty is further aggravated in the post-Budget context.

“Where the MSME sector is concerned a number of isolated interventions have been taken although there cumulative impact on the economic consolidation is not quite clear. This is not a period for experimentation of numerous economic theories and models rather a period for urgent action of the widely accepted, logical and practical solutions and strategies.” The long-term and sustainable way of getting out of this economic mess is the gradual shifting towards a production-oriented economy from an import substitution economy. Shifting into organic agriculture, though it is the right direction in the long run, needs carefully designed phasing out strategy for each crop sector unlike the sudden withdrawal of chemical fertiliser implemented by the Government. 

The shortage of agricultural produce will have far-reaching long-term economic consequences right across all sectors of agro-based industries, tourism and hotel industry and many other related sectors further aggravating the economic wounds of the nation.

A number of direct and indirect taxes introduced by the Budget 2022 could add to short-term market confusion and could further add to the rising cost of production making Sri Lankan products and services uncompetitive in the export market, making it more difficult for the export sector. 

The MSMEs are particularly concerned that the new tax imposed on the banks could finally be passed on to the end customers by some way or the other, making the hard-hit MSMEs further vulnerable in their day-to-day struggle for existence.

“Import restrictions due to foreign currency problems have created shortages of industrial raw materials further affecting the industrial production base in the MSME sector. So the MSMEs are particularly in a big dilemma leaving them not many alternatives to try out in sustaining their production processes,” said Rajabdeen.

“The Government needs to understand that desperate and ad-hoc measures could backfire making the economy more vulnerable and desperate. Unless the fundamental problem of fiscal consolidation is addressed, the economy will continue to be highly unstable,” Rajabdeen added.