116% rise in 1Q Govt. revenue to Rs. 317 b exposes President, Treasury Secy. claim of no funds for LG polls

President Ranil Wickremesinghe

Treasury Secretary Mahinda Siriwardena

The Inland Revenue Department’s (IRD) jubilation of 116% year-on-year rise in Government revenue in the first quarter to Rs. 317 billion has raised questions over bleak status claims previously by Treasury Secretary Mahinda Siriwardena and President Ranil Wickremesinghe as among reasons why funding cannot be allocated for the conduct of Local Government (LG) polls as scheduled in March.

The IRD on Monday proudly announced the doubling of Government revenue in the first quarter to Rs. 316.6 billion from Rs. 146.5 billion a year ago and attributed it to higher and new taxation along with enforcement. (See https://www.ft.lk/top-story/Govt-revenue-doubles-to-Rs-317-b-in-1Q/26-747674)

The massive haul comes hot on the heels of sharp gain in Government revenue in 2022. In the first nine months last year, Government revenue rose by Rs. 484 billion to Rs. 1.8 trillion as against the corresponding period of 2021. Government expenditure rose by only Rs. 378 billion to Rs. 3.4 trillion.

The robust tax collection is despite the economy in 2022 suffering its worst contraction of 7.8% whilst forecast for 2023 is a 3% decline.

However, on 23 February President Ranil Wickremesinghe told Parliament that there are no funds to hold elections whilst there is no election even if the Treasury had funds. 

This bizarre statement by the President was despite Opposition, civil society and international community calls to hold LG polls as scheduled. Estimates were that holding LG polls would cost around Rs. 10 billion.

In mid-January, Cabinet Co-Spokesman and Minister Bandula Gunawardena bemoaned how President Ranil Wickremesinghe during a Cabinet meeting spoke of challenges. (See https://www.ft.lk/top-story/Govt-paints-doom-and-gloom-ahead-of-mini-polls/26-743958).

Gunawardena said the Treasury is faced with a severe depletion of funds, and it is worse than what was anticipated.

“The potential income that may be earned through taxes in the first three months from January to March 2023 will be greatly reduced due to the adverse economic impacts of the ongoing economic crisis of last year and reduced tax income,” Gunawardena said.

In mid-February Treasury Secretary informed the Election Commission that it is facing difficulties in providing the necessary funds requested to hold the upcoming Local Government polls (https://www.ft.lk/front-page/Treasury-tells-EC-no-cash-for-LG-polls/44-745466). 

Citing the National Budget Circular 01/2023 issued in February by the Ministry in a bid to curtail Government expenditure, Siriwardana said disbursement of funds has been limited to only essential services and any other expenditures that are considered non-essential must be approved by Finance Minister and President Wickremesinghe.

Notwithstanding Siriwardena's claims, the Supreme Court on 4 March issued an interim order on the Finance Ministry Secretary to not withhold funds for LG polls following a petition filed by the main Opposition Samagi Jana Balawegaya.

In mid-March Government Printer said she had not received a reply on her request for funds to print ballot papers. (See https://www.ft.lk/news/LG-polls-in-limbo-as-Treasury-fails-to-release-funds/56-746227). The Government Printer Gangani Liyanage has put forward an estimate of Rs. 200 million as the initial cost of printing material required for the Local Government poll. The total cost for printing ballot papers and other materials is an estimated Rs. 400 million. State Minister of Finance Ranjith Siyambalapitiya also told the media that providing funds to hold the vote could possibly create yet another crisis situation in the country.

However, on his part President Wickremesinghe in his address to Parliament on 23 February defended the State officials who failed to provide funds or support the ECSL in holding polls. He said as elections have not been declared in a legal manner, if the requested money had been given, he would have been forced to remove the Treasury Secretary and make a complaint before the Police against him. “The same will happen to the Government Printer too. They all will lose their jobs,” he said.