Eran says Budget 2022 will be decisive to remain attractive for foreign investors

• Claims economy on verge of collapse, if Govt. fails to win confidence among global community

Given the bleak overall economic outlook, SJB Parliamentarian Eran Wickramaratne said Budget 2022 would be decisive for Sri Lanka to remain attractive to foreign investors.

“Given the economic woes and poor economic management, it is going to be a difficult task for the Finance Minister to establish foreign investor confidence. The country is really on the verge of disaster if we are unable to establish confidence among the global community,” he told journalists on Friday.

He said the entire country was keen to know what Finance Minister Basil Rajapaksa, who assumed duties in mid-July, promising to deliver economic growth and prosperity to the people, has to offer in his maiden Budget on Friday (12).

Wickramaratne emphasised that the Government needed to implement fiscal consolidation by removing the barriers on the path to attracting Foreign Direct Investments (FDIs), whilst exploring new export markets and products and encouraging technology to improve SMEs, agriculture and productivity, rather than opting for quick fixes to put the economy back on track.

He said the Government was grappling not only to defend the rupee against depreciation but also to save depleting foreign reserves, needed to import essential foods and other items. 

“How is this Government going to overcome this problem? The Budget should be preceded with major policy reversals by ensuring that there is law and order and all contracts and agreements are in line with international treaty obligations,” he said.

He also said the current foreign reserves were enough only to meet a little over one month’s import needs. “This is very concerning and a dangerous economic status. The rating agencies during the past one-and-a-half years have downgraded Sri Lanka’s rating and the latest was Moody’s, with the long-term foreign currency issuer and senior unsecured debt ratings down from Caaa-1 to Caaa-2,” he added.

Net reserves in the country have drastically dropped to a mere $ 2 billion from $ 7.6 billion when the Yahapalana Government was defeated in 2019.

He said the adverse impact made in the international arena by refusing to implement UNHRC conditions has resulted in the EU Parliament and other trading partners already showing displeasure over the fundamental policies of the Government.

Wickramaratne added that the Government had already messed up economic management and the spread of COVID, and should wake up from its slumber, acknowledge its blunders and reverse policy to bring about change.

“During our period in office, we focused on fiscal consolidation and systematically brought it down to 5.5% of GDP from 7%. The mid-term goal was to bring it down to 3.5%. We brought in reforms to revenue with a new Inland Revenue Act. As a result, we saw tax revenue going by to 12.5% from 10%,” he said. 

Wickramaratne also said that inflation had been rapidly rising and people were finding it extremely difficult to meet their daily expenses because there had been no salary increases since those that were last given during the Yahapalana Government. 

“Now the prices are skyrocketing, but there are no salary increases for anyone – be it in the public or private sector. Another salary increase which had been proposed by the Yahapalana Government to be effective from January 2020 was also suspended by the current Government with a promise to implement it from January 2021. That was not implemented and as a result, public servants inclusive of retired war heroes have filed FR petitions to get their rights restored, which were deprived by this Government,” he claimed.

“The Government curtailed imports to boost the manufacturing economy and the agrarian economy, but now it has completely reversed the decision and removed price controls on a number of essential commodities, allowing price hikes as well,” he claimed.

Wickramaratne said that the way things were taking place in a haphazard manner implied that there was no Government in the country.

“Former Finance Minister late Mangala Samaraweera took progressive measures which resulted in increased Government revenue. But due to the wrong economic policies pursued by the current Government, including the massive tax exemptions, the country’s economy collapsed even before the outbreak of the COVID pandemic. Government revenue which was around 13% of the GDP in 2010 increased to 13% in 2019,” he said.

“Although the country was ruled by gazettes, today there is a regime that reverses them as fast as gazettes are issued. All controlled prices have been removed from 3 November and all previous gazettes that stipulated Maximum Retail Price (MRP) on essential goods have been withdrawn. Now the Government’s economic pundits and professors have begun to say that they were unable to maintain MRPs for essential goods due to unprecedented global economic supply constraints,” he charged.

Against this backdrop, Wickramaratne said the Government had not come up with any solution to manage the ever-increasing commodity prices. 

“Just before the Budget the import levy on a kilo of rice was reduced from Rs. 65 to 25 cents.  Even when the sugar tax was reduced to 25 cents, the benefits were not passed on to the consumers, but the cronies who imported them into the country gained an undue profit up to Rs. 16 billion, depriving the State of revenue. The reduction of the levy on imported rice, if not passed on to consumers, will also give the same benefits to the importers,” he warned.