Reforms and relief Budget today

President and Finance Minister Ranil Wickremesinghe putting final touches to 2023 Budget to be presented in Parliament today at 1.30 p.m.

• Rs. 500 b defence expenditure and new tax proposals come under fire by experts

President and Finance Minister Ranil Wickremesinghe is widely expected to unveil a reforms and relief Budget 2023 today in Parliament at 1:30 p.m.

Though most of the revenue measures were announced in the interim 2022 Budget in August, analysts expect the President to unveil a raft of further measures today aimed at ensuring stability as well as growth amidst the most challenging circumstances in the history of the country.

The country in April declared bankruptcy on external debt whilst the public debt has been declared unsustainable. The Budget 2023 is also presented amidst 80% of the depreciation of the Rupee, high interest and inflation rates and an envisaged 8-9% contraction of the economy in 2022 and next year.

Last week, the President told Parliament that the Budget 2023 will incorporate most of the measures aimed at achieving the goals enshrined in the upcoming support program worth $ 3 billion of the International Monetary Fund (IMF).

Relief to the poorest and most vulnerable segments of the society is also expected amidst a raft of measures to boost Government revenue which had fallen to 8% of GDP.

The ambitious Inland Revenue Amendment Bill was subjected to litigation by multiple parties and the Supreme Court is expected to give its ruling within this week.

Some analysts opined that the revenue measures were impractical and not equitable hence the Government will fall short of targets.

At a webinar organised by the Daily FT and the International Chamber of Commerce on Saturday, a host of professionals and business leaders opined that in 2023 enterprises and people are bound to make less money hence less tax revenue for the Government. Higher taxation proposed especially on the export sector came under heavy fire as well.

It was pointed out that the new tax regime proposed will not boost exports nor much needed Foreign Direct Investments (FDIs).

Though announcing slew of measures to boost revenue, the Government’s failure to immediately and drastically tackle the problem of a bloated public sector and high State expenditure came under fire, especially the Rs. 500 billion envisaged defence expenditure. 

“This (defence expenditure) is the elephant in the room,” said PriceWaterhouseCoopers Sri Lanka Managing Partner Sujeewa Mudalige at the webinar who alleged that the private sector lacked the spine to demand the Government to reduce the colossal defence expenditure which is around 10% of govt expenditure.

Recurrent spending in 2023 is listed at Rs. 4.6 trillion in the Appropriation Bill with interest payments seen making up 36.5% of that expenditure. That would amount to Rs. 2.1 billion rupees in interest payments, a 55% jump on 2022 levels. Total spending is expected at Rs. 5.9 trillion in 2023, with capital expenditure likely to make up 20.9% of that total.

Parties backing President Wickremesinghe as well as the Opposition have vowed not to approve the Budget if it fails to give relief to the people prompting political analysts to term the 2023 Budget will be the litmus test to Wickremesinghe.

In a statement, the President’s media office said Wickremesinghe in his capacity as the Minister of Finance will present the 2023 Budget aimed at creating long-term, stable economic growth.

The 2023 Budget has given special attention to the sectors of the capital market, export market, labour market, and digital economy and it is expected to achieve the budget targets through the social market economy.

This year’s budget will focus more on providing social welfare benefits to the people who need them most and creating a policy environment to build the private sector as the driving force of the country’s economy.

Through the 2023 Budget, the process of building a new economy tailored for the new world has been initiated aimed at creating a program to ensure a decent country for the youth.