Ranil says interim budget first step to ‘resetting system

Noting the dire state of the country at the moment, Prime Minister and Minister of Finance, Economic Stabilisation, and National Policies Ranil Wickremesinghe yesterday (7) said that Sri Lanka’s system needs to be reset, for which the first step is to present an interim Budget. 

“Our country is not working like a well-oiled machine. We are not sure as to what we should do first. This system needs to be overhauled. That is what we are doing now – resetting the system. The interim Budget is the first step in rebuilding the system. Once we have taken that step, we will implement a modern system and install safeguards that will protect us from future calamities. But to do all this, we need to restart the system,” Wickremesinghe said while speaking in Parliament yesterday. 

He said that the interim Budget is to act as the “foundation” for the economy, allowing it to “stabilise and recover”.

“The interim Budget will reduce unnecessary Government spending, while controlling other costs. We will also focus on revitalising many areas affected by the crisis. There is an urgent need to focus on many sectors such as the export economy, tourism, and construction.”

According to Wickremesinghe, the Government of Sri Lanka (GoSL) had informed the International Monetary Fund (IMF) that the focus should be on the economically weaker sections of the country, to which the latter had agreed. 

Thus, the interim Budget is to be drafted based on this and will include six key areas: A food security plan; an increase of the annual expenditure on the economically backward to $ 550 million from $ 350 million; a 100% write off of the loans of farmers’ with less than two hectares (ha) of land; a programme to grant free ownership of Government land to their residents; a programme to grant the ownership of urban flats to the occupants on a concessional basis; and a programme to grant 1,888 flats, donated by China, to the public for free. 

Expanding on the proposal to completely write off the loans obtained by farmers’ who own less than two hectares of land, Wickremesinghe noted that as a result of the fall in the agriculture industry, farmers are not in a position to repay loans whilst continuing to farm and feed their families. 

“We know that farming families who cultivate paddy on small lands are in a very precarious position,” he said. 

Citing a recent study by the World Food Programme (WFP) which found that 73% of participating households had reduced their diet and food intake owing to the crises in the country, the Premier also said that it is the responsibility of the Government to ensure that food is provided to the people without a shortage. “When the Cabinet of Ministers gathered on Monday (6), we decided that we will, if required, provide meals free of charge for those who are unable to afford meals. Everyone should have three meals a day. That is our responsibility.”

He said that $ 5 billion is needed to ensure that daily life continues without disruption in the next six months, while an additional $ 1 billion is needed to strengthen the Sri Lankan rupee. “That means that we need to find $ 6 billion to keep the country afloat for the next six months.”

“The United Nations (UN) has arranged for a worldwide public appeal tomorrow (9). They are seeking support to provide humanitarian assistance to Sri Lanka. Through this project, they plan to provide $ 48 million over a four-month period to the food, agriculture, and health sectors,” said Wickremesinghe. 

He commented on the need to rebuild relations with friendly countries, especially Japan, China, and India, as they are now broken, despite “always having been strong”.

 “Japan is our long time friend. A nation that has helped our country greatly. But they are now unhappy with us due to the unfortunate events of the past. Our country had failed to formally notify Japan of the suspension of certain projects. Sometimes, the reasons for these suspensions were not even stated. According to the reports submitted by an individual, some projects undertaken by Japan in our country have been halted midway through. Japan and India had agreed to supply us with two liquefied natural gas (LNG) power plants. The Ceylon Electricity Board (CEB) stopped those two projects without any justifiable reason. Japan had agreed to provide about $ 3 billion worth of projects to our country by 2019. All of these projects were put on hold for no reason. I urge the Parliamentary Committee on Public Finance (COPF) to conduct an inquiry into the suspension of such valuable projects granted to us by our long-time allies for unstated reasons,” he said. 

Furthermore, he said that the GoSL has requested China to reconsider the condition in a recent loan obtained through the swap facility which states that Sri Lanka can only use it if the country has three months of foreign reserves. 

“We have not had foreign exchange reserves for three months since the loan was taken. Our former officials took loans to deceive the country. We will not be debt-free under that condition. We have requested the Chinese Government to consider removing that condition from the agreement that has been signed with them. We urge the Chinese Government to look into the matter favourably.”

He further called on the IMF to host a conference to help unite Sri Lanka’s lending partners, adding that such a conference under the leadership of India, Japan, and China would be a great strength to the country. 

Wickremesinghe also commented on food security in the coming months. 

“Our harvest has declined in the past several months. We have to face this situation and we have to work hard from this point onwards to ensure that the next harvest is a success. That harvest, however, will be available by the end of February, 2023. In terms of rice, our country’s annual rice requirement is 2.5 million metric tonnes (MT). But we have only 1.6 million MT of rice in stock.  We need to import food items to meet our daily requirements which would cost about $ 150 million a month.”

He thanked various international assistance programmes and donor countries who have stepped up to provide the healthcare sector with necessary medicines and equipment for the next six months. 

“We are currently in talks with the IMF. Our discussions are based on our future economic plan. Accordingly, the year 2023 will see us face all the challenges. We need to achieve economic stability by the end of this year. Then, by 2024, we will have the opportunity to create economic stimulus through financial stimulus. By 2025, our goal is to balance our budgets or create a primary surplus. This economic programme must continue to move towards this long-term goal.” The Morning

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