The Hon. Harshana Suriyapperuma - Deputy Minister of Finance and Planning

¶ 01 Madam Deputy Chair, when presenting views on the Budget, we expected the Hon. Member in charge of Opposition finance and economic policy to present a more robust analysis. Unfortunately, we heard a speech filled with accusations and confusion. He tried to cite examples involving religious places—temples and churches. But you know the people rejected the culture of politicians taking offerings. The people have given us a mandate to take the country on a new path with a qualitative model of governance. We saw Hon. Harsha de Silva groping for our model, switching North and South and trying to stick labels. But we also clearly saw the people affix a label to them: failed rulers who destroyed the country and bankrupted it.

¶ 02 He also said Sri Lanka has become the country paying the highest interest on international debt. Perhaps he has forgotten: that country was created by you. In 2015, during your governance, you raised the largest amount of commercial debt at the highest interest, trapping the country in a massive debt snare. Using those very analyses and principles you speak of, you bankrupted this country. Therefore, instead of those runaway models, this Government has prepared this Budget according to a methodology suited to a new society, to the economy, and aligned with the direction the world is taking.

¶ 03 Madam, the Budget is based on the fundamental of growth facilitation. Considering the importance of consistency and continuity, businesses are able to forecast and plan for the future. These are important fundamentals and principles allowing businesses to invest to expand the production capacity of the economy, particularly to support local value addition for our industries to ensure that we support our SME sector to reach out to their maximum potential.

¶ 04 An Hon. Member from the Opposition during his speech mentioned that there is a lack of support for the SME sector in the Budget. I will take a few examples. There are over 24 references to the SME sector in the Budget Speech relating to facilitation, both in terms of policy and financial assistance, facilitation through financing. I will refer to a few of them starting from page 9 of the English Text of the Budget Speech: formulating the national export development plan, introduction of National Tariff Policy for removal of limitations to access high quality markets, strengthening the network of Free Trade Agreements, expansion of export-oriented investments, leasing out underutilized State-owned lands for productive economic activities with SME participation, introducing new laws to ensure effective implementation of the one-stop-shop concept, expanding the activation of the process for new insolvency law, providing required technical and financial assistance for exporters and importers to obtain quality testing and certification, which is a burning issue for both importers and exporters, a development bank for the SME sector to improve SMEs' access to finance and the establishment of a new administrative structure within the existing banking mechanism.

¶ 05 Then, if you consider financial allocations from the Budget, for Innovation Invention Fund, Rs. 1,000 million is to be allocated. Underutilized lands managed by State institutions will be identified for private investments with Rs. 250 million allocated including for SMEs; for the producer co-operative society for youth entrepreneurs, the financial incentive is Rs. 100 million; for youth entrepreneurship development in agriculture targeting youth-led, agro-based SMEs and startups, Rs. 500 million would be allocated; for the improvement of Dairy Value Chains, the allocation is Rs. 2,500 million; for promoting high-yielding coconut seedlings mechanism, Rs. 500 million; for trade promotion programmes, particularly for Ceylon cinnamon, Rs. 250 million; for establishment of freshwater related industries, Rs. 200 million and particularly for the SME Line of Credit Project, Rs. 6,868 million. Likewise, the list goes on.

¶ 06 Madam Chair, that indicates that adequate and detailed attention has been paid for these sectors to facilitate a production economy. Through this we emphasize that a very large sum is allocated from this Budget to encourage small and medium entrepreneurs. In addition, a special programme is proposed to develop the country’s industrial zones. With this, we will steer the country to a production economy and have prepared rapid measures to take that programme forward.

¶ 07 The Budget has been prepared on the basis that no one is left behind, particularly the vulnerable segments of the society. Children, the disabled and other segments of the society have been identified and adequate provisions have been made to allow them to connect to economic activities. The Budget has been based on strategies such as budget deficit reduction, Government expenditure management, particularly the reducing of wasteful expenditure of the Government and revenue enhancement measures relating to the Sri Lanka Customs, the IRD and the Excise Department of Sri Lanka. When you consider the Sri Lanka Customs, sufficient allocations have been made to ease congestion in cargo clearance by acquiring new scanners and developing new container yards. That is, once again, to ease the congestion. All that is to ensure the production economy is facilitated and the system functions smoothly.

¶ 08 Then, effective debt management mechanisms have been put in place. Currently, the SriLankan Airlines' final debt negotiation is underway with the identified parties; proposals are to be handed over. Once it is finalized, we expect the ratings of Sri Lanka will further improve. That is the expectation of the Government.

¶ 09 The Budget has allocated for investment in human capacity development, particularly for a healthy society. Early childhood development and various other sectors have been identified and adequate funding has been allocated. Creating equal opportunities for everyone is a fundamental aspect. For providing necessary assistance for students, scholarship increments, for vocational sector students, the Mahapola Scheme, to grant opportunities in high-ranking universities for students who have achieved higher scores or made educational achievements and for development of the sports sector, several allocations have been made in the Budget. Economic expansion is expected through investment facilitation of export-oriented industries. The Investment Protection Bill would be targeted and developed for this purpose.

¶ 10 The Trade National Single Window is expected to be expedited. Interim solutions will be provided to those industries and institutions. The digital economy is prioritized in this process through the UDI mechanism and the digital payment infrastructure. We provide opportunities to the people or communities in the remote areas of Sri Lanka to get connected to the national economy.

¶ 11 The SME ecosystem, as I mentioned, and the Credit Guarantee Scheme are to provide opportunities for businesses to borrow from the financial system without collateral. Instead of placing assets as collateral for their business activities, a mechanism is proposed for SMEs to obtain loans without collateral. Likewise, loans will be provided with a grace period; that is, instead of starting repayment from the first month, a 12-month grace period will be given to SMEs. Further, repayment periods will be extended with lower interest.

¶ 12 There are further reforms, structural reforms to be done in the system to strengthen the State-owned enterprises. Governance is to be introduced to these institutions. Many institutions have challenges with regard to money that had been taken, but never accounted for. Therefore, the Auditor-General has qualified many of the financial statements of these institutions. A mechanism has already been identified to facilitate these institutions to be more accountable, transparent and to expand their capacity to deliver. Through that system, it is expected that these State-owned enterprises would add value, particularly to welcome investors into the country.

¶ 13 A host of legislations have been proposed to align with the Budget. One of them is the Investment Protection Bill I mentioned earlier. In addition to that, there is the Insolvency Bill, the PPP Bill and the Data Sharing Bill relating to State agencies refusing to share data with each other. As a result, those would remove the impediments that are there for importers and exporters to engage in their activities. At the same time, they would also remove the impediment for State revenue agencies to function smoothly. The new Bill relating to data sharing would be enacted after going through the due process with stakeholder consultation and adequate facilitation. With the system that has been managed in the past, we, as a country, have become poor not only in terms of money, but in terms of availability of data as well. As a result, a new Statistics Act would be brought in to ensure that relevant, accurate and timely data would be procured in a timely manner and that data would be used in making policy decisions. Instead of making decisions based on political connections and at the discretion of Ministers, a data-driven approach would be made use of to create an economy which we can proudly hand over to the next generation. Similarly, the Act relating to valuation would be refined to provide the necessary foundation.

¶ 14 There are many instances where we, as a nation, get stuck due to the lack of a Valuation Act which addresses the needs of today. As I mentioned earlier, you all were referring to archaic and outdated regulations, systems and laws, whereas the new Budget paves the way and lays the foundation for creating a country we all can be proud of.

¶ 15 We noted that State accounts are currently qualified by the Auditor-General due to the way the nation's finances were handled in the past. The introduction of the new Public Asset Management Act would pave the way for recognizing some of these assets, ensuring they are brought into the books to reflect the investments the taxpayers and the public have made to take the country forward.

¶ 16 Similarly, a Public Procurement Law, as mentioned yesterday during the Budget Speech, will also be introduced. Currently, we are managing the country with guidelines and circulars. Instead, a Public Procurement Law will be introduced to close the gaping holes in the system. Through this mechanism, transparency in procurement and accountability required in evaluation will be introduced into the system.

¶ 17 Similarly, a microfinance and credit regulatory framework, which has been a national requirement for several years, will also be introduced. Efforts had been made to introduce it on several occasions in the past. However, due to certain vested interests, the Bill was not allowed to be proceeded with. We are of the view that it is an important requirement, particularly because the vulnerable segments of the society have been affected due to the absence of a microfinance and credit regulatory law.

¶ 18 Through bringing the required Bill on microcredit schemes, we propose relief for our citizens, society, and small entrepreneurs who are in severe difficulty due to microfinance issues. Likewise, to further strengthen anti-money laundering and counter-terrorist financing laws and to implement the necessary measures, we have already prepared work. To strengthen capital market fundraising mechanisms for business, special measures are also proposed. Along with individual investments, investment through funds will be expanded and introduced into the new systems so that investors can better connect with the economy.

¶ 19 Let us look at the amounts allocated through this Budget. The previous speaker analysed public sector wage increases. Given the debt burden you left and the wrong economic policies, even if we used just one per cent of our current debt-servicing cost, we could meet a significant share of the funds required for public sector salary increases.

¶ 20 This Budget proposes: Rs. 604 billion for strengthening the health sector; Rs. 619 billion for education; Rs. 456 billion for the school system; Rs. 135 billion for the university system; Rs. 15 billion for technical education.

¶ 21 Similarly, for public investment to support the transport mechanism: of the Rs. 483 billion allocated, Rs. 355 billion is for the highway system; Rs. 21.85 billion for bridges.