The newly appointed Prime Minister and Finance and Economic Affairs Minister Mahinda Rajapaksa yesterday directed authorities to implement a series of concessions for the public and local entrepreneurs in a bid to boost economic growth and bring down the cost of living.This relief package for consumers and concessions for other sectors of the economy will be effective immediately.
A Government news release issued yesterday said the President and the Prime Minister and Finance and Economic Affairs Mnister have raised concerns regarding the serious setback in the economy reflected in the persistently low growth rates during the last 3 years along with the rising cost of living.
The Prime Minister is of the view that ill-conceived economic and financial policies of the previous Government have led to this situation by marginalising local entrepreneurs, industries and domestic production, the Ministry of Finance and Economic Affairs said in a media statement. The Government also expects to reduce its expenditure with the rationalisation of Cabinet ministries as reflected in a lessor number of ministries and reexamination of capital expenditure programs. Accordingly, the government is confident that the primary surplus of 1.8 percent of GDP and the budget deficit of around 4.9 percent of GDP that have been targeted for 2018 could be achieved in support for further fiscal consolidation to provide economic stability. The measures for further consolidation of external trade and payment transactions are also being examined to provide much needed stability to the exchange rate.
As 2018/2019 Maha cultivation season has begun with extremely favorable weather throughout the country, the economy is set to get a new revival as all hydro power reservoirs and irrigated schemes have reached full storage capacity to generate electricity, provision of drinking water and water for cultivation. The Government thinks that this is the best opportunity to prepare the country to get the maximum benefit from agricultural production. At the same time the consumers are saddled with high cost of living. In this background the Prime Minister and Minister of Finance and Economic Affairs has given directions to implement several initiatives to revive the economy, it added.Accordingly, the commodity prices will be reduced with immediate effect. Given the impact of fuel pricing on all strata of the society specially those engaged in transport, agriculture and fisheries sectors, price of Petrol (Octane 92) and Auto Diesel will be reduced and Lubricants including the 2T lubricants used in three-wheelers and small agricultural engines by Rs.10 per litre.
A guaranteed price scheme will be introduced for Paddy, Onion and Potatoes produced locally by our farmers. Accordingly, Special Commodity Levy will be raised during harvesting period to protect farmers through remunerative guaranteed prices. As potatoes and B-Onions are being harvested, SCL on potatoes and B-Onions will be maintained at Rs.40 per Kg. In order to mitigate the impactof adverse weather conditions which resulted in farmerslosing their livelihood and becoming heavilyindebted, interest and the penal interest incurred by farmers and small Paddy Mill owners on loans up to a maximum of Rs.50 million, from all Commercial Banks during the past 3 years, will be written off in full and will be borne by the Government.
The maximum threshold on Loan advances given by Samurdhi Banks to Samurdhi beneficiaries to support their livelihood activities will be increased by Rs.10,000.
The adverse impact created by high indirect taxes will be mitigated by simplification of VAT and NBT. The VAT threshold will be increased from Rs.12 million per annum to Rs.24 million per annum. The threshold for the VAT liability of wholesale and retail sector also will be increased from Rs.50 million to Rs.100 million per twelve months providing benefits to small traders and businesses.
The VAT rate applicable on the import of Sawn Timber will be reduced to 5% to support the local Construction Industry.
VAT on import of fabric will be exempt providing benefits to the small and medium garment manufacturers. The thrust of these initiatives are to encourage production and simplify the tax system. It will certainly help households with additional income in their hands. The proposed changes to the tax system will also encourage inward remittances and savings. The President and the Prime Minister and Minister of Finance and Economic Affairs have directed the implantation of the above policy measures. The necessary Gazettes for the aforementioned tax related proposals will be issued immediately.