President at the traditional tea party after reading budget (Photo: Kushan Pathiraja/Daily Mirror)
Sri Lanka's 2011 Budget: Fiscal deficit Comes Down to 6.8 percent
(NIDAHASA News) President Mahinda Rajapaksa presented Sri Lanka’s first full post-war budget today (22) evening.
Government targets 2011 fiscal deficit of 6.8 percent, down from 8 percent in 2010. That would be the lowest since 1992.
Government also plans to cut corporate taxes, lower the value added tax for banks and reduce the levy on construction companies to 12 percent.
A 5% monthly pensionable allowance increase will be provided for all public servants.
Taxes on Liquor, Cigarettes and Casinos increased by 35% to 40%. A tax of Rs. 2 per minute will be added to International calls while reducing the local call cost by 50 cents.
The interest bill for 2011 is estimated at 353 billion rupees, hardly changed from the 350.3 billion rupees a year earlier. Sri Lanka's interest rates fell after inflation fell with better monetary policy in 2009 and lower domestic borrowing in 2010.
The budget proposes to increase total revenue to LKR 986.1 billion from LKR 828.3 billion this year. The tax revenue will be increased to LKR 862.1 billion next year from LKR 720 billion. At the same time, total expenditure is expected to climb to LKR 1,419.9 billion from LKR 1,275 billion this year.
Private sector workers forced savings scheme, the Employees Provident Fund (EPF), is the key source of financing of the deficit.
A new pension fund will be set up for private sector cutting 2.0 percent from private sector wages and employees will have to contribute 2.0 percent.