Sri Lanka’s dilemma on allocating funds for the year 2019 aggravates

Sri Lanka’s dilemma on allocating funds for the year 2019 continues even after the endorsement given by the cabinet of ministers newly appointed by President Maithripala Sirisena for the three month Vote on Account this week as it needs parliamentary approval for drawing expenditures from the consolidated fund, official sources said.

According to article 150 of the Constitution, "the Government may withdraw funds from the consolidated fund once parliament passes a resolution or a law, granting a specific sum of money for a specified public service to be spent in a particular financial year."

Once parliamentary approval is granted, the warrant under the signature of the Minister of Finance alone has to be issued, for the withdrawal of the specified amounts to be effected.

Cabinet spokesman Dayasiri Jayasekara of the 'purported' UPFA government said that they will present a Vote on Account in parliament next week and enact it with a majority vote in the legislature.

Without a legitimate settlement for the current political impasse, the Finance Ministry will find it difficult to make payments to cover the salaries of public sector employees, pensions, samurdhi beneficiaries and public welfare programmes for at least the first three months 2019, official sources claimed.    According to Treasury statistics, the consolidated fund has over drawn a massive sum of money to the tune of around LKR 250 billion at present for state expenditure.

No money from state institutions including state owned enterprises is forthcoming to the fund and the treasury cannot resort to borrowings to swell the consolidated fund, he revealed, adding that the sudden dissolution of parliament without passing a Vote on Account would further aggravate the financial crisis in the country.

To make matters worse, the 'purported' Finance Minister Mahinda Rajapaksa's tax reductions introduced recently would cause a massive reduction in state revenue next year as there was no way to present revenue proposals in a three month Vote on Account.

Furthermore, 15 tax revisions will come into effect from January 1 next year, on the directions of the Ministry of Finance, if those amendments are approved in parliament.

Out of those revisions, three such tax measures, namely the Telco levy reduction, VAT threshold increase, and WHT on interest income would result in a loss of LKR 75 billion in revenue, tax experts revealed.  

By removing the 5 percent WHT, the Finance Ministry officials are expecting the interest income to be declared as income tax and subject it to be taxed at 24 percent instead of the 5 percent applicable at present, tax experts added.

According to Finance Ministry statistics, the total state revenue was LKR 925 billon in the first 6 months of this year.

Meanwhile, expenditure on salaries and wages was LKR 316 billion, interest payments at LKR 391 billion, welfare at LKR 223 billion with the total expenditure at LKR 930 billion.

Under this set up, the Finance ministry faces a monumental task ahead to manage the cash flow prudently, he warned.