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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Budget 2013

Budget 2013

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Redbulls


Director - Equity Analytics
Director - Equity Analytics
By Cheranka Mendis
Treasury Secretary Dr. P.B. Jayasundera yesterday emphasised that the 2013 Budget was developed to unleash a new wave of growth and reforms to make Sri Lanka a poverty-free country by 2016.

Addressing an audience exceeding 1,200 persons at the first-ever post-Budget seminar organised by Ernst & Young, Jayasundera assured that the Government would maintain continuity, consistency and clarity in implementing the Budget decisions announced on Thursday and that the main thinking behind the formation of the proposals was to create a new wave of growth and not lose the momentum created thus far.

Noting that the reforms had been shaped with President Mahinda Rajapaksa’s vision of going beyond the Millennium Development Goals and a US$ 4,000 per capita income to become a ‘poverty-free Sri Lanka’ by 2016, he stated that “every single line in the Budget has been made to outline these aspects and looks at equitability in terms of opportunities, livelihoods, and way of power”.

Jayasundera firmly assured that the Government would not borrow in the capital market in the coming year, secure in the knowledge of having US$ 3 million worth of solid 10-year bonds, with good rates for Sri Lanka international bonds.However, the country needs capital in every way possible, he said. “Restrictions on capital formation have to move out. The country has developed activity to improve capital formation.”

“The country needs a mindset change, and this is what the Budget has done by driving actions such as import substitution and import replacement. Instead of money moving out, we need money to come in and do the value addition here. This is what we need and what the reforms will do.”

The Government has also created space for banks to go global without competing for the same customers locally. “Banks must also go global. They must raise the money and show their balance sheets and strength in the world market. BOC cannot always be the ‘Banker to the Nation’. Other banks must support it.”

What matters is the sustainability in the market in capital formation, he said.

Offering support for a financial boost, the Government has given the Municipal Councils an opportunity to raise capital by issuing municipal bonds, which are five times bigger than the Municipals’ Budget surplus. “We need certain reforms creating investment opportunities in the Municipal areas, because those areas must also be developed.”

With industries requiring long-term funds and not just short-term overdrafts, the country’s two development financial institutions, DFCC and NDB, with their ‘super balance sheets,’ must take more risks in the market.
Jayasundera stated that US$ 250 million has been earmarked for each of the institutions to take their balance sheets and go global to raise money. “We hope either together or individually they will bring this money to the country and lend for much-needed investment such as to plantation companies.”

On the tax front, the corporate large tax unit of the Inland Revenue Department will be strengthened while the department will be expected to carry out ‘decent tax audits’ of 30% more than at present and to give faster interpretations on tax, etc. The Tax Appeal Commission should be strengthened as well, he said.

“The tax system will not compromise for short-term gains. We were pressed for revenue mid this year but did not compromise. We balanced it by expenditure management, being more cautious, and delaying new project commencement rather than making ad hoc changes. We will continue this in the same manner as the theory has worked well for the country.”

He commented: “Policies have been created to set the stage on a much bigger ground of growth, maintaining single digit inflation, creating a strategic exchange regime not by running down reserves but by maintaining strategies on trade deficit and draining capital inflows rather than capital outflows. “

Noting that the country could have still gone for 8% growth if not for the drought, which did not just leave the earth dry but also the growth of the country, he assured that poverty reduction across all levels had significant importance in the 2013 Budget.

Presently the poverty level is at 8.9% and unemployment at 4.5%. He appealed to the private sector to join the Government in reducing poverty, not just by way of employment generation, but by addressing issues such as malnutrition, poor health and sanitary conditions, education, etc. He pointed out that this could be carried forward as companies’ CSR projects.

Skills development, IT and language literacy, and creating space for students who do not qualify to enter local universities must be addressed.

“We have identified the areas for improvement and the Government is doing all the changes in the next wave of reforms,” Jayasundera said. “The Government thought the Budget must spend, recognise, and design policies towards education, skills, technology, and research.”

Increasing research is also an integral part in the development process; hence the decision to extend a triple deduction of expenditure in research to the private sector in the Budget.

He also noted that the Government had committed 6% of GDP as public investment in infrastructure development as well.
http://www.ft.lk/2012/11/10/new-wave-of-growth-reforms-via-budget-2013-dr-pb/

42Budget 2013 - Page 3 Empty Stockbrokers praise govt. for Budget 2013 Mon Nov 12, 2012 4:08 pm

Redbulls


Director - Equity Analytics
Director - Equity Analytics
The Colombo Stock Brokers Association (CSBA), representing 23 stock broking companies today praised the government for the unprecedented policy initiatives proposed to develop the capital market Budget 2013.

“We, as one of the major stakeholders of the capital market of Sri Lanka are elated that the important and the urgent need to develop the capital market has been duly recognized by the Finance Minister. The key proposals announced in the Budget impacting the capital market demonstrate the desire of the government to see a vibrant capital market in the immediate future,” a CSBA statement said.

“Introducing a 3-year 50% tax holiday for new companies to be listed at the CSE with a public float of at least 20% on or after 01/04/2013, exempting stamp duty for the transfer of shares to and from margin trading account effective from 01/01/2013 are some of the measures that will translate into improved liquidity at the Colombo bourse,” CSBA noted.

The proposal to set up a Presidential Task Force to implement a Capital Market Development Plan was also haled by the CSBA.
http://www.dailymirror.lk/business/economy/23422-stockbrokers-praise-govt-for-budget-2013.html

Redbulls


Director - Equity Analytics
Director - Equity Analytics
The Colombo Stock Brokers Association (CSBA), representing 23 Stock Broking companies wishes to thank His Excellency the President Mahinda Rajapakse on the unprecedented policy initiatives proposed to develop the capital market in 2013 according to the proposals included in the National Budget presented in parliament on last Friday.

We, as one of the major stakeholders of the capital market of Sri Lanka are elated that the important and the urgent need to develop the capital market has been duly recognized by as the Finance Minister. The key proposals announced in the Budget impacting the capital market demonstrate the desire of the government to see a vibrant capital market in the immediate future.

We are also grateful to Dr.P.B.Jayasundara ,the Secretary to the Treasury, , for giving due considerations to the urgent needs of the capital market when formulating the budget proposals for 2013.

Introducing a 3-year 50% tax holiday for new companies to be listed at the CSE with a public float of at least 20% on or after 01/04/2013, exempting stamp duty for the transfer of shares to and from margin trading account effective from 01/01/2013 are some of the measures that will translate into improved liquidity at the Colombo bourse.

Permitting lump sum depreciation up to 100% for the stock broking companies for IT infrastructure development and branch office establishment with effect form 01/04/2013 would no doubt help the market intermediaries to evolve into full fledged brokerage houses on par with their peers in the international arena. Proposals impacting the debt market and the unit trust industry are also very encouraging.

CSBA is extremely happy that the H.E. President has proposed to appoint a Presidential Task Force to implement a Capital Market Development Master Plan. We see this as the most important proposal impacting positively on the capital market. Therefore we thank H.E. the President for the long term vision to create and nurture a capital market that would contribute towards nation building.

We also take this opportunity to thank the SEC Chairman for submitting market positive proposals during the budget preparation stage while supporting the CSBA’s proposals and following a consultative approach since his appointment.
http://www.dailynews.lk/2012/11/13/bus10.asp

44Budget 2013 - Page 3 Empty Re: Budget 2013 Tue Nov 13, 2012 4:28 pm

D.G.Dayaratne


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Selection of members for presidential task force is very important

Most probably govt will appoint 'HORAGE AMMALA' and get advice



Last edited by D.G.Dayaratne on Wed Nov 14, 2012 12:26 pm; edited 1 time in total (Reason for editing : Typing Mistake)

45Budget 2013 - Page 3 Empty No commercial foreign borrowings next year Wed Nov 14, 2012 3:18 am

Redbulls


Director - Equity Analytics
Director - Equity Analytics
Budget 2013:
* Little room for lower interest rates as country grapples with trust deficit, warn experts


The government proposes not to go for any foreign commercial borrowings next year, according to the 2013 budget, but domestic non bank borrowings will surge in order to finance a growing fiscal deficit leaving little room for monetary policy easing next year as the country continues to grapple with a trust deficit, experts warned.

According to 2013 budget proposals the government will not seek foreign commercial loans next year after borrowing Rs. 109.5 billion in 2011 and Rs. 128 billion in 2012.

With the budget deficit estimated at Rs. 507.4 billion next year, the government hopes to raise Rs. 86 billion from foreign sources to finance the deficit, a sharp decline from Rs. 205.6 billion estimated for this year, while domestic borrowings are estimated at Rs. 421.4 billion, almost doubling from 259.6 billion in 2012.

Non bank domestic borrowings are expected to carry the weight of the deficit, surging to Rs. 289.4 billion next year from 84.6 billion this year.

"Non bank borrowings will be high next year. This means more funds would be mobilised by selling Treasury bills and bonds to the public and borrowing from EPF, NSB and Sri Lanka Insurance," Institute of Policy Studies Executive Director Dr. Saman Kelegama said, addressing a post budget seminar organised by the Sri Lanka Economic Association and Alumni Association of the University of Peradeniya (Colombo Branch) earlier this week.

"For such borrowings to be effective interest rates would have to be attractive and this, among other factors, implies there is limited space for a reduction in policy interest rates," he said.

Dr. Kelegama also pointed out there was limited headroom for additional commercial borrowings from abroad to boost investment and growth.

"Public debt as a percentage of GDP may have declined from 80 percent to 78 percent in 2012, but the stock of foreign debt in total public debt has increased from 7.3 percent in 2003 to 37.5 percent in 2010, thereby raising risks associated with the economy. The share of commercial debt in total public debt has also increased. Within that, the external short-term debt has increased. As a result, despite the decline in the stock of government debt as a percentage of GDP, the external debt service ratio is heading in a risky direction," Dr. Kelegama said.

The government’s fiscal policy is under strain this year because authorities failed to take early action to rectify a balance of payments problem last year.

The budget deficit for the first eight months of this year reached 6 percent of GDP, the full year target being 6.2 percent.

The budget for this year had estimated the government’s debt requirement for 2012 was Rs. 776.2 billion from domestic sources and Rs. 327.8 billion from external sources. However, by end July 2012, the domestic debt component grew by Rs. 381.6 billion from end December 2011 while foreign debt surged to Rs. 646 billion.

Tax expert N. R. Gajendran addressing the seminar said Sri Lanka’s biggest challenge was bridging a trust deficit.

"The problem is not with the revenue deficit. It’s not the budget deficit. It’s not the trade deficit. It’s not the balance of payments deficit. The problem we have is the trust deficit.

"After three years since the war ended, and with foreign investors fleeing US and European markets, we have not been able to attract enough FDIs. Investors are pulling their monies from Switzerland and going to Singapore. We might miss this bus," Gajendran warned.

FDI inflows were estimated at US$ 2 billion this year, but for the first six months of this year inflows amounted to less than US$ 500 million and official estimates have been revised downwards to between US$ 1 to 1.5 billion.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=65989

46Budget 2013 - Page 3 Empty Re: Budget 2013 Wed Nov 14, 2012 12:20 pm

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Ok let's issue $ bonds for couple of years and then print money for couple of years.

easy peasy lemon squeezy

47Budget 2013 - Page 3 Empty Re: Budget 2013 Wed Nov 14, 2012 12:39 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Money is just a material thing. just prinintg on paper mostly. Here is a thought, what happens if the whole world agrees to cancel all debt and each country be given only 50% of their current savings to start fresh.
Will the world do better than now or worse in 25-50 years?



@UKboy wrote:Ok let's issue $ bonds for couple of years and then print money for couple of years.

easy peasy lemon squeezy

48Budget 2013 - Page 3 Empty Re: Budget 2013 Wed Nov 14, 2012 12:46 pm

Hanoifortune

Hanoifortune
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@slstock wrote:Money is just a material thing. just prinintg on paper mostly. Here is a thought, what happens if the whole world agrees to cancel all debt and each country be given only 50% of their current savings to start fresh.
Will the world do better than now or worse in 25-50 years?



@UKboy wrote:Ok let's issue $ bonds for couple of years and then print money for couple of years.

easy peasy lemon squeezy

no need 20-50yrs, pls wait& see another 7- 10years

49Budget 2013 - Page 3 Empty Re: Budget 2013 Wed Nov 14, 2012 12:50 pm

D.G.Dayaratne


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
"The problem is not with the revenue deficit. It’s not the budget deficit. It’s not the trade deficit. It’s not the balance of payments deficit. The problem we have is the trust deficit."

What are the reasons for trust deficit ?
1Govt do not trust institutions and system
2 Destroy institutions by unnecessary interventions Best
Example is Stock market
Latest one is Judiciary
3.No rule of law It apply only on people who do not support the govt
4.Poor relationship with the countries who can invest


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