Interim Budget 2022


UNP Leader, President and Finance Minister Ranil Wickremesinghe, presenting the 2022 Interim Budget in Parliament yesterday mentioned three things of socio-economic importance. One was on revenue and the other two were on the fertiliser and cooking gas issues, respectively.

He said, beginning from next month, VAT would be lifted to 15 per cent bringing it in line with what it was, the last time he was in power three years ago in 2019. The other two were US aid to the tune of USD 180 million to alleviate the chemical fertiliser and cooking gas issues. Uplift of VAT to 15 per cent is an IMF condition for aid, which is currently under negotiation. An IMF team is in the country in this connection at present and is due to leave the island today.

The President further said, of this value of USD 180 million US aid, USD 110 million would be allocated to import chemical fertiliser for Maha 2022/23 and the balance USD 70 million to import cooking gas, so, that the Sri Lankan consumer would be able to enjoy this Christmas, without having to worry about from where they would get their cooking gas to prepare both their Christmas lunch and dinner!

USA’s target of alleviating Sri Lanka from the twin crises caused by the dearth of chemical fertiliser and cooking gas are spot on, from a humanitarian, political and geopolitical perspective. While the humanitarian aspect is self explanatory, politically, this step would strengthen Wickremesinghe’s and his party’s position, particularly in the context that the next Presidential Poll is due in 2024 and the Parliamentary Poll in 2025. Geopolitically, it would give a boost to the USA vis-à-vis the Sri Lankan masses, both urban as well as the rural farmer.

USA’s fertiliser aid to the Sri Lankan farmer has to be looked at in the context of China’s stance on this same issue. Sri Lanka, during President Gotabaya Rajapaksa’s era imported an organic fertiliser shipment from China on an agreement of an advance payment of USD 6.9 million.

However, Sri Lanka rejected the shipment on the basis that it was contaminated. But, upon arbitration, Sri Lanka accepted the shipment. But, China has refused to release the consignment until the balance payment of USD 1.5 million is received. China has also refused to ship chemical fertiliser in exchange. 

The end result is that Sri Lanka has no fertliser, organic or chemical, even after making an advance payment of USD 6.9 million to China! China, since gaining a foothold in Sri Lanka after ‘acquiring’ Hambantota Port, a few years ago, on a debt for lease swap, has been eyeing more such swaps in Sri Lanka, being one of its largest creditors. Sri Lanka declared itself bankrupt in April.

Among some of the other salient points made by the President yesterday was selling 20 per cent of shares each of both People’s Bank and the Bank of Ceylon to their depositors and employees. Wickremesinghe said, the money raised by such sales  would help uplift the much needed capital needed by these two State banks. But, not only the sale of shares, there also is a need for management autonomy to be given to these two State banks to overcome any possible political interference.

He further said, the Government of Sri Lanka (GoSL) plans to raise revenue from 8.2 per cent to 15 per cent of GDP by 2025. Wickremesinghe further said, GoSL targets to obtain a primary budget surplus of two per cent by 2025, where, however, such a target would be achievable as early as by 2024. He further said, GoSL aims at reviving those reforms which were stultified by the change of Government in 2019, delivering a kidney punch to the economy.

The President said, he also has plans to make Sri Lanka a key education destination similar to that achieved by its neighbours, with a focus on ‘STEM’ education, medicine and IT. These changes planned are positive if Sri Lanka plans to avert a repeat of another ‘9 May’ and ‘9 July’.