SRILANKA TODAY

http://www.crossed-flag-pins.com/genimg/flaggen/Sri-Lanka-240-animated-flag-gifs.gif

Thursday, July 21, 2011

Peace Economic Dividend

 Peace Economic Dividend
http://www.lbo.lk/fullstory.php?nid=103344303
Sri Lanka is seeing a peace dividend in the form of lower interest rates, taxes, inflation and higher capital expenditure after a 30-year war ended, Treasury secretary P B Jayasundera said.

He said defence expenditure which was about 5.0 percent of gross domestic product during the war years, has now dropped to 3.0 percent. "We managed the budget under stress, because the country was at war," Jayasundera told members of the Joint Apparel Association Forum, an industry body.
"So we had fairly high defence expenditure, sometimes as high as five percent of GDP. It has now dropped to three."
Spending Trends
In 2010, defence spending fell to 190 billion rupees or 3.4 percent of GDP as the economy expanded compared to from 3.9 percent of GDP in 2009.
"So this number is going to go down, because we no longer spend money on aircraft, buying ammunition or military hardware," Jayasundera said.
"Probably we have to build little bit capital stock to have fairly high tech security. "But since there is no war threatening the existence of the country itself, we can have planned defence expenditure like any other country which will also be conducive for national development."
For 2011 defence spending was originally slated at 214 billion rupees or 3.4 percent of forecasted GDP. But spending was upped last month by another 20 billion rupees to build a new defence headquarters, taking the share up to about 3.7 percent.

However the government is selling land where military facilities were earlier sited, to raise funds.
Sri Lanka's citizens have taken up arms against the state three times since independence from British rule, amid a steady erosion of economic freedoms, civil liberties and rule of law.
Sections of the Sinhalese majority have engaged in armed rebellions twice and the Tamil minority once. However analysts say since 1977, a series of economic freedoms have been restored, leading to higher growth.
Rebuilding
Jayasundera said the government was now investing heavily in infrastructure and re-building the war torn areas.
"Where do these savings go now? It is going for development," Jayasundera said.
The government is investing rapidly, people can see it. All over where you go you can see a bridge and irrigation scheme; Jaffna KKS (a town in the north) or down south."
The government has maintained capital spending to about 6.0 percent of gross domestic product. This year about 1.1 billion rupees would be spent on roads alone.
A finance ministry report said earlier that the military itself was now engaged in reconstruction activities. Health expenditure previously used to treat injured soldiers, were now diverted to the general public.
He said in the last budget the government has abolished a series of 'nuisance' taxes resulting in a 15 billion rupee revenue loss. He said as a result, transaction costs related to a series of taxes were no longer there for businesses, not counting the nuisance value.
"Road barriers are not there," he said. "Interest rates have come down. War risk is not there. Now these nuisance taxes are not there.
"No separate provincial national taxes. So I am sure this saving must be somewhere. This saving is with the economy now. So it has to produce the real activities."
Sri Lanka's inflation is now on the high side of single digits and lending rates in the low double digits.