Criticizing Ravi K on VAT is baseless

“Criticizing Ravi K on VAT is baseless”-Rishad

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• Sri Lanka’s Minister of Industry and Commerce Rishad Bathiudeen came on strong to defend his embattled Cabinet colleague, Finance Minister Ravi Karunanayake on June 9, in the House.

“Many times Minister Karunanayake is criticized more than the government regarding VAT. I would like to ask this August House on what logical basis that Hon Minister Karunanayake could be criticized?” asked Minister Bathiudeen while addressing the House on the afternoon of on 9 June.
Minister Bathiudeen was pledging his support to the Finance Minister against whom a No Confidence Motion was submitted in Parliament previously and about which the debate was on.
“Honorable Sir, the no-confidence motion says that Minister Karunanayaka mishandles the economy and places the country in an economic crisis. We need to clearly understand that the unity government of HE the President Maithripala Sirisena and Hon Prime Minister Ranil Wickremesinghe along with Finance Minister Ravi Karunanayake are trying to handle an ‘already mishandled economy’ as a result of waste and luxuries of the previous government. We all now know of the wasteful expenses and international borrowings of the previous government that has created this difficult situation as we see today. As the economy faced more difficulties they turned to other countries requesting loans but at high interest rates. For example at the start of this year short-term external debt totalled 104% of foreign exchange reserves. In fact our foreign debt increased by three times to 94% of GDP from 2010 to 2015. This is the sad state of the broken economy that the unity government of HE the President and Hon Prime Minister received from the previous government. I believe that the Budget of Finance Minister Ravi Karunanayake is the most important instrument that can correct this problematic economy and place us in a reform oriented development drive envisioned by the unity government of HE the President Maithripala Sirisena and Hon Prime Minister Ranil Wickremesinghe” said Minister Bathiudeen, and added: “The other main allegation in the no confidence motion is that the country is in an economic crisis. We all know of our difficult financial situation due to debt repayment and global market situation. In 2014 the IMF warned us on our increasing foreign debt. The (IMF) staff urged caution with respect to external borrowing through the banking system. A huge 65% of foreign borrowings went for repayment of existing foreign debt in 2010 to 2015. Even 98% of domestic borrowings went for repayment of existing debt and thanks to the latest budgetary efforts of Finance Minister Karunanayake we now expect an improvement in 2016. In fact we should commend Finance Minister Ravi Karunanayaka for taking the lead in reforms through his many budgetary initiatives. Among his reforms are reduction of handing out free money. As we make our efforts to upgrade Sri Lanka from lower middle income ranks to higher levels we are also compelled to reduce giving free money and subsidies. Subsidies are a burden on the economy and on our taxpayer. At the same time Sri Lanka’s poor people cannot be ignored as well. Therefore we cannot stop subsidies and instead we need to use it correctly. Despite the fiscal challenges and difficulties, expenditure on subsidies such as fertilizer and transfers such as Samurdhi has increased. For example 73% growth in pensions alone in 2015. Realising this situation in his 2016 budget Minister Karunanayake makes special efforts to link subsidies with employment. This is in line with the government’s efforts to provide targeted subsidies rather than subsidies for everyone and a successful effort to fulfil our election promises given to Sri Lankans. As we struggle to meet our debt repayment obligations, we have less funds to give back to the economy. This affects the private sector and we are trying to bring back faster credit and business confidence. The good news is that interest rates on government securities increased greatly in 2015. This helps the market. The 6% rate for 364 day treasury bills has increased by 21% in 2015. The two year treasury bond rate increased by 25% in 2015. I am pleased to say that despite these difficulties in the budget we have increased our development expenditure as well as subsidies and transfers so that we can fulfil our promises to all Sri Lankans. Hon Minister Karunanayake despite fiscal challenges has allocated Rs 65000 million for education in the recent budget. This brings our education expenditure to around two percent of our GDP as promised in our election campaigns. Many people criticize the government on VAT Tax. Many times Hon Minister Karunanayake is criticized more than the government regarding VAT. I would like to ask this August House as to on what logical basis that Hon Minister Karunanayake could be criticized on VAT! I believe that such criticisms against him are mostly politically motivated and like say that the reality about VAT is different. Do you know that VAT is only 16% of the government’s total tax revenue in 2016? Even income tax stood at 19% of total tax revenues of this year. In fact I like to enlighten the correct picture on VAT today. The VAT tax income collected by the government has been actually declining since 2005. In 2005, 41% of government’s tax revenue was VAT. Today only 16% of government’s tax revenue is VAT. In this background I would like to ask this August House on what correct basis that Hon Minister Karunanayake is criticized regarding VAT. I urge the criticizers and promoters of No Confidence Motion to focus on the country’s fiscal background rather than the Hon Finance Minister. Another challenge only the Finance Minister is faced with is the foreign debt issue. Thanks to him, the Unity government is working on repayment of the huge debt collected by the previous government. The annual growth of government debt in 2009 was 18% but today we reduced it to 15%. In this background I commend Finance Minister Ravi Karunanayake for his work towards the successful IMF agreement for a $1.5 billion three-year Extended Fund Facility program for Sri Lanka agreed in early May. We should specially praise Minister Karunanayake for getting IMF to agree to give this loan facility without any conditions. This shows Sri Lanka has regained the lost confidence of international community as well.”
Minister Bathiudeen also declared that his party ACMC would extend its unconditional support to Finance Minister Ravi K to defeat the Motion. In addition to Minister Bathiudeen, ACMC has four more MPs in the Parliament.