Central Bank Governor Dr. Nandalal Weerasinghe yesterday said unrealistic revenue projections with regard to the estimated government revenue when preparing the budget in the past had created a significant budget gap and led to a debt trap.
He pointed out that due to this, a large amount of money was allocated for expenditure including Ministries based on this estimated government revenue and in the end a large budget gap was created which could not cover that expenditure and this situation led to a debt trap.
The Central Bank Governor said such unrealistic government revenue projections had misled Parliament. The Governor of the Central Bank said this when the Parliamentary Committee on Public Finance summoned Dr. Weerasinghe, Secretary to the Ministry of Finance Mahinda Siriwardena and other officials to discuss the current economic crisis. The Committee met under the chairmanship of Anura Priyadarshana Yapa.
In addition, a number of issues were discussed at this meeting, including the establishment of a mechanism for the proper collection of income tax, the prevention of irregularities in exports and imports related to various industries, including the gem industry, and the provision of proper revenue to the country.
Dr.Weerasinghe pointed out that when a fuel price formula was introduced earlier, it could not be implemented in the face of opposition but added such a formula had to be introduced today. Finance Committee Chairman Anura Priyadarshana Yapa recommended that a full report be submitted to the Committee on the policy decisions to be taken to resolve the current economic crisis and to build a stable economy in the country. He said it will be presented to Parliament for necessary approval.
Explaining the current economic situation, the Governor of the Central Bank said that US$ 600 million allocated for World Bank-funded projects has been agreed to be used to purchase essential goods and services, including fuel and gas, for the foreseeable future. He also pointed out that companies such as the Ceylon Electricity Board, the Ceylon Petroleum Corporation and Litro Gas do not have the necessary amount of rupees to buy dollars due to the huge losses incurred.
He also said that discussions with the International Monetary Fund are currently underway to get financial assistance.
The Governor pointed out that the next 3-4 months leading up to the successful completion of those discussions and the restructuring of the external loans will be challenging.
The Finance Committee also agreed to table a motion in Parliament to increase the borrowing limit to One Trillion rupees more than previously allowed under the Local Treasury Bills Ordinance. Meanwhile Dr.Weerasinghe made an open appeal to the Committee to tell the people the true reality of the current difficult economic situation and to lend support to policy decisions taken for long-term economic stability. He said these should be supported without party affiliation and narrow political interests.
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