Sri Lanka fuel subsidy cuts a good move: Daim

July 2, 2008 (LBO) – Cutting fuel subsidies when the national budget is de-stabilized is a necessary move to keep the economy stable and development ticking, former Malaysian finance minister Daim Zainuddin has said. In Sri Lanka, left-oriented political parties led by the Janatha Vimukthi Peramuna (JVP) pushed state policy towards subsidizing imported commodities from mid-2004 setting the country on a high budget deficit, inflation, large government and currency weakness path.

Some of these policies are now being partially reversed in the face of the highest inflation in the country’s history, but a bloated public sector remains in place, becoming a dead weight on the country’s poor and productive sectors.

Trade minister Bandula Gunewardene had said that the public sector has expanded by more than 250,000 persons during the last three years.

State workers who do not pay taxes on their salaries or pensions now eat up more than 55 percent of tax revenues.

Amidst rising inflation of close to 30 percent and threats of strikes partially egged on by the JVP that promoted inflationary economic policies, President Mahinda Rajapakse had promised a salary increase which is expected to cost an extra 7 billi