Sri Lanka restrains state wages, presents policy budget

June 29, 2010 (LBO) – Sri Lanka presented a broad policy budget outlining a commitment to cut deficits over the medium term, bring down interest rates and inflation and also held a state salary hike until next year.

Though the gap is high, it is lower than the 9.9 percent (10.4 percent with grants) of GDP gap last year.

“We consider that the historically high budget deficit in this country must be phased out in order to reduce the debt burden and strengthen the financial situation so that our people will have better access to finance from our financial institutions,” Amunugama said.

“We believe that such adjustment should be done through the improvement in the quality of government spending, by putting state assets to productive use and collecting revenue through a broad based and low tax regime.”

Amunugama said they would not privatize state institutions or cut down public investments. Last year seven state entities lost more than 50 billion rupees or over one percent of gross domestic product.

He said ad hoc tax incentives given under the Board of Investment, the state investment promotion agency, would be pha