Key Highlights of 2021 Budget Proposal (Sull Summery)

Prime Minister Mahinda Rajapaksa delivered the budget speech at the Parliament. In his capacity as the Finance Minister, the PM presented the budget to the parliament at around 1.40 pm.

The Department of Communication of Parliament said that this is the 75th budget report of the country.

The Appropriation Bill would seek the allocation of Rs. 2.678 billion for service spending and the borrowing cap for the 2021 financial year has been set at Rs. 2.900 billion, according to Bill.

Key Points of 2021 Budget:

Highlights the need to build a knowledge-based economy, and the need to promote sport, particularly among the young generation. The Prime Minister also points out that education reforms are important to tackle issues especially among unemployed young generation.

• Small-scale businessmen who have been impacted by Covid-19 must be encouraged to contribute to national development from which the existing import-based economy can be modified, said PM.
• Government programs must be promoted, cost-cutting steps recommended and efficiency increased. Condemns the previous government for the political victimization of government workers, instead of promoting their work, states PM.

Government programs have slowed due to the need to allocate funds to repay foreign debt, he adds. 65 percent of foreign loans to be used for development projects within the country, with the exception of technological innovations.

PM highlights the need to minimize poverty and improve social welfare measures. National debt of 90 percent must be reduced to 70 percent, said PM.

The new 8 per cent VAT will continue for businesses earning a monthly income of more than Rs. 25 million.

The Government shall implement a separate common tax on goods and services that contribute more than 50% of the national tax revenue.

Commodity trading center to be used for aid operations in the ports of Colombo and Hambantota.

Rs. 750 million to be provided to the housing, welfare, education and entrepreneurship needs of retired, disabled or deceased military personnel through the Ranaviru Seva Authority.

• Investment of Rs. 15,000 million allocated to the Telecom Development Fund. The project will be implemented in the period 2020-2022. Mobile and fixed broadband networks to be covered by this island-wide network. This will support the fiber installations needed by service providers and will also concentrate on local businesses in the acquisition of capital.
• Allocate additional Rs. 20,000 million to the tri-forces to build infrastructure and short-term machinery to assist their various tasks, including the management of disasters.

Technical schools, which currently have an annual enrollment of 100,000, are expected to rise to 200,000 students a year.

He aims to allocate additional Rs. 3,000 million to initiate a scholarship program to offer Rs. 4,000 monthly allowances to students receiving vocational education on the basis of their active participation.

A loan of 500,000 as start-up funding with a grace period of five years to be implemented for entrepreneurs. The 0.25% commitment fee proposed to be levied on the creditors to ensure that the funds are handled and used accordingly.

A 5 year grace period for the tax imposed from vocational training centers which are willing to double their annual student intake.

• New city universities to be set up in each district to cater to students studying common subjects.
• Proposes steps to maximize the participation of women in national sports.
• Rs. 10,000 million to be allocated to new technical colleges to be developed in Colombo, Kalutara, Kandy, Anuradhapura and Batticaloa.

• The Government aims to build a sports economy worth USD 1,000 million over the period 2021-2024. The budget to be allocated to Rs. 1000 million in support of this vision.
• A 50 percent exemption from income tax for local companies if incorporated before 31 December 2020 to be listed on the Central Stock Exchange.
• Measures proposed to reduce taxes imposed by local government authorities on tourism-related companies.

The Prime Minister proposes the allocation of additional funds of Rs. 250 million to improve the basic infrastructure of temples in rural areas.

Rs. 55 billion spent annually on dairy imports. The Government proposes that this expenditure be directed towards the production of domestic agriculture and animal husbandry. Import of milk cows and livestock feed locally as part of the steps included in the budget. A loan of up to Rs. 500,000 proposed for the production of dairy farming.

• Rs. 150 million dedicated to the production of local fisheries.
• In addition to the prevailing currency rates, it proposes to pay an extra Rs. 2 per dollar sent by Sri Lankans who have been employed overseas.
• He also guarantees the implementation of a contribution pension plan for Sri Lankan foreign workers.
• The Prime Minister plans to increase the daily salary of estate workers to Rs. 1000 as of January 2021.

Construction of a national expressway network to be speeded up. Colombo  Marine Drive to be expanded to Moratuwa. 25 districts to be served by a three-year road infrastructure improvement programme. The railway network, including Colombo and Kelani Valley, is to be extended. Rs. 1,300 million to be spent in this aspect.

Lakvijaya and Kerawalapitiya Power Plants to be improved in order to provide free power supply interruption over the years 2021-2022. One coal power plant with a capacity of 300 MW and two LNG plants to be connected to the national power grid. Kerawalapitiya to be turned into an LNG plant.

Electricity customers must be confident of a reliable and clean energy supply by 2023. 70% of Sri Lanka’s energy supply is to be sourced from clean energy sources by 2023.

• CESS tax to be levied for the protection of local industries.
• Investments of a trillion rupees were expected to launch 1,000 community water projects aimed at supplying drinking water to the entire country between 2021 and 2024.
• Local agricultural inputs and goods to be promoted, eliminating the need for agricultural imports.
• Proposed tax relief for clothing and hide manufacturers. Gem companies are to be given a three-year tax exemption period.

• The proposed amendments to the foreign service. Bilateral agreements to be reviewed to ensure national stability and the non-aligned position of Sri Lanka. The diplomats and foreign service officers would also be evaluated in the light of the new reforms.
• Tax relief is to be given on import levies to the motor vehicle industry.
• Housing facilities in the suburbs of Colombo and the major cities of Sri Lanka need to be strengthened. Maintenance and waste management should be given special consideration.
• Construction of 50,000 houses already underway under the Urban Development Authority. A 25-year loan with an interest rate of 6.25 per cent to be given to applicants for these state housing projects

Banks and financial institutions need to be strengthened by special government programs.

Delays in the justice system to be resolved by specific changes. Rs. 20,000 million to be allocated to judicial facilities, with a specific emphasis on the development of the judicial workforce and physical infrastructure.

The government will not yield to the privatization of public services, said PM. It recommends legislative amendments to make room for the financial independence of state institutions.

PM introduces changes to the Finance Act to fix employment concerns.

Employees of the state sector shall be able to operate independently. State workers must also be given leave of up to two years for overseas education or work.

• Single-use polythene and plastic to be prohibited from 1 January.
• More than 30% of Sri Lankans live in river valleys and catchment areas. PM recommends legislation to protect natural waterways and to prevent activities such as illegal sand dredging.
• Sri Lanka Air Force Surveillance to be stepped up to minimize deforestation efforts and to support reforestation programmes.

The compulsory retirement age of the state sector is 60 years, while the retirement age is 55 years in the private sector. Although noting that the compulsory retirement age varies between men and women, PM aims to increase the compulsory retirement age for both men and women to 60 years.

He aims to allocate additional Rs. 5,000 million to build water supplies and reservoirs in line with the 2021 initiative to provide 200,000 families with drinking water.

Rs. 5,000 million is allocated to the improvement of rural hospitals, clinics and maternal clinics.

Rs. 3,000 help reduce the tension between the human elephants by promoting community involvement. PM states that steps to help secure elephant corridors have also been included in this programme.

Rs. 3000 million allocated to local government to avoid the disposal of waste in forests and protected nature reserves.

Business operation in the Colombo Port City Special Economic Zone to begin in 2021. A new regulatory structure to regulate these business practices is to be implemented in January.

The debate on the budget for the second reading will take place from 18 to 21 November, following the presentation of the budget speech by the Prime Minister.

The vote on the second reading will take place at 5.00 p.m. on 21 November. The sessions of Parliament will be held from 9.30 a.m. to 5.30 p.m. from the 18th to the 20th.

The Committee Stage debate will begin on 23 November and will end on 10 December. The vote would then take place at 5.00 p.m. on 10 December.

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Full Video of Budget Speech Click

PM Full Statement