Cabinet approves massive relief package worth Rs. 229 billion to people reeling from the soaring cost of living; payment of Rs. 5,000 monthly allowance from January to public servants, pensioners and differently abled soldiers ; Additional Rs. 1,000 per Samurdhi family; “Govt wll initiate talks with the International Monetary Fund, the World Bank, the Asian Development Bank as well as major donors for debt relief.” says Finance Minister Basil Rajapaksa

By Nisthar Cassim

The Cabinet of Ministers yesterday approved a massive but critical relief package worth Rs. 229 billion to people already reeling from the soaring cost of living, with the hope that the stimulus will invigorate the economy especially via the local economy including agriculture among others.

Finance Minister Basil Rajapaksa told a hurriedly convened media briefing at the Treasury post-Cabinet meeting that President Gotabaya Rajapaksa, Prime Minister Mahinda Rajapaksa and the rest of the Cabinet were fully aware of the difficulties being faced by the people owing to factors influenced by the COVID pandemic.

“The President previously made several requests for the Cabinet to consider granting relief to the people amidst the challenging conditions. We have done so via multiple moves since the onset of the pandemic and we felt the time was right to come up with this latest stimulus,” Basil added.

The package includes a Rs. 5,000 monthly allowance from January for all public servants amounting to over 1.4 million, over 600,000 pensioners and differently abled soldiers – all of which will cost Rs. 87 billion; and Rs. 1,000 additional payments to 1.7 million Samurdhi families. The Government will request the private sector to follow suit with a proportionate increase. Basil said Labour Minister Nimal Siripala de Silva and the trade unions and Employers Federation will meet shortly to discuss the matter. “We hope the employers will also support private sector employees,” the Finance Minister added.

Cabinet also approved the move to increase the guaranteed price for paddy from Rs. 50 to Rs. 75 per kilo if the Maha harvest was lower by 50% due to the delay in or non-application of fertiliser. “Whilst Maha season has seen satisfactory cultivation, there could be a 20-30% drop in harvest. The higher guaranteed price will be paid even if the harvest is lower by 50%,” Basil said, adding that the subsidy would be carried out without a corresponding increase in rice prices for consumers.

Emphasising that the continuity of the home gardening initiative initiated soon after President Rajapaksa assumed office was the best solution for the current food shortage and high prices, Cabinet decided to pay Rs. 5,000 for households with a land area of below 20 perches to incentivise cultivation of fruits and vegetables and Rs. 10,000 for those with land over 20 perches. The scheme costing Rs. 31 billion will be administered through local governments.

Basil also said that the estate community would be provided with subsidised wheat flour amounting to 15 kilos per month at Rs. 80 per kilo as against Rs. 120 per kilo sold at present. All EPF registered plantation workers will qualify for this scheme.

Another move approved by Cabinet was to remove all taxes and levies on essential goods and drugs.

Basil said the Government would use funds within the 2022 Budget for the stimulus and that no new taxes would be imposed.

“We came to office promising taxation will be broadly consistent for three years and we will continue to do so,” the Finance Minister said, adding that the Government will focus on enhancing State revenue via an expanding economy.

He also said that the foreign exchange crisis will be addressed via increasing exports as well as inward workers remittances. The Finance Minister expressed confidence in these two measures on the basis that tourist arrivals in 2021 improved to nearly 200,000 with improved outlook for 2022 whilst the number of Lankans migrating for employment rose to 220,000 by end-2021 after a two-year lull and the number will increase to 300,000 in the next few months.

“People can say anything, but we have endeavoured to stabilise and strengthen the economy sans corruption,” Basil said, adding that in the past six months austerity measures enabled an expenditure saving of Rs. 53 billion in the public sector.

Commenting on the 7 billion public debt servicing challenge in 2022, the Finance Minister said Cabinet approved the decision to initiate talks with the International Monetary Fund, the World Bank, the Asian Development Bank as well as major donors such as China, Japan, India, the US and the European Union for debt relief.

“We are not going for a bailout from the IMF, but we will have talks. We are engaged in Article 4 Consultations with the IMF at present and it will release a report shortly. President Rajapaksa also met the World Bank officials. Both institutions commended the Government’s highly successful COVID vaccination drive,” Basil added.

The Finance Minister said the $ 500 million maturing International Sovereign Bonds (ISBs) would be honoured in mid-January whilst the Government will explore options on the $ 1 billion worth of ISBs maturing in July. “Our ongoing measures will boost investor confidence,” he added.

The Finance Minister hinted that artificially capping the US Dollar exchange rate at Rs. 203 had helped the country, as a depreciation would adversely impact the value of the country’s debt stock. He also hinted that the fixed rate arrangement on the US Dollar gave room for the Government to come up with the latest stimulus package.

Courtesy:Daily FT