Govt. confident of raking in Rs 241 billion in import taxes/ tariffs during 2012

With imports poised to go up

By Hiran H. Senewiratne

The government is confident of collecting of Rs 241 billion as import taxes/ tariffs during 2012 because imports would likely go up during the year due to high economic development activities, says  says K. M. M. Siriwardana, the Director General of the Department of Fiscal Policy, Ministry of Finance and Planning.

 "The prevailing forecast had indicated that Sri Lanka’s imports will go up during this year due to enhanced economic activities. Therefore, many investment and intermediary goods would be imported on a large scale into the country, he predicted.

 Siriwardena said that fiscal policy will continue to support growth. The revenue growth target of 20.1% in 2012 is optimistic given external headwinds, and the ambitious deficit target of 6.2% of GDP may be overshot, as increased spending may be needed to support growth.

 With the widening of the trade gap to nearly US$ 2 billion, Sri Lanka’s expenditure on imports grew 78 percent in November 2011 compared to the previous year, the Central Bank reported last week in its External Sector Performance Reviews.

In November 2011, earnings from exports grew by 11.6 percent to US$ 879 million, while the expenditure on imports increased by 78 percent to US$ 1.981 billion compared to that of November 2010.

However, in the first 11 months of 2011, the country’s exports grew 22.2 percent to US$ 9.58 billion and expenditure on imports grew by 53.2 percent to US$ 18.42 billion to widen the trade gap by 111.3 percent to US$8.84 billion.

By end November 2011, gross official reserves stood at US$ 6.2 billion sufficient for 3.8 months of imports. The reserves have dropped from a record reserve of US$ 8.1 billion the Bank had at the end of July 2011.

The Central Bank’s decision to defend the rupee currency in the latter half of 2011 at a cost of US$2.6 billion in foreign exchange reserves since July, has raised concerns in the International Monetary Fund (IMF) which has sent a mission to Sri Lanka this week to discuss the US$ 2.6 billion Stand-By Agreement.

The increased demand for investment goods by the government’s infrastructure projects, a majority of which were funded by foreign loans, and higher intermediate and investment goods import by the private sector have contributed to the staggering trade deficit in November, the Central Bank reported.

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