COLOMBO: An international award won by Finance Minister Ravi Karunanayake could not have come at a more appropriate time. Even as the Sirisena-Wickremesinghe government is being badgered from all sides for alleged non-performance, London-based magazine The Banker has declared Sri Lankan Finance Minister Ravi Karunanayake as the Best Finance Minister in the Asia-Pacific region for the year 2016.
The 90-year-old magazine, which annually evaluates over 5,000 banks, honoured Karunanayake for his efforts to steer Sri Lanka into a new era of economic reform and a change of mindset.
The Banker noted that under Karunanayake’s leadership, Sri Lanka had been working towards fiscal consolidation. Sri Lanka’s budget deficit dropped from 7% ,when Karunanayake took office in January 2015, to 5.4% in 2016 – a significant achievement though it is below the targeted expectation of 5.6%.
According to the latest fugures, Sri Lanka’s total government revenue grew from LKR 1205 billion in 2014 to LKR 1,461 billion in 2015. Tax revenue rose from LKR 1,050 billion to LKR. 1,356 billion in the same period.
This is crucial for Sri Lanka, which has a very low tax revenue-to-gross domestic product ratio.
To raise tax revenue further, Parliament passed a bill to increase value-added tax from 11% to 15%. Karunanayake was also keen to continue simplifying the tax system as well as change people’s mindset towards taxes. But even without expected revenue from the increased VAT due to its late implementation, the Finance ministry was able to increase the national revenue to 13.5% the GDP in 2016 from 11.4% in 2014, thus making it possible to cover recurrent expenditure.
Karunanayake inculcated in the minds of the people that paying taxes is not something bad, but a must for the country. As a result, Sri Lanka’s tax records have grown from having 700,000 files in January 2015 to having 1.4 million today.
The Banker says Karunanayake secured a USD 1.5 billion International Monetary Fund (IMF) loan program to avoid a balance of payments crisis, replenish reserves and rebuild confidence among international investors.
Sri Lanka’s latest bond issues in the international capital markets suggest Karunanayake has indeed reached his objective. In 2015, the sovereign issued a USD 1.5 billion dual-tranche note – its largest since 2007. A year later, it printed a second bond of the same size, with order books of $US 6.6 billion, despite market volatility after the UK voted to leave the EU.
After a visit in September 2016, the IMF said Sri Lanka’s tightening of fiscal and monetary policies had been effective and that it met the IMF program’s targets through to the end of June 2016.