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The Sri Lanka Government has introduced a series of measures designed to provide immediate economic relief to the people and help overcome short-term financial difficulties. The relief measures include the granting of an interim allowance of Rs. 1,200 per month for all government employees and Rs. 750 per month for all pensioners with effect from 1st October, 2001 pending the implementation of the recommendations to be made by the Salaries Commission, the Finance Ministry announced Friday. To give a boost to local industries, the import duty on essential raw materials identified by the Joint Inter-Ministerial Committee appointed in terms of a Budget proposal has been removed. A Finance Ministry official said that the measures were part of a package the government intended to provide in this year’s budget. The Sri Lankan economy which was adversely affected by the high defence expenditure and high petroleum prices, faced a further setback after the July terrorist attack on the Katunayake Airport. The prolonged drought, the power shortage, the slow-down in the world economy and the threat to the global economy after the terrorist attacks in New York and Washington D.C. have added to the country’s woes. In addition, high interest rates have affected local industries and production activities and high prices have increased the cost of living. The Ministry of Finance and Planning has already instructed the commercial banks to write-off loans of Rs. 20,000 and below, granted for paddy and banana cultivation, to give relief to small farmers affected by the drought. Commercial banks have been advised to grant possible relief to the smallholder tea sector borrowers who are affected by the drought. The Government also introduced a relief package for the tourism sector by granting an interest subsidy and rescheduling of loans. The collection of the cess on export of shrimp and prawn has been suspended effective from 20th August 2001 and the implementation of the Budget proposal to introduce a cess on export of fisheries products has been postponed. The Government also negotiated with international insurance and underwriting firms towards removing the war-risk surcharge on shipping and aviation imposed after the Katunayake attack. Security audits by independent auditors have commenced and the Government also provided the necessary financial facilities to reduce the insurance surcharges imposed after the attacks on Washington and New York. As a measure of relief to middle-income level people, the Diesel Vehicle Tax and Save the Nation Contribution Tax have been done away with. The National Security Levy has been reduced by 1 percent and the turnover tax on banking and financial institutions has been removed to reduce the high cost of borrowing as well as cost of production and cost of living. In order to provide relief to the local construction industry, the import duty on bagged cement has been reduced to 15 percent and bulk cement to 10 percent. With a view to supporting exports, duty rebates on exports have been increased and incremental exports would be rewarded. Stamp duty on LCs has been reduced to 1 percent to lower the cost of imports and borrowing. The Government plans to do away with the stamp duty requirement on LCs as well as on other financial documents by the year 2002. The personal income tax rate is also expected to be reduced to 15 percent from the next tax-year. With the recent reduction of interest rates, foreign currency lending for exporters is now available at 6 percent as opposed to 8 percent earlier. The Bank of Ceylon has already made an announcement to this effect. The Treasury bill rates have also been reduced by around three percent. Action has also been initiated to harmonise BOI/Non-BOI facilitation agreements. The Finance Ministry said that these measures had already resulted in some improvement in the stock market and that the proposed measures would further enhance the prospects for further economic improvement.
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