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Finance Ministry prunes ministries and department spending

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In a fresh fiscal policy stance of austerity measures, the Finance Ministry has cut down non-essential capital expenditure in ministries, departments and state institutions in a bid to save money during this economic crisis, a Ministry circular revealed.

Treasury Secretary Mahinda Siriwardene in a circular to government departments, provincial councils and statutory boards has ordered to cut controllable expenditure by at least 30 per cent with suggestions to curb spending, ranging from development projects, advertisement and publicity to overtime allowance.

It has also been directed to suspend all new projects and those that have been started and stalled due to lack of raw materials.

“Improving the government revenue is essential to control present financial crisis situation,” Mr. Siriwardene said adding that public expenditure will have to be controlled to save cash inflows for the most essential services for a certain period.

This austerity move comes close on the heels of Treasury findings that Sri Lanka spends too much on defense and spends its budget inefficiently. In fact, the government spends more on defense today than it did at the war’s peak – a finding that stands even when adjusting for inflation.

According to the Ministry analysis, it estimated that the government could gain a paradigm improvement in the level and quality of its security while cutting defense expenditure from 2.1 per cent of the gross domestic product (GDP) to below 1.5 per cent.

In the most efficient scenario, the government could significantly improve its security services while reducing defense spending to 0.7 per cent of GDP amounting to annual savings of Rs.466,62 billion.

The Ministry has recommended cutting Rs.5 billion from the allocation of Rs.12 billion made from 2022 budget for the ongoing construction work of the Sri Lanka’s Pentagon-styled Defense Headquarters building complex at Akuregoda, Battaramulla.

In addition, necessary action will be taken to totally slash the sum of Rs. 111.6 million set apart for modern technology and infrastructure facilities to strengthen national security.

It has also recommended cutting down Rs 20 million out of Rs 50 million allocated for infrastructure facilities at Kotelawala Defense University and Rs 40 million from the allocation of Rs. 50 million to its teaching Hospital at Werahera Boralesgamuwa.

Financial allocations allocated to Health and Education will not be slashed, a senior Treasury official said adding that with the proposed interim budget 2022, it is just about cutting down expenditure, to the bone where possible and transferring it to welfare of the poor and vulnerable people in the country.

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