* Nine percent interest assured on EPF bonds

*That is anyway interest paid on average in the past

*As a result, DDR impact on contributions minimum

• Sri Lanka reports Rs.625bn budget deficit for 1Q, up from Rs.484bn a year ago
• Revenue grows from Rs.446.9bn to Rs.635.3bn primarily driven by increased tax income
  
• Economy in 1Q contracted by 11.5% after shrinking a record 7.8% in 2022

Barely into a year since the present administration opted for an International Monetary Fund (IMF)-assisted fiscal reset by raising taxes and rationalised spending, the budget is still running a higher deficit than a year ago, the data showed.
Sri Lanka raised taxes across the board, ended exemptions and introduced new taxes such as Social Security Contribution Levy while suspending big time spending to plug the fiscal hole, which many repeatedly claimed was the root cause for the economic crisis last year.

Despite implementing significant changes in economic management approximately a year ago, the country continues to face challenges in reducing its budget deficit.
According to the most recent data available up until March 2023, the budget deficit for the first three months amounted to Rs.624.8 billion, a slight increase from Rs.484.3 billion during the same period last year.

As expected, the country witnessed growth in revenue from Rs.446.9 billion to Rs.635.3 billion, primarily driven by increased tax income.
However, this growth was hindered the higher tax rates and the prolonged, significant decline in the overall economy, which seemed to have undermined the full potential of tax collection.
The economy in the first quarter contracted by 11.5 percent after shrinking a record 7.8 percent in 2022, when the country ran out of its foreign exchange and other supplies, firing inflation and interest rates to insurmountable levels. The economy is believed to have exited the recession in the second quarter, which ended last week, providing perhaps some fillip into the tax incomes, helping to cut the deficit in the remainder of the year.

But with true prices and interest rates still remaining at red-hot levels, alongside excessive taxes both on businesses and personal incomes, a fast turnaround in spending by the two groups could take longer than anticipated.

 Multilateral agencies still expect the overall economy to contract in 2023 although the second half could register a recovery.As the interest rates are expected to come down, it is likely that credit flows will resume, benefiting the real economy. However, in order to unlock the full potential of certain sectors, it will be necessary to implement tax cuts by next year. This measure will help alleviate constraints and provide the necessary boost for those sectors to thrive.

Sustained growth in tax incomes and economic growth cannot be expected in an economy where the tax rates are restrictively high, specially when so-collected taxes aren’t providing the taxpayers a return by way of improved services from the government with efficient and less corrupt public service, better infrastructure and less red tape.

DN

Foreign Minister Ali Sabry who recently visited China said he held talks with Sinopec and it expressed keen interest in setting up an oil refinery in Sri Lanka.

The All Island Canteen Owners' Association (AICOA) urged its members to hit anyone with hot water, waste water or with their fried rice mixture pan if they refuse to pay their bills.

A special programme organized by the International Centre for Foreign Studies (ICFS), was held at the Cinnamon Grand Hotel to issue spot admissions to students seeking higher education in foreign countries.

Air China resumed services between the Bandaranaike International Airport (BIA) Colombo and Chengdu Tianfu International Airport with three flights a week from Chengdu-Colombo-Chengdu yesterday (3), Airport and Aviation Services (Sri Lanka) (Private) Limited (AASL) said.

• President Wickremesinghe is yet to recommend a suitable name to the Constitutional Council to appoint the 36th IGP
  
•  The post of IGP remains vacant since June 26, 2023

Attackers in France tried to set fire to the home of a suburban Paris mayor's home overnight and fired rockets at the official's fleeing wife and children.

Two people have been killed and another 28 injured in a shooting in the US city of Baltimore, Maryland, police say.

In what appeared to be a breakthrough in the restructuring of external debts, China has pledged to fully cooperate in the process, and Finance Ministry Secretary Mahinda Siriwardane will travel to Beijing soon to work out nitty-gritties, Daily Mirror learns.

A special discussion regarding commencement of direct passenger flights from Tel Aviv in Israel to Katunayake was held between the civil aviation authorities of the two countries recently, which was chaired by Ports, Shipping and Aviation Minister Nimal Siripala de Silva.

Strengthening Sri Lanka’s reserves position, reserves surged to USD 3.5 billion in May 2023 from USD 2.8 billion in April 23 and USD 2.7 billion in March 2023.

A Russian cargo plane arrived at the Bandaranaike International Airport (BIA) last night to take back the elephant Muthu Raja which was donated by Thailand to Sri Lanka, the Airport Duty Officer said.

At least 25 people, including three children, were killed and eight others injured when the bus they were travelling in caught fire on an expressway in Maharashtra early this morning.

A 100-metre distance of the Rajagiriya Road will be closed till July 04 due to a pipe-laying activity for the Ambatale water supply project, the National Water Supply and Drainage Board (NWSDB) said.

A 100-metre distance of the Rajagiriya Road will be closed till July 04 due to a pipe-laying activity for the Ambatale water supply project, the National Water Supply and Drainage Board (NWSDB) said.

The Ceylon Petroleum Corporation (Ceypetco) has revised fuel prices effective from midnight on Friday (June 30).

Highlights proposed DDO’s limited scope in addressing fragile state of country’s budgetary situation

Sri Lanka's only specialist in Pediatric Radiology has left the country, Dr. Ashoka Gunaratne of the Specialist Doctors' Association said.

Addressing the media, he said earlier it was estimated that at least 4,000 specialist doctors would be required for the health sector by 2024 and 2025.

The Ceylon Electricity Board (CEB) said has settled all its payment arrears that were due to rooftop solar panel customers up to April 30.