Minister of Trade Bandula Gunawardena says the government is compelled to increase taxes or must obtain foreign loans to meet the state expenses.
Speaking to media in Colombo today, Minister Gunawardena said the present administration has to rely on three income sources to meet the expenses, since it has lost other income streams due to the coronavirus pandemic.
He said in addition to increasing taxes and obtaining foreign loans, the only other measure would be to sell state assets.
The Minister said a statement he made yesterday regarding state expenditure has been misinterpreted in media.
Minister Bandula Gunawardena claimed due to the COVID-19 pandemic, in 2020, state revenue stood at only Rs. 1,216 billion while expenses for state sector employees alone were Rs. 1,052 billion with a net balance of Rs.164 billion.
The Minister said additionally the government had to pay Rs.900 billion in interest for loan installments which is a staggering amount.
He said however the increase in state expenses is not a recent phenomenon.
Minister Gunawardena said all recent governments had a considerable annual budget deficit and it can only be covered by either increasing taxes, obtaining foreign loans or by selling state assets.
He said therefore despite demands for relief, in economic principles, the government should either obtain more loans or obtain funds through indirect taxes from the public.
The Minister said the current government is left with only these two choices.
Meanwhile, when questioned by media over the stance of the government to meet the demands of teachers, Minister Bandula Gunawardena said the present administration is not in a position to provide any salary increments at present.
He said due to the prevailing climate no country is able to raise salaries.
The Minister said since businesses have collapsed, the government has lost its revenue and therefore to facilitate salary increases it must take more loans.
Minister Bandula Gunawardena said however the country has almost reached the loan ceiling and will not be able to provide salary increases unless it obtains the required funds from the public itself.