Sri Lanka: Policy Matrix, 1990–93
|Policy Areas||Objectives||Strategies and Measures||Timetable|
|1. Stabilization program|
|a. Government expenditure||Contain public expenditures.||Eliminate most bus subsidies.|
Reduce subsidies to railways in line with restructuring plan, assisted by World Bank.
Implement freeze on filling vacancies in the public sector, except for limited cases of essential technical and professional cadres.
Eliminate subsidies on wheat flour and rice and, accordingly, the price of wheat flour and rice will not be reduced.
|b. Monetary policies||Reduce excess liquidity in the economy.||Improve institutional framework for monetary control.||1990|
|c. Exchange rate||Increase export competitiveness and reserves.||Allow for a higher degree of market determination of the exchange rate.||Each year|
|2. Public sector reform|
|a. Administrative reform||Improve the efficiency of the civil administration and reduce its cost to the Government.||Reduce Overstaffing in the public sector and rationalize civil administration.|
Implement the first round of the retrenchment plan and formulate the plan for a second round to be implemented in 1991.
Establish an expenditure control system to monitor and control the use of central government provisions to the provincial councils.
|b. Tax reform||Strengthen tax administration.|
Broaden tax base, improve tax elasticity, and simplify the tax structure.
|Establish a unit for controlling compliance of the largest taxpayers. Extend coverage of a new system gradually to all taxpayers.|
Introduce measures taking account of the recommendations of the National Taxation Commission, while broadly preserving revenue neutrality.
|April 1991 1992–93|
|c. Public expenditures||Contain government expenditures and improve cost effectiveness of welfare expenditure program.|
Increase economic returns to public investment.
|Limit the cost of the welfare programs to 2.5–3.0 percent of GDP.|
Improve targeting of the midday meal program and keep costs at SL Rs 1.5 billion in both years.
Reduce number of households in the food stamp program to 1 million households and increase value of food stamps for households in the program. Limit costs to SL Rs 3.2 billion in both years.
Improve targeting of welfare programs, reduce fiscal costs, and make programs more production oriented.
Maintain public investment at about 9 percent of GDP, protect a core investment program against adverse fiscal developments.
Establish a monitoring mechanism to enable the Treasury to monitor at any time existing staff strength of each department, ministry, and nongovemment institution.
|d. Public enterprise reform||Reduce the size of government and devolve to the private sector all activities for which there is no reason for public sector involvement.||Privatize four enterprises (Ceylon Oxygen, Dankotuwa Porcelain, Hotel de Buhari, Veyangoda Textile Mills).|
Move toward privatization of two other textile mills and state distilleries.
Commercialize remaining public manufacturing enterprises.
Convert the Telecommunications Department into a public liability company.
Action plan for restructuring sugar industry.
Restructure sugar industry in line with measures proposed by the AsDB study.
|e. Tree crop sector||Increase productivity and financial viability in the tree crop sector.||Formulate and agree with the World Bank on a restructuring plan for the state-owned plantations.|
Implement first stage of the plan.
|3. Industrial and trade reforms|
|Tariffs||Increase international competitiveness of the export sector and economy’s export orientation.||Reform quota allocation system for garment export quotas.|
Implement the recommendations of a high-level committee to reduce excess paperwork and administrative costs.
Formulate a plan to increase the role of the private sector in importing and marketing rice and fertilizer.
Reduce maximum tariff from 60 percent to 50 percent.
Introduce four-band system of tariffs.
|4. Sectoral policies|
|a. Finance sector||Improve the conduct of monetary policy through market-oriented instruments.|
Strengthen bank supervision.
Reduce intermediation costs and improve credit delivery.
|Prepare monthly assessment of monetary conditions and establish a special unit to conduct reserve money programming.|
Allow more efficient market determination of interest rates by:
• Reviewing procedures for selling Treasury bills;
• Introducing new procedures for selling Treasury bills;
• Reviewing Central Bank refinance facilities;
• Reviewing reserve requirements;
• Maintaining bank rate at appropriate level in relation to Treasury bill rate.
Introduce more vigorous loan classification and provisioning guidelines.
Introduce enforcement procedures for the effective implementation of the Debt Recovery Act.
Implement recommendations of the 1989–90 Central Bank working group on the financial sector.
|b. Agriculture||Diversify output in view of high-value export crops.||Rationalize extension services.|
Improve cost recovery in irrigation.
|c. Energy||Improve efficiency of the existing system.||Implement energy-saving measures.|
Maintain realistic prices.
Rationalize the distribution system and improve management of billing and collection system.
|d. Social sector||Maintain existing standards in health and education and improve the management of the system.||Implement programs supported by the World Bank in health and education and maintain adequate budgetary provisions for these two sectors.||1990|