• The government has set challenging fiscal targets for next few years with budget deficit ratios being 5.2%, 4.5% and 3.8% respectively for 2014, 2015 and 2016.
  • Government is making a conscious effort cut down the debt exposure by bringing down the debt to GDP ratio to 65% by 2016 from its current figure of 79%.
  • The government targets to achieve revenue to GSP of 14.8% for 2014 compared to 13.8% in 2013.
  • 2014 budget has increased the foreign financing portion to 46% of the total financing compared to 29% in 2013 budget.
  • The budget targets to raise about USD 1.5bn in the foreign bond market to finance the development projects.

The government targets to lower fiscal deficit by raising the revenue collection by broadening the tax base but without cutting back on the expenditure. It has further increased expenditure on public investment by 32% strengthening the growth prospects. 





Budget Impact for Listed Counters


Banking & Finance
Nation Building Tax (NBT) to be extended for banks and finance companies. NBT is 2% payable on gross turnover. Negative

During the segregation of composite insurance companies by 2015 as per the insurance regulations, continuation of the business and the tax neutrality position will be provided for carried forward losses, set off of unabsorbed VAT, set off of ESC, and transfer of assets and the continuation of the claimability of depreciation allowances. Positive

Comprehensive assessment of the performance of the plantation companies. A credit scheme with 8year maturity and 6% interest for plantation companies with sound performance, provided the planation to replant an agreed extent, and are committed to ensure social development of its plantation workers and increase the volume of its value added tea exports. The banks will earmark around Rs. 500 million for this development loan scheme in 2014. Provisions of existing leases will be suitably amended incorporating new conditions necessary to ensure the development of the sector. Positive

Introducing a pricing formula based on the cost structure in place of a price control on poultry to regulate pricing, which will reduce the volatility of the profitability of the industry. Positive

Food and Beverage
VAT exemptions for import of liquid milk or powdered milk will be removed. Importation of 20,000 high quality cows to promote small and medium dairy farms. A special loan scheme at an interest rate of 8 percent will be implemented in support of SMEs in the dairy sector. Companies which source milk locally may benefit from the initiative to discourage dairy imports and encourage local production. Positive

Telecommunication levy to be increased to 25% from 20%. The concessionary rate of 10% applicable on the services provided through Internet /broad band, to facilitate IT and BPO sectors will remain unchanged. Negative

The tax-free threshold applicable for VAT on supermarket scale retail trade to be reduced to at Rs. 250 million per quarter from Rs. 500 million. VAT exemption is limited to 25% of the total turnover. Negative

Motor vehicle depreciation schedule applied at the point of import for the calculation of Customs based taxes will be revised (stricter) to prevent under valuation. This may push the costs of importing a used motor vehicle, which in turn may increase demand for brand new vehicles. Positive

There have been several infrastructure expenditure proposed in the budget including, a USD 1,200 million credit facility from the Asian Development Bank to connect the national road network to provincial and Pradesheeya Sabha roads, construction of 50,000 new housing units in 15 locations to house all families currently living in temporary shelters and 50,000 housing units to replace poor quality housing available in the plantation sector. Positive