Sysco LABS Sri Lanka
The budget comes at a volatile time for the country and its economy. It’s a short-term revenue fix with increased taxation, which understandably, the government needs to pursue at this time.
However, there are many aspects the budget has to balance in terms of economic recovery without constricting industries and sectors such as IT, which are crucial forex earners and necessary for future socioeconomic growth.
At present, the IT sector is impacted by the loss of talent to other countries due to the prevailing socioeconomic environment. This is in addition to disruptions to operations caused by inconsistent electricity and fuel supplies, and so on.
The import bans further compound these problems by making it difficult and costlier for companies to access the technology imports that are needed for business continuity. Together with the increase in different components of taxation, these factors combine to reduce Sri Lanka’s desirability as a tech hub – for both the IT workforce and international clients.
If left unremedied, this will result in a migration of clients to more stable and viable sourcing locations – leading to a decrease in forex revenue. The interim budget does not offer adequate solutions to the issues that impact the IT sector’s performance and sustainability.
2023 budget expectations
The 2023 budget must address the public sector’s high expenditure. The private sector is the nation’s engine of growth but imposing high taxes on it and using that revenue to prop up inefficient state owned enterprises (SOEs) is not the way forward.
Most SOEs must be privatised or at a minimum, be restructured and listed on the stock exchange – so that they can be run and scrutinised like any private company. We must change our welfare mentality and minimise the negative impact of unproductive SOEs on the national economy.
I expect the November budget to deliver a framework that empowers export sectors as they’re key to economic revival This applies to the IT sector especially, because our core export is knowledge and therefore, we are neither capital intensive nor import dependent – so our value added per employee is higher than in most other industries.
The 2023 budget should allocate funds and announce measures to significantly improve socioeconomic conditions to curtail migration, and reduce the talent attrition rates that currently affect different industries.
It should address short-term challenges while also making provision for a midterm recovery and long-term socioeconomic growth. I expect the focus to be on further developing the IT sector. Budget 2023 should protect and promote the sector because it’s vital for the country vis-à-vis the PESTEL framework.
Overall, I think the budget must prioritise sustainable revenue generation and management, as well as socioeconomic stability, while safeguarding forex generators such as the IT sector. It has to introduce favourable measures for business continuity so we can emerge from this crisis faster and stronger.
At present, the IT sector is impacted by the loss of talent to other countries due to the prevailing socioeconomic environment