Budget Woes; How Soon Will Titanic Touch The Bottom?

By Rusiripala Tennakoon –

The Minister of Finance, Sri Lanka, who is also the Country’s President, made a gloomy forecast about the economy while the country awaits resurrection from the economic calamity it has fallen into. President’s audacious use of simile and metaphor since his takeover of the Finance Ministry portfolio, indeed have been both shocking and hilarious. Once he compared himself with the peasant girl Grusha in Samuel Beckets Caucasian Chalk Circle, crossing the hanging bridge carrying someone else’s child. Yesterday at the A.G.M. of the Sri Lanka Tea Factory Owners Association he let off another bombshell revealing a worst scenario on the eve of his maiden budget to the Parliament misquoting a historic tragic event with his own interpretation. He declared that he was made to take over a Titanic after it hit the iceberg. Strange, why he used this metaphor because we know not of such a situation of handing over a sinking Titanic to a new skipper. Going a little deeper, it means he himself knew that it is going to sink in no time (along with him) and those who made him a skipper also knew that he too will sink with the Titanic. 

Status of the economy apart, the others mentioned are possible realities. According to THE PLAY quoted, in his first simile, Grusha was claiming motherhood to someone else’s child and the unruly Judge Azdac ,( whom we can for the sake of comparison and symbolism equate to the people of this country, waiting to give the judgement),  may determine who the true culprits are and deliver the final Order accordingly. Although the Titanic sank in the mid seas there is no way for the country to befall such a disastrous fate. The bankruptcy that the government itself declared and the inflation they themselves created are due to system defects that could be addressed. There is no need for anyone to scare the country with a gloomy and forbidding picture  because it is more a  creation than a happening. If the causes are addressed and the direction is carefully maneuvered, any ship caught in a storm could be made to sail safely. Only the skipper should be more positive and realistic with a sensible and practical approach and ideas.

Ironically, Mr. Ranil Wickremesinghe’s Budget is to be presented to the Parliament during the same month a few days after the historic Guy Fawkes day. According to records an  English Conspirator in the 17^th century, planned  a Gun Powder plot unsuccessfully, to blow up the Westminster Palace with the parliament inside. Political rivals here are hinting about a more democratic attack to defeat the budget. Beyond such Political manifestations and empty threats there lies a cardinal factor which is of great importance to the people of this country. Unlike during normal times, people are seriously concerned about the delivery from this budget to end the  economic crisis , with wide spread expectation that the situation the country is facing would be solved soon. By Whom? And, How? are the painful concerns they are plagued with. That is why this kind of tales of woe are causing further alarm.

Now to brass tacks. What did the FM spell out from his package of plans to resolve the current issues. In his summarized address he mentioned the following; he said, the priority had been to conserve foreign exchange and limit imports emphasizing that it did not work initially but ok now. Then he stated that as the revenue is dried up measures have to be taken to increase revenue and this too is in the scope of the plans envisaged. Then he has expressed his concerns about the need to ensure sufficient steps to wipe out the mal-effects arising out of the self- declared Label of Bankruptcy. As the final and only possible way out he is relying on the pending IMF bail- out package.

The outlined steps in his plan to resolve these issues include the following. 

The import controls will be continued, along with other measures to conserve foreign exchange. In order to boost the FE reserves, he intends to sell off some of the State-Owned Enterprises and realize 3 to 4 Billion dollars.  Justification for this is his plan to move towards a complete market economy. About increasing revenue, he stated that there is no way out other than resorting to raising taxes and that too not smoothly as a gradual process due to the pressing conditions. He referred to the  steep rising of the inflation and maintained that it is a Global Trend. 

No further elucidation is required to imagine the pending consequences and the extremely negative outlook of the economy ahead of us. The steps suggested too are nothing more than short-term survival plans. While accepting that we have to adopt short-term measures to address the current impasse we cannot dispense with the need to look forward towards more dependable and sustainable  means and sources to strengthen the economy in the long run.

A budget helps create financial stability. While preparing a plan as to how the expenditure is to be met it also provides information as to how  income is generated. There are two main ways for Financing of the expenses. Income generated through taxation: TAX and by resorting to borrowing: DEBT. Debts have to be repaid while tax income becomes more acceptable comparatively in terms of justice and efficiency. At times when Public Debt figures have skyrocketed proportionate to national Income, governments will be compelled to resort to Taxation as the only other available option. The Central Banks take measures to regulate and redistribute capital. They can resort to print and issue currency in situations where taxation is inadequate and borrowing pause problems.

Finance Minister is addressing the current impasse facing a situation of ‘a point of no return’ saddled with the consequences of a mishandled economy over a long period of time contributed to by regimes he himself was associated with. He is caught up in a predicament where many uncertainties are dominantly affecting a smooth passage. Even his high hoped refuge seeking of the facilitations by IMF, that he is looking forward to, with desire and confidence, dependents upon several factors beyond our control. IMF is insisting on an acceptable program of restructuring external debts. Some of these debts are from different countries. International political rifts and concerns play a decisive role for these countries to come to a consensus on a restructuring program, as we have seen so far. 

While the considerations of the experts and the policy makers remain focused on such issues, the general public and the citizens are anticipating policy changes that would provide relief from their  current unbearable hardships. They expect and wish the budget to address the following which in their laymen opinion, believed, would contribute towards the building of a sustainable economy.

Taxation proposals are already under heavy public criticism and some of the steps proposed are not constructive OR conducive to an environment of  smooth business operations.

Eg.The agricultural export sector which deserves tax holidays are brought into the net indiscriminately. Instead, if the Estates are given tax concessions with attached conditions to utilize this component to improve the living standards of estate labour, it will be a positive factor towards improving productivity while also helping to resolve long neglected humanitarian issues. 

* The proposal to sell the SOEs indicate the government’s inability to effectively improve their performance. Any investor will do so if they feel there is a possibility to turn around these to profitable ventures improving their efficiency. Suitable Reforms programs will be a better option in place of selling them, both socially and economically. 

Eg. The vast extent of unutilized land resources lying idle belonging to State, under the LRC Divisional Secretaries and SPC will be a good source of attracting foreign and Local capital infusion for development of agricultural crops and agro- based industries etc.

* Improving, introducing and assisting the Energy sector has to be addressed aggressively to generate sufficient power specially through renewable sources on a priority basis. 

* Revival and recuperation of defuncted factories and state industrial plants by offering them to investors with no political interference,

* Raw material resources with a potential of processing for export should be permitted into the country  freely, 

* Promoting solar energy in all public spaces freely available such as school roof tops , 

* local government bodies to be directed to start suitable waste management units that will produce energy as power and compost as fertilizer, as by-products of the process, with funding provided at highly concessional rates of interest from LLDF, 

Such more inward looking policies would serve as supplementary sources of support  for the economic revival programs that will be launched under the budget proposals.

Country is looking forward to a saner and sober parliamentary response to the budget in a spirit of National Interest sinking all other differences. 

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