2023 Budget: Wickremesinghe Economics & Post-Rajapaksa Politics 

- colombotelegraph.com

By Rajan Philips

Rajan Philips

The 2023 Budget presented by President Wickremesinghe on November 14 is notable for a number of unique ‘firsts.’ Ranil Wickremesinghe is the fifth President to sequester the finance portfolio instead of assigning it as an exclusive portfolio to a cabinet minister, but he is the first to prepare and author most or the entirety of the budget speech. The budget is shot through and through with Wickremesinghe economics, or Ranilonomics as it is now commonly called. Mr. Wickremesinghe is not an economist by training, so he has no disciplinary fetters to constrain him freely bandying his economic philosophy. A philosophy, if not moss, which he has auto-gathered over his upbringing years at his erudite home and long years labouring as a cabinet minister and parliamentarian among lackluster colleagues. 

Optimisms and Omissions

The President’s idiosyncratic and ideologically pragmatic fingerprints are everywhere in the budget. The budget is also strikingly optimistic both in regard to economic expectations and in its assumptions about Sri Lanka’s factor endowments. And there are significant omissions of details on the pressing issues of the day – timelines for, and even the likelihood of, securing IMF assistance and debt restructuring; stock and price status of food supplies and backup plans to deal with current and future scarcities; and the state of affairs in the petroleum sector which is becoming a costly circus under a runaway cabinet minister. 

A not so curious omission is the deafening silence on the utilization of Port City in the new economic order that the President is assiduously promoting. It is no longer curious because after nearly two decades of political gestation, environmental fudging and  oceanic landfilling, the vaunted Port City is virtually dead on arrival. Then there is this in the budget to feed one’s curiosity – the President’s proposal “to establish an Institution to undertake and facilitate research on the history of Sri Lanka. Accordingly, I propose to allocate Rs. 50 million for this purpose.” Go, figure. 

At the same time, President Wickremesinghe’s budget is a politically clever piece of work in the most trying circumstances. It straddles, rather than balance, the restructuring demands of the IMF and the livelihood requisites of Sri Lanka’s growing poor. It even placates the army by downsizing through retirement. The President made a point in repeatedly emphasizing that it was time for governments in Sri Lanka to move away from making ‘popular’ decisions to making ‘right’ decisions. To make a different point, it is time political leaders moved away from blaming the people for their so called popular decisions. The President deftly sidestepped the issue to say whether the decision of the Gota-regime to do away with taxes was meant to be popular among the people who are now being called upon to pay the price for it with interest. Or was the decision on organic fertilizer meant to be politically unpopular and economically right? 

Welfare economists are familiar with the false dichotomy between equity and efficiency in economics. Equity with efficiency is amply possible, and efficiency without equity is socially unsustainable. Ranilonomics appears to be expressing the same falsehood in popular terminology. The budget is also clever in totally avoiding any mention of the Rajapaksas and their contributions to Sri Lanka’s debt and economic distress. Instead, the President picks on SWRD Bandaranaike using a quote from Singapore’s Lee Quan Yew that has been a longstanding table talk topic among Colombo middle classes. He even adds a measure of self-deprecation by alluding to the shortcomings, if not failures, of the 1977 economic changes under JR Jayewardene and calling for a new direction defined by the so called Social Market Economy. 

Politics of Passage

There is a political reason for avoiding any blaming of the Rajapaksas in the budget speech. The reason is the uncertainty of the budget securing a majority vote in parliament. And here is another significant ‘first’ for Ranil Wickremesinghe’s first budget, for never before has a budget been presented by the leader of a political party that has only a single listed MP in parliament. This is another quirkiness of post-Rajapaksa politics, and President Wickremesinghe’s reluctance to canvass a majority in parliament for the budget without including the support of MPs who are loyal to the Rajapaksa family. 

Conflicting reports have emerged connecting the return on Sunday (November 20) of Basil Rajapaksa to the passage of Wickremesinghe’s budget in parliament. Initial reports indicated that Mr. Rajapaksa on his return will twist MP’s arms to get a two-thirds majority for the budget in parliament. Other commentaries have since been aired that Basil Rajapaksa’s SLPP can barely muster a quorum in parliament, let alone secure a two-thirds majority for the Wickremesinghe budget. According to SLPP loyalists, more than canvassing for the budget, Mr. Rajapaksa will focus on revamping his party to face the local government elections, which are due before March 2023, but the President and the Prime Minister are in no hurry to see them go ahead. 

After the impressive vote in parliament to pass the 21st Amendment, the President could have tried to piggyback his budget on the same coalescence, and get a two-thirds majority for a second time while isolating the Rajapaksas yet again. But that would have required a broader consultation with multiple parties in parliament and involved, by his reckoning, potential exclusion of ‘right policies’ and inclusion of ‘popular policies.’ Ideally, the President could have facilitated a ‘consociational budget’ by nominating/appointing an outside technical expert as Finance Minister to build parliamentary consensus on details while providing overarching leadership as President. Such an exercise would have won broad political support at home and significant credibility abroad.

As has been his wont, the President wants to make his own budget and manufacture his own majority in parliament. No matter what and how much cut to size they are, the Rajapaksa cohorts will be voting for the budget. The President is also trying to fish for maximum votes among the Tamil, Muslim and Upcountry Tamil MPs by his timely casting of the reconciliation net. For the rest, he will count on the country’s political mood that will not easily approve of the budget being defeated in parliament by opposition MPs. To prevent an unseemly split in its ranks, the SJB may give a free vote to its MPs which would allow those who want to vote for the budget to go ahead. Opposition MPs in general who do not like the budget may opt to abstain rather than vote against, and allow the budget’s passage. The JVP can stand in its lonely eminence and vote on principle against the budget without affecting the outcome of the vote. 

Come to think of it, the President would seem to have been able to stabilize himself politically far more than he and his government have been able to stabilize the economy. He will keep his detractors guessing on the timing of the local government elections, and more so about dissolving parliament and calling for a general election. He might also be testing the political wind going by the inspired rumours that a presidential election (not due before November 16, 2023) might be held before the next parliamentary election (which could be as late as August or September 2025). But November 2023 is an eternity in politics and anything can happen between now and then, including a second Wickremesinghe budget.     

The post 2023 Budget: Wickremesinghe Economics & Post-Rajapaksa Politics  appeared first on Colombo Telegraph.

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