By Dr Laksiri Fernando
The budget speech that Finance Minister Basil Rajapaksa delivered to Parliament on November 12, 2021 was quite structured with the following sections. This is a positive point.
2. “Global challenges”.
3. Our strengths.
4. The challenges ahead.
5. Policy synopsis.
6. Development of the national economy.
7. Income proposals.
8. Macroeconomic vision for the recovery.
But its content was the question because of the boasting, half-truths, contradictions, and unworkable statements. If the opposition really wanted to counter bad policies, weaknesses, mistakes, etc. budget, it could have used the same format. Democratic politics is not a “gang war” between government and opposition as it appears to be in today’s Parliament. Debates should be more critical on the wrong policies with alternative perspectives offered. .
In parliamentary democracies, there are “shadow cabinets” and “shadow ministers”. There should be a “shadow finance minister”. It is primarily its role to present counter-arguments, expose false data and criticize deceptive policies. The opposition should also have an “official website” where they can post counter arguments or challenge fiscal policies. Of course, it is also the duty of the media (as it is fairly done), academics and journalists to do the same critically and objectively.
A family preface?
The Preface rightly says: “We are perhaps passing through the most painful period of human civilization. This should mean environmental disasters, the Covid-19 pandemic and deaths, increasing poverty in poor countries and evolving economic crises around the world and others. Of course, these are challenges even in Sri Lanka. As a solution, he says:
“I first learned the concept of ‘meeting the challenges’ for the welfare of the public in my ancestral home in Madamulana. Rajapaksas are used to never being intimidated by challenges. MDM Rajapaksa, nicknamed the “Lion of Ruhuna”, who represented the second Council of State in 1936, is known throughout the country. He is my father’s older brother (loku thaththa).
If the Minister was serious about the public nature of the protests, he should not have given a purely family perspective on the subject. His phrase “Challenging the Challenges” is a common phrase in many languages and in quotes from many authors. Tracing it back to Madamulana may suit a speech by DM Rajapaksa, but not a preface to a budget speech.
It doesn’t stop there. In the remaining eight paragraphs of the Preface (1.4 to 1.11), he boasts of his family, loku thatha, thatha, aiya, malli, thama, and their accomplishments. It is without a doubt a record of budget speeches in the world. He places Mahinda Rajapaksa at the center of this legacy which, in fact, was shamefully defeated in 2015. This is what the minister says: “Hon. Prime Minister Mahinda Rajapakse, who now sits in this House, is at the center of Rajapaksa’s political legacy.
There is no mention of other ministers, cabinet or its collective responsibility. Not a word about the other parties or their leaders other than the one he created under the name of Podu Jana Peramuna.
Meeting global challenges
The finance minister is correct in briefly describing five global challenges: (1) increasing global social and economic disparities between rich and poor, (2) slow progress in achieving (UN) sustainable goals ), (3) increasing environmental disasters, (4) limited assistance from bilateral and multilateral institutions, and (5) challenges of embracing the post-pandemic “new normal”.
The degeneration of moral and ethical standards around the world, especially among political leaders with corruption, deals, mischief and authoritarianism, is not mentioned at all.
However, of little relevance, he says: “The impact is worse on countries with trade-oriented economies like ours compared to economies dominated by manufacturing.
While his “vision” of moving Sri Lanka’s current economy from “commerce-driven” to “manufacturing-dominated” is laudable, the global challenges he described have nothing to do with it. the difference. To my knowledge of economics, commerce and manufacturing are complementary. While Sri Lanka should undoubtedly promote manufacturing, a balanced approach might be best without promoting one against the other like it has. It is in the same section that he arrived at a figure of Rs. 500 billion.
“The possibility of providing such services, both domestically and externally, has been reduced, resulting in loss of income. As a result, the loss of revenue for the country and the treasury is unlike any other year before. The loss to the Treasury, according to our estimates, is over Rs. 500 billion.
The nature of local production and the nature of exports are undoubtedly the reasons for our economic difficulties and our underdevelopment. It would therefore be commendable for the government to make real efforts to change the situation. But the claim that the loss of Rs. 500 billion is purely the result of this economic imbalance is incredible unless the government provides concrete evidence of the claim. This loss or much of it seems to be the result of mismanagement of imports and exports, and the huge tax breaks given to the rich by the last budget. Without direct import controls, higher taxes could have been imposed on unnecessary or luxury imports. Another measure could have been dialogues with importers.
“Our strengths” inflated
It is quite superficial to speak of “our strengths” just after speaking of global challenges as if Sri Lanka is at the forefront of changing the world! At the start of this conference, the Rajapaksa family and their leadership are once again bragged about. The President and the Prime Minister are congratulated. If the budget speech followed some kind of SWOT analysis (strengths, weaknesses, opportunities and threats), along with strengths, weaknesses could also have been discussed. This is the way forward for economic change.
Among the highlights, there is only one paragraph with four sentences on infrastructure: “Our infrastructure facilities are of high quality. The quality of our ports, airports, telecommunications, highways, roads and electricity supply is very good. Of course, there are some aspects that we can be “proud” of, but some are still in preparation (the ports). What about the railways? They are still in the colonial heritage.
The minister suddenly said: “In addition, through the 100,000 kilometer road project and the 5,000 bridge program, the road network will be further strengthened and the whole country will become a single network. This 100,000 km highways program was there even in the last budget, the only addition being the 5,000 bridges. Perhaps there is a new determination to move forward because, as many people claim, these road constructions benefit political supporters.
The third force is called “Friendly and non-aligned international relations”. Nine international organizations are particularly cited as “the World Bank, the Asian Development Bank, the European Union, the Japanese International Cooperation Agency (JICA), the Kuwaiti Fund, the French Development Agency, the KfD, the Korea International Cooperation Agency (KOICA), OPEC for International Development and the UN. ‘
There is no mention of the IMF in friendly organizations.
It is also surprising and intriguing that China or Chinese organizations are not mentioned as friendly countries or organizations. Mahinda Rajapaksa’s budget speech last year put a lot of emphasis on China. It may be too early, however, to speculate whether this shows a shift in alliances in the international context and relations.
Question from the IMF?
However, in the next section on “The Challenges Ahead”, the IMF is mentioned with some negativity. Basil Rajapaksa refers to Dr NM Perera’s 1970/71 budget speech pointedly to prove his point.
“In this he [N. M. Perera] states that instead of building up foreign exchange reserves, we have used it for importing goods creating a foreign exchange reserve crisis and, therefore, seeking support from the International Monetary Fund (IMF). Since the first IMF facility in 1961, successive governments have resorted to short-term assistance from the IMF, and our leaders and financial sector experts have failed to introduce a long-term sustainable program to manage our cash reserves. exchange.
There is no doubt that a country should try to manage its foreign exchange reserves without resorting to the IMF, if possible. I believe this is what Dr NM Perera said and tried to do. Of course, there were others who went to the IMF to easily escape.
However, during recent administrations (Rajapaksa and Wickremesinghe) there has been a tendency to resort to various dubious sources to seek foreign currency loans and assistance when reserves are depleted. Although no direct conditions are attached to these sources, these loans and transactions have been one of the main reasons for the deterioration of Sri Lanka’s foreign exchange conditions over the years. No appropriate solution is proposed in the 2022 budget to this paradoxical situation.
Sri Lanka should not hesitate to approach the IMF. It is the most reliable and ingenious multilateral organization, almost like a United Nations agency to deal with currency crises and the reserves of member countries. It is up to the government to deal properly with the IMF and to negotiate any conditions attached when seeking foreign currency or other assistance.