Bits and pieces budget, doublespeak

This is why an office peon when asked “Kohomada budget eka”, replied: “Aney sir, apita mokkakwath nehe.” A senior physician in a government hospital, asked the same question, replied, “salaries have gone up but from where is all this money coming from?”

l by FS

(November 27, Colombo, Sri Lanka Guardian) In one of the many panel discussions this week, a panellist described the budget as a ‘bits and pieces exercise of giving a little bit here and a little bit there to respond to the needs of the government’s vote base’.
Is this what budgets are all about? Aren’t they to deal with the macro picture and look on the long-term while handing out a few short-term sops?
As another panellist pointed out only a former finance minister N.M. Perera (once dubbed NO MONEY PERERA) was able to perfectly balance the budget without a deficit and being a Trotskyite, it was a tremendous achievement. However that was in another time and place and the scenario has changed so rapidly that no country, by far, runs without a deficit.
Another flaw in civil society is the lack of analysis of the earlier (2011) budget. While many seminar or panel discussions are held before or after a budget is presented, no one does an analysis of the budget, for example by November (11 months of the current year) to find out whether the government has fulfilled or kept its targets and/or achieved its objectives. There has been no pre-budget seminar that discusses these numbers and targets and analyse whether the objectives and goals have been on track; and if not why.
A weak and inept opposition is also responsible for the inability to keep the government on its toes. For example the kindergarten attempt to protest with rowdy shouts in parliament as the President began his budget speech was uncalled for and an insult to parliament. The response from government politicians in trying to manhandle their opponents was even more disgraceful. A top foreign head of an accounting agency was horrified at the events and wondered aloud whether such behaviour in whatever form would attract investments.
What the United National Party (UNP) should have done was to seek the Speaker’s permission to make a statement before the budget was presented, explain reasons why they were walking out and then stage a dignified walk out. They would have scored much more points with the public. What they eventually did resulted in more negatives than positives!
The budget is an important exercise of parliament and the people’s right to be involved in the cost of running a country. The budget explains the costs for a fiscal year and from where the resources are to be tapped. The institution of the budget is what is important, not the individual presenting it or the government in power. The institution (budget) needs to be protected as a hallowed tradition of parliament and a right of the people, unlike the presentation of bills or any other business, often at the whims and fancies of the governing party. Thus an opposition must be present in the context of this argument to represent the people, however much they destest the dictates of the governing party.
Thus taking all these into consideration, the UNP walk-out was unfortunate and the response from government benches is an event that should not be repeated.
Some 37,000 hectares of land are to be reclaimed by the government from plantation companies on the grounds that these are unutilized land. Some weeks back when the first news-break on the now, controversial take-over bill appeared in the newspapers by way of the bill being discussed in the Supreme Court, plantation companies by virtue of an audit done earlier in the year by the Plantation Ministry on unutilized lands, feared that the bill was targeting these companies.
When the schedule of companies ultimately became known, plantations were not the target and these companies heaved a sigh of relief. That was however short-lived because less than two weeks later, the budget delivered the dreaded news – unused plantation lands are up from grabs. Plantation companies argue that unutilised lands exist because these are either, protected areas for forestry and other legal purposes or, eyed by local politicians under land-grab measures.
Instead of taking the disastrous and undemocratic route of the other bill where victims were not consulted or asked why their land should not be taken over, the government should ask plantation companies why they haven’t developed this land and a rational approach made that would not dampen investor sentiment with such retrogressive steps.
The unorthodox method used to announce a devaluation in budget (and setting a precedent) raised many credibility issues, particularly since exchange rate policy is the role of the Central Bank, not the Treasury. Apparently the Treasury has been ‘pressured’ into this move by a few influential exporters. One may argue that the Central Bank (CB) exchange rate policy is misaligned, that the rupee was overvalued and maintaining a lower rupee was not the right decision. However monetary policy is the role of the CB and any decision has to be respected, rightly or wrongly. What, for example, would stop the Treasury from continuing to dictate monetary policy as and when it sees fit?
This has sent a negative message to investors and doubts about CB assurances that the exchange rate policy was stable. Asking another agency to handle this function is like telling a civilian defence force to take over the role of the Police.
Furthermore credibility has also been dented by the assurance and promise by the President to a group of chambers at a recent meeting to discuss the take-over bill that no more lands would be seized. A few weeks later this is broken (take-over of 37,000 hectares) and credibility and trust thrown out of the window. How can one entice foreign investment with this kind of policy?
The drama over the Pelwatte take-over also raises many questions. The company last week raised a fundamental issue: the government cannot seize possession of the land because the law refers to lands that have been leased for a period of 20 years and below from the date of enforcement of the Act. The Pelwatte lease is more than 25 years old, signed in 1985 – a huge blunder by whomever drafted this land and following on a similar case where the Chalmers Granaries was also reclaimed when it never left the state!
On the other hand was it stage-managed? The company is owned by powerful businessman Harry Jayawardena, a top funder of the ruling party and questions are being asked as to whether these were deliberate ‘mistakes’ to allow the company to be reinstated and still profess that the bill was non-political and that even government supporters were targeted. The new Competent Authorities (CAs) of the seized properties have the option of allowing the existing companies to remain if a new plan is provided and the CAs are convinced it would work.
The fact that the stockmarket was unfazed by the budget despite the many sops offered leads to one simple explanation: Either investors are not convinced about budget give-aways or that sentiment is so very low that its recovery is based on whether or not the independence of the regulator is upheld without any interference from powerful investors goading the government to intervene.
Some analysts said the return to very, broad tax holidays was a regressive measure as the 2011 budget clearly laid the ground for limited tax holidays and concessions which have seen a lot of abuse. Going back to the statuesque means the government has been unable to raise targetted foreign investment levels and wants to correct this situation.
A day after the budget, many chambers rushed with statements and comments, essentially all praising the government for a job well done. But in private, as our email poll this week shows, many of these chamber bigwigs and others had a contrary view and felt the budget didn’t meet the expectations of the private sector. Why this two-faced approach. Why doublespeak?
The many panel discussions this week on the budget where some speakers attended two or three in a row, reflect the need for clarity and clarification on the real issues in the budget. Over the years the budget has been full of rhetoric and niceties while the real things (increases in taxes and commodities) were outside the budget.
This is why an office peon when asked “Kohomada budget eka”, replied: “Aney sir, apita mokkakwath nehe.” A senior physician in a government hospital, asked the same question, replied, “salaries have gone up but from where is all this money coming from?”
Which leaves us with the thought – whichever way you look at it -, Sri Lankans are skeptical about budgets and the way the country’s finances are managed.

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Author: Sri Lanka Guardian

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