Almost every one of the 75 budgets presented in this country prior to the 76th last Friday (12) entailed quite a bit of hype with the Government in power leveraging the readymade PR opportunity to maximum effect. This hype reached a crescendo during the J.R. Jayewardene era, when Sri Lanka’s longest serving Finance Minister to date, Ronnie de Mel, who had the unique distinction of presenting 11 consecutive budgets to a parliament that consisted of a five-sixths majority for his United National Party (UNP), ruled the roost. He had it all worked out, and in the days preceding the presentation, there would invariably be some inspired leaks which in turn would whip the press into a speculative frenzy that resulted in the public being glued to their TVs on budget day. De Mel did not disappoint, making the hours-long presentation something of an artform by rewriting the rules on what is usually a very boring affair.
Nowadays, such theatrics have given way to disengagement with the public, leaving the media to use its own devices to create the budget hype, the level of which is dependent on political proximity to the centres of power. The greater the hype, the bigger the potential for an anti-climax, and that about sums up the sentiments expressed so far on the much-hyped “Aladdin’s Budget”. It will be recalled that in the run-up to the event, various political personalities and even cabinet ministers compared the Finance Minister to the 18th Century storybook character Aladdin, with the innuendo being that Budget 2022 would be the magic lamp. Combine the two, and the people were made to believe that magic was about to unfold.
Interestingly, the Aladdin analogy appears to have deeper connotations, which may not have necessarily escaped the attention of its creators. For instance, at a time when an intense war of attrition seems to be brewing between Colombo and Beijing over a consignment of purportedly contaminated fertiliser, a little-known fact is that the original story of Aladdin was set in China. And yes, the original Aladdin was supposedly Chinese.
Be that as it may, whether in fact the Budget 2022 delivered on the promised magic is now the subject of critical analysis by the financial and economic sectors, but initial reactions decidedly point towards the usual anti-climax. Credit, however, must go to the Finance Minister for treading on territory none of his predecessors dared to in targeting the 225 elected members of parliament for austerity measures, trimming some personal benefits that had earned the ire of the public over a period of time. These include cutting down personal allowances, as well as doubling the period required to be eligible for a pension. But what has been taken from one hand has been replaced through the other by way of enhancing the area development allocation for each MP from Rs. 10 million to Rs. 15 million. That apart, the will to take on the boisterous state sector and implement an ambitious, performance-based salary structure is nothing short of praiseworthy.
Besides that, the longstanding teachers’ and principals’ salary issue has finally received redress while Covid-hit self-employed entrepreneurs also have something to smile about. Other progressive measures include investment in IT infrastructure for schools, digitalisation of the state sector, financial incentives to promote the manufacture of organic fertiliser, and enhanced allocation for road development.
However, despite its somewhat decent share of positives, Budget 2022 also has its negatives, seemingly in larger measure. For starters, none of the current burning issues that have led to the brink of social upheaval seem to have warranted special attention by the Finance Minister. The farmers' issue is one. Despite the constant assurances provided by the Government, in general, and the Agriculture Minister, in particular, to the farming community that has had to stomach a financial sucker punch as a result of the sudden switch to organic fertiliser, that any financial loss as a result of reduced output would be compensated by the Government, appears to have been ignored in the Budget with no specific allocation announced for the purpose. Whether such an allocation in fact exists under some unspecified budgetary head would require clarification by the relevant authority in the days ahead.
The same goes for mitigatory measures to control the spiralling cost of living. On the contrary, what seems like a pre-election spending spree has the potential to further increase inflationary pressure that will likely result in even higher prices for essential items in the weeks and months ahead. But the biggest hole in the budget bucket is the lack of focus on arguably the biggest issue facing the nation’s economy at the present juncture, the forex crisis.
The universal methodology to secure forex is to boost export production. In the absence of any major push to increase the export footprint, indications are that the Finance Minister seems to have put all the eggs in the tourism basket, willing to roll the dice on its revival prospects in a scenario where key source markets in Europe are experiencing yet another surge in Covid cases. The fragility of tourism receipts has been one of the fundamental lessons of the pandemic, not only for Sri Lanka, but for every other country that depends on such revenue. For a nation that has had a rather limited export basket for some time, one would have thought that the pandemic would have pricked the grey matter of the powers that be to consolidate and expand that basket given the lessons learnt, but that somehow seems to have skipped the attention of the Department of National Budget at the Treasury.
In the recent past, Sri Lanka has appeared less competitive in terms of labour and operational costs for manufacturing industries. The Budget would have been an excellent opportunity to address that issue, and in the process, lay the foundation to tackle the forex problem, which it has to a certain degree; but its effectiveness in both commitment and implementation remains to be seen. The other alternative would have been to place greater emphasis on attracting foreign direct investment for specific sectors crying out for investment. The fact that some very progressive proposals have been put on the table is a matter for comfort. However, treading on uncharted territory at a time when the need for returns is immediate, the upshot is that if the tourism hen fails to deliver the golden egg, we are in even deeper trouble. The country’s main agriculture export crop, tea, has suffered a body blow due to the fertiliser issue, but that sector has also received little or no attention in the Budget.
The absence of a coherent and workable policy framework in the mid to long term that can withstand electoral pressure is what has hurt Sri Lanka Inc. and its sustainable developmental ambitions over the years. Budget 2022 does not appear to have the potential to break out of that mould, and therefore, the wait for sustainable growth that can actually push people out of poverty will inevitably be left for another day and another time. If budgets in Sri Lanka are usually a reliable indicator of an impending election, the Budget 2022 is simply screaming election, simply going by its focus on the ruling party’s comfort factor at the expense of the already imperilled macroeconomic fundamentals.
A spending spree and a huge deficit mostly funded by further debt is hardly likely to impress international rating agencies that have placed Sri Lanka’s national rating just above junk status which, in turn, has made the acquiring of foreign funds next to impossible. Needless to say, the very reason for Sri Lanka's economic stagnation over the years has been the prioritising of votes over what is good and necessary for the country. In doing so, governments then and now have spent beyond their means simply to remain in power, choosing to pay the bills by borrowing against borrowings, little realising that there will come a time when no one will be willing to lend a penny. That we have now reached that point is an open secret. In that context, the Budget 2022 was expected to offer a viable economic roadmap that would help navigate the rough ride that lies ahead. Whether it will do the job, only time will tell.Budgets and Aladdin’s Budget
13 Nov 2021
Budgets and Aladdin’s Budget
13 Nov 2021
Almost every one of the 75 budgets presented in this country prior to the 76th last Friday (12) entailed quite a bit of hype with the Government in power leveraging the readymade PR opportunity to maximum effect. This hype reached a crescendo during the J.R. Jayewardene era, when Sri Lanka’s longest serving Finance Minister to date, Ronnie de Mel, who had the unique distinction of presenting 11 consecutive budgets to a parliament that consisted of a five-sixths majority for his United National Party (UNP), ruled the roost. He had it all worked out, and in the days preceding the presentation, there would invariably be some inspired leaks which in turn would whip the press into a speculative frenzy that resulted in the public being glued to their TVs on budget day. De Mel did not disappoint, making the hours-long presentation something of an artform by rewriting the rules on what is usually a very boring affair.
Nowadays, such theatrics have given way to disengagement with the public, leaving the media to use its own devices to create the budget hype, the level of which is dependent on political proximity to the centres of power. The greater the hype, the bigger the potential for an anti-climax, and that about sums up the sentiments expressed so far on the much-hyped “Aladdin’s Budget”. It will be recalled that in the run-up to the event, various political personalities and even cabinet ministers compared the Finance Minister to the 18th Century storybook character Aladdin, with the innuendo being that Budget 2022 would be the magic lamp. Combine the two, and the people were made to believe that magic was about to unfold.
Interestingly, the Aladdin analogy appears to have deeper connotations, which may not have necessarily escaped the attention of its creators. For instance, at a time when an intense war of attrition seems to be brewing between Colombo and Beijing over a consignment of purportedly contaminated fertiliser, a little-known fact is that the original story of Aladdin was set in China. And yes, the original Aladdin was supposedly Chinese.
Be that as it may, whether in fact the Budget 2022 delivered on the promised magic is now the subject of critical analysis by the financial and economic sectors, but initial reactions decidedly point towards the usual anti-climax. Credit, however, must go to the Finance Minister for treading on territory none of his predecessors dared to in targeting the 225 elected members of parliament for austerity measures, trimming some personal benefits that had earned the ire of the public over a period of time. These include cutting down personal allowances, as well as doubling the period required to be eligible for a pension. But what has been taken from one hand has been replaced through the other by way of enhancing the area development allocation for each MP from Rs. 10 million to Rs. 15 million. That apart, the will to take on the boisterous state sector and implement an ambitious, performance-based salary structure is nothing short of praiseworthy.
Besides that, the longstanding teachers’ and principals’ salary issue has finally received redress while Covid-hit self-employed entrepreneurs also have something to smile about. Other progressive measures include investment in IT infrastructure for schools, digitalisation of the state sector, financial incentives to promote the manufacture of organic fertiliser, and enhanced allocation for road development.
However, despite its somewhat decent share of positives, Budget 2022 also has its negatives, seemingly in larger measure. For starters, none of the current burning issues that have led to the brink of social upheaval seem to have warranted special attention by the Finance Minister. The farmers' issue is one. Despite the constant assurances provided by the Government, in general, and the Agriculture Minister, in particular, to the farming community that has had to stomach a financial sucker punch as a result of the sudden switch to organic fertiliser, that any financial loss as a result of reduced output would be compensated by the Government, appears to have been ignored in the Budget with no specific allocation announced for the purpose. Whether such an allocation in fact exists under some unspecified budgetary head would require clarification by the relevant authority in the days ahead.
The same goes for mitigatory measures to control the spiralling cost of living. On the contrary, what seems like a pre-election spending spree has the potential to further increase inflationary pressure that will likely result in even higher prices for essential items in the weeks and months ahead. But the biggest hole in the budget bucket is the lack of focus on arguably the biggest issue facing the nation’s economy at the present juncture, the forex crisis.
The universal methodology to secure forex is to boost export production. In the absence of any major push to increase the export footprint, indications are that the Finance Minister seems to have put all the eggs in the tourism basket, willing to roll the dice on its revival prospects in a scenario where key source markets in Europe are experiencing yet another surge in Covid cases. The fragility of tourism receipts has been one of the fundamental lessons of the pandemic, not only for Sri Lanka, but for every other country that depends on such revenue. For a nation that has had a rather limited export basket for some time, one would have thought that the pandemic would have pricked the grey matter of the powers that be to consolidate and expand that basket given the lessons learnt, but that somehow seems to have skipped the attention of the Department of National Budget at the Treasury.
In the recent past, Sri Lanka has appeared less competitive in terms of labour and operational costs for manufacturing industries. The Budget would have been an excellent opportunity to address that issue, and in the process, lay the foundation to tackle the forex problem, which it has to a certain degree; but its effectiveness in both commitment and implementation remains to be seen. The other alternative would have been to place greater emphasis on attracting foreign direct investment for specific sectors crying out for investment. The fact that some very progressive proposals have been put on the table is a matter for comfort. However, treading on uncharted territory at a time when the need for returns is immediate, the upshot is that if the tourism hen fails to deliver the golden egg, we are in even deeper trouble. The country’s main agriculture export crop, tea, has suffered a body blow due to the fertiliser issue, but that sector has also received little or no attention in the Budget.
The absence of a coherent and workable policy framework in the mid to long term that can withstand electoral pressure is what has hurt Sri Lanka Inc. and its sustainable developmental ambitions over the years. Budget 2022 does not appear to have the potential to break out of that mould, and therefore, the wait for sustainable growth that can actually push people out of poverty will inevitably be left for another day and another time. If budgets in Sri Lanka are usually a reliable indicator of an impending election, the Budget 2022 is simply screaming election, simply going by its focus on the ruling party’s comfort factor at the expense of the already imperilled macroeconomic fundamentals.
A spending spree and a huge deficit mostly funded by further debt is hardly likely to impress international rating agencies that have placed Sri Lanka’s national rating just above junk status which, in turn, has made the acquiring of foreign funds next to impossible. Needless to say, the very reason for Sri Lanka's economic stagnation over the years has been the prioritising of votes over what is good and necessary for the country. In doing so, governments then and now have spent beyond their means simply to remain in power, choosing to pay the bills by borrowing against borrowings, little realising that there will come a time when no one will be willing to lend a penny. That we have now reached that point is an open secret. In that context, the Budget 2022 was expected to offer a viable economic roadmap that would help navigate the rough ride that lies ahead. Whether it will do the job, only time will tell.Kapruka
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Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!