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Stem the rot

Stem the rot

05 Nov 2023

The Budget 2024 that is to be presented to Parliament on 13 November will supposedly be full of surprises, according to its presenter, the Minister of Finance, who is on public record stating as such. For a nation that is accustomed to surprises on a daily basis – more by default than by design, courtesy of its leadership – a budget full of surprises therefore is very much par for the course. 

Given that this will be the last budget before the next Presidential Election, chances are it will keep to the tradition of an election year budget, handing out goodies in the hope of some electoral gratitude. However, those drafting the Budget proposals at the Treasury cannot be blind to the fact that, unlike any time before in the history of this nation, the circumstances in which this Budget is being presented are unprecedented and dire and affords no room for benevolence – notwithstanding the necessity to do so. Therefore it will be interesting to see whether the Finance Minister chooses to walk the tightrope or play to the gallery as has been the case.

The latest available data compiled by the Department of Census and Statistics suggests that 40% of households in this country earn less than Rs. 30,000 and 20% earn less than Rs. 20,000 a month. Contrary to official inflation data, the cost of living continues to soar and each meal is a challenge for over 50% of the population based on current prices. Therefore, the State as their guardian cannot afford to look the other way. Given this reality, trade unions are up in arms demanding a minimum salary increase of Rs. 20,000 for public servants, which, under the current economic circumstances, is reasonable enough from the other side of the fence.

The President, who is also the Finance Minister, has already hinted at a public sector salary hike but the billion-dollar question is, from where is he going to find the money for it? Already State sector salaries eat up 55% of tax revenue and GDP growth is still in the red and chances are it will stay that way following the latest tax hike. 

Other than the half-hearted attempts to reform State-Owned Enterprises, there has been no attempt to streamline and improve productivity in the heavily overstaffed State sector – the majority of the 1.4 million-strong workforce being political appointees long used to doing the minimum and demanding the maximum. It is this lot that is vehemently opposed to the installation of CCTV cameras monitoring workplaces and even the installation of electronic attendance marking, leave alone any sort of productivity monitoring. 

For all intents and purposes, the tax-paying public is already being milked to the bone and the latest raft of taxes including the VAT adjustment to a prohibitive 18% and other taxes in the offing such as a wealth tax and property tax will test the endurance of the business sector now fighting for survival. It will find the going that much tougher if it is called upon to match the anticipated public sector salary increase as well.

It is basic economics that when prices of products and services go up, consumption falls. The VAT hike will instantly be passed on to consumers along with the increased electricity and transportation costs, driving most basic goods beyond the reach of the middle class. Falling consumption will not only lead to reduced production but also job losses, adding to the thousands of pandemic-induced job losses that are yet to be reversed. Constant policy changes, increasing utility costs, and ad hoc tax amendments at regular intervals have left the business sector running for cover. 

Given these dynamics, the Finance Minister has the unenviable task of making ends meet while meeting debt obligations that remain frozen as of last April. But it is evident that the status quo won’t remain for much longer, with creditors continuing to knock on the door and the IMF publicly highlighting revenue shortfalls and serious governance failures.

Of late the budget presentation has been reduced to a mere propaganda exercise; independent research has shown that over the last decade or so, less than 40% of proposals are actually implemented in the proposed manner and revenue targets are seldom achieved while expenditure almost always exceeds targets. Therefore, if the Finance Minister really wants to surprise the nation, all that is required is to present a realistic budget and ensure its full implementation over the course of the year.

Unfortunately, however, the track record of the past 15 months since the incumbent Leader took office points to the contrary. Hardly a day passes without some mega scam coming to light, depriving the Treasury of precious funds – the latest being yet another sugar scam with the import tax being hiked while one lucky importer was unloading his consignment at the port. Whichever way one looks at it, it is difficult to camouflage the reality that the administration is in survival mode and forced to turn a blind eye to corruption. The absence of anything resembling a strong policy framework or political will to fight this cancer has not helped the cause in any way.

If Sri Lanka is to come out of the mess it has created for itself, the solution is plain and simple. It must at least now resolve to clean up the rot that has spread to every arm of governance, eating away the future of this nation. Rooting out corruption should be topmost on the agenda and Budget 2024 is as good a place as any to get that endeavour underway by allocating the necessary resources for it.

Singapore’s success is rooted in its zero tolerance for corruption. Singapore continues to be Singapore because whoever has come into power has never budged from that fundamental policy. If Sri Lanka is to move beyond cosmetic development orchestrated by corrupt politicians and put this nation back on the road to sustainable and enduring recovery, it has no option but to follow the Singaporean example. It is this nation’s misfortune that none of its leaders – past or present – has had the will to put this nation on that path, preferring to limit their commitment to the cause to mere lip service. 

The state of what used to be the pride of this nation, its national cricket team, exemplifies the extent to which the rot has spread. While the team’s performance so far in the ongoing ICC World Cup has been nothing short of embarrassing, it is reflective of the political leadership that drove the nation to bankruptcy. 

That apart, the powers that be are still struggling to appoint a new Inspector General of Police due to factions within the administration fighting to have their man appointed for obvious reasons, leading to the incumbent being given a fourth extension. While the post itself has now been reduced to a joke, it is proof enough that the change that this nation so badly needs is nowhere in sight, echoing the sentiments of the UN Human Rights Commissioner who just two months ago bluntly stated that the people’s call for historic transformation is far from being realised.

The fact that it took 11 months to rule the death of a prominent businessman as murder, vital documents including entire databases on drug purchases being erased at the NMRA in broad daylight, and commissions upon commissions being appointed to probe the Easter massacre until such time an amenable report is presented, among so much more that’s going on, point to a system that is rotten to the core. The surprise that the nation awaits is for Budget 2024 to be leveraged to stem this rot.

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