SL will face disaster if Budget fails to instill global confidence: Eran
While noting that increasing the confidence of international markets and the global community is going to be a difficult task for the Finance Minister, Samagi Jana Balawegaya (SJB) MP Eran Wickramaratne notes that the country will be on the verge of disaster if market confidence is not established.
He made this statement while speaking at a press conference at the office of the Leader of the Opposition on the 5th of November.
Wickramaratne added that one of the unprecedented challenges is the budget deficit and that the current economic crisis was created prior to the pandemic.
“One of the unprecedented challenges is the budget deficit. This is a huge problem. The current economic crisis was created prior to the Corona pandemic. During our period in Government, under the leadership of the Finance Minister, Mangala Samaraweera, we focused on fiscal consolidation and we had a budget deficit of over 7 % of GDP, systematically brought down to 5.5 %. The midterm goal was to bring it down to 3.5 %. We brought reforms to increase revenue with a new Inland Revenue Act. As a result we saw that the tax revenue increased from 10% of GDP in 2014 to nearly 12.5 % in 2018,” he said.
He went on to state that the second cause of concern would be the lack of foreign exchange and that the net asset reserves in the country have drastically dropped to a mere USD 2 billion from the high of USD 7.2 billion when the Yahapalana Government left in 2019.
“The current reserves are enough to meet just over one month’s import needs. This is a very dangerous level faced by a country. The rating agencies over the past one and half years have brought down Sri Lanka’s rating: the latest is Moody’s which decreased the rating from Caaa-1 to Caaa-2 before the announcement of the 2022 Budget,” Wickramaratne stated.
He also said that inflation has been rising very rapidly and people are finding it extremely difficult to meet their daily expenses and that there have not been any salary increases since they were last given during the Yahapalana Government, and a salary increase which had been proposed by the Yahapalana government to be effective from January 2020 was also suspended by this Government with a promise to implement it from January 2021.
“That was not implemented. As a result public servants including retired war heroes have filed FR petitions to get their rights restored which were deprived by this Government,” He said.
Additionally, he went on to say that the country is facing not just the rupee problem but also a foreign currency problem and that foreign currency is needed for imports of essential foods and other items, further questioning how the Government plans on overcoming this problem.
“In the Budget, fiscal announcements should be preceded by major policy reversals making sure that there is law and order, that the rule of law is applied and all contracts, agreements and international treaty obligations are honoured. That is the way to basically reverse the adverse decisions made against Sri Lanka by the UNHRC, EU Parliament and trading partners who have shown signs that they are reluctant to trade with Sri Lanka,” he added.
Additionally, Wickramaratne emphasized that the government needs to uphold the rule of law while engaging in fiscal consolidation and decreasing the barriers in the path of FDI and encouraging and finding markets for exports with introduction of technology to improve agricultural productivity and the quality of products of SMEs, is imperative, further saying that the Government should realize that apart from this, there is no quick-fix solution to uplift the economy of the country.
He also said that if this Government which has messed up economic management and the management of Covid wakes up from its slumber, acknowledges its mistakes and reverses policy, then there is a glimmer of hope.
Elaborating on the way the country is being allegedly misled by this Government, he said that the Government which had talked of a closed economy to boost the manufacturing economy and the agrarian economy, has now completely reversed its policies and removed the control of prices of a number of essential commodities.
Referring to the statement made by Minister of Finance Basil Rajapaksa about the 2022 budget not having anything to give the people, but only to “take” from the people, the former State Minister of Finance said that the way the things are turning in a haphazard manner shows that there is no Government in the country.
“Although the country was ruled until recently by gazettes, today, there is a regime that reverses the gazette notifications as fast as they are issued. All control prices have been removed from November 03 and all previous gazettes that stipulated maximum retail prices on essential goods have been rescinded. Now the government’s economic pundits have begun to say that under the current economic system there was no possibility of maintaining a maximum and minimum price for goods,” Wickramaratne stated.
Further, the Parliamentarian said that the Government has not come up with a solution to the huge increases in commodities, and the issuance of gazettes and reductions in taxes has not benefited the consumers.
“The government has not come up with any solution to the huge increases in commodity prices. Before the budget, the levy on a kilo of rice was reduced from Rs. 65 to 25 cents. When the sugar tax was reduced to 25 cents/kilo, its benefits were not passed on to the consumer. The ‘cronies’ who imported the sugar into the country gained an undue profit of up to Rs 16 billion depriving the state of its revenue. So the reduction of levy on the imported rice, if not passed on to the consumers, would also give the same benefits to the importers,” warned Wickramaratne finally.