Vote on Account | Funds secured, project loans under review
Kicking off the two-day debate in Parliament on the Vote on Account (VoA), Prime Minister Mahinda Rajapaksa, in his capacity as the Minister of Finance, said the Government has decided to review all project loans totalling approximately Rs. 9 billion.
He noted that around half of the loans comprised foreign loans, emphasising that it was high time the Government gave priority to investment promotion instead of depending on loans.
Pointing out the large amount of unsettled bills for the year 2019, the Prime Minister said that, as a result, the incumbent Government would have to prune its expenses.
“There is a debt ceiling of Rs. 1,300 billion,” he said, adding that a sum of Rs. 1,900 billion would be allocated for government expenditure from 1 September to 31 December.
Recalling that the growth rate of the economy was between 5-6% when his Government was in power, Prime Minister Rajapaksa said that since the transition to the Yahapalana Government in 2015, the economy had declined gradually, resulting in having the lowest growth rate in South Asia at 2% by the end of 2019.
Meanwhile, the Samagi Jana Balawegaya (SJB), the main Opposition in Parliament, demanded to disclose the Government’s use of public finance for the period between April and August this year without the prior approval of Parliament, the key authority over public finance.
“Even though the Secretary to the Treasury had issued a circular on 10 March 2020, asserting that the President had authorised the use of funds under Article 150 (3) of the Constitution, it is clear to all that only Parliament has the power to authorise a Vote on Account,” SJB MP Patali Champika Ranawaka said while participating in the debate on Thursday (27).
He charged that the SJB was of the firm view that Article 150 (3) of the Constitution only gives the President the power to use funds from the Consolidated Fund for three months till the date of the sitting of the new Parliament.
“Article 150 (3) does not grant him powers to draw funds or approve a VoA from the date of dissolving Parliament. The Prime Minister must clarify this in his capacity as the Finance Minister. We hope he will provide Parliament with a detailed account on state revenue during the past eight months of this year – how revenue from various taxes came to the Government and the Government’s recurrent expenditure – before the end of the debate,” Ranawaka added.
He then said that 2020 will go down in history as the only time the country functioned without a budget.
“A similar problem occurred in 2015. This was just after a presidential election and also with a general election looming, but the then Government discussed with all parties concerned and still managed to present a budget. This Government, however, though it came to power in November last year, could not present a budget this year. It relied on a Vote on Account passed by the previous Government which approved funds up to 30 April this year. We now have another VoA for funds from 1 September to 31 December,” he said.
Ranawaka then asserted that the current fiscal crisis the country is facing was not due to the Covid-19 pandemic, but was a result of the poorly constructed economic and tax policies of the current regime.
“The Government’s tax policies, implemented from 1 December 2019, have had a disastrous impact on state revenue. Due to these policies, annual state revenue, which was nearly Rs. 2,000 billion during the previous Government, had plummeted to about Rs. 1,000 billion since last December. According to my estimate, state revenue this year will be about Rs. 1,100 billion, whereas the interest on the loans alone are about Rs. 1 trillion (Rs. 1,000 billion). As such, this is the first time the country’s revenue is only enough to pay off the interest on the country’s loans,” he said.
Ranawaka, who opened the debate for the Opposition, made note of the fact that before the coronavirus outbreak forced the country into lockdown, the economic growth rate in the first three months of 2020 was 1.6%.
“That was the Government’s report card before Covid-19. According to Asian Development Bank’s forecast, the economy is due to contract by 0.6% this year. The Government can’t hide behind Covid-19 and claim everything was because of it. The fact remains that the economy was in severe distress long before it (Covid-19) came around.”
He then charged that the $ 7.2 billion in foreign reserves, which the Central Bank Governor of the previous Government had managed to collect, was not being utilised to repay foreign debt obligations.
Furthermore, Ranawaka said that a blanket ban on imports would only worsen the already complicated situation, adding: “You cannot develop domestic industries in such a manner.”
The SJB also alleged that 38% of the total allocations in the VoA had been distributed to the ministries coming under the purview of just four members of the Rajapaksa family.
SJB MP Harshana Rajakaruna said that ministerial portfolios held by four individuals were given 38% of the funds that are to be release via the VoA. In addition, Rajakaruna inquired from the Government as to why it stated that it would borrow an additional Rs. 750 billion in addition to the initial Rs. 1,300 billion worth of debt.
“This is a massive amount of debt that we have never seen the likes of in the past. I expect the Government would clarify as to why it wants to borrow another Rs. 750 billion,” he noted. He then questioned whether the Government would provide some form relief to those who lost jobs as a result of the Covid-19 pandemic.
“The Covid-19 outbreak saw many factories and offices being shut down and thousands of people losing their jobs. The Government should take care of them too.”
“It is a timely need. The businessmen should be given relief while safeguarding the bank system simultaneously,” Rajakaruna said.
SJB National List MP Eran Wickramaratne, also taking part in the debate, said that when the Yahapalana Government had taken the reigns in 2015, the GDP was at 10%.
“We were able to gradually increase it to 13.5%. I think today, it has come down to 8% or 9%. The Government has stated that the country’s total expenses stand at Rs. 947 billion, but they have allocated 38% of the total funds to the ministries under the President, Prime Minister, Chamal Rajapaksa, and Namal Rajapaksa,” MP Wickramaratne pointed out.
With funds secured for the remaining four months of the year through the VoA, the Government has commenced preparatory work on the 2021 Budget, which is to be presented to Parliament this November.
SJB and Opposition Leader Sajith Premadasa charged that the incumbent Government was hiding the true horrid state of the nation’s economy which saw an economic growth rate of -1.6% in the first quarter.
“A misconception has been presented that we handed over the reins to the incumbent (Government) in 2019 with a minus economic growth rate. This is completely false. If you look at the economic growth rate of 2019, it was 2.3%. The Central Bank annual report clearly states so. In addition, some groups also tried to reject the fact that the first four months 2020 was -1.6%, but the fact is that it is true. It is unfortunate that even those who are known to be economic experts within government ranks have stooped down to that level and continued to refute that the economic growth rate in the first quarter of 2019 was -1.6%,” Premadasa said.
He said the previous Government had managed to alleviate Sri Lanka’s status to “upper middle-income”, but the incumbent Government had reversed this progress.
“We must also observe another reality which is that by July 2019, we attained the status of ‘upper middle-income country’, but by July 2020, we had declined once again to become a lower middle-income country. That decline is the responsibility of the incumbent Government.”
Charging that the Covid-19 pandemic did not have an impact on the first quarter of 2020, the Opposition Leader demanded to know who would be held accountable for the crippled economy.
“It also must be noted that the Covid-19 outbreak did not have much of an impact during the first quarter of this year. When we spoke about the impending dangers of the Covid-19 pandemic in January and February, the responsible authorities did not give two hoots about it.
So the question remains, how did this Government manage to decline our economic growth rate to -1.6% in the first quarter of 2020? Who is responsible? Who is accountable?”
He then went on to say that international financial bodies had predicted even further depreciation of Sri Lanka’s economic growth rate.
“It has also been predicted that the economic growth rate for this year would fall -6%, but still the Government rejected our claims and said that we were misleading the House. I will table all the necessary documents from the Central Bank as well as the Department of Census and Statistics that proves our charges. The World Bank too states that they predict Sri Lanka will have a -3.2% economic growth rate while Asian Development Bank estimates that this number will be in fact -6.1%. I will table all these documents.”
Moreover, he said the country would have to face many economic challenges due to the global pandemic, emphasising that 400,000 jobs have been lost as a result.
“It is good that the Prime Minister said the Government would provide 150,000 jobs, but unemployment is 400,000 in addition to the thousands of jobs lost due to political revenge and victimisation. Despite the recent positive report about our exports, we will have to pay special attention to the export sector in the coming months. Governments must support start-ups and businesses.”
Premadasa then claimed that the Government had made empty promises with regard to providing economic relief to the masses.
“This House was told at the beginning of this debate that a fiscal stimulus package would be introduced. But I would like to ask the Government whether their claims of providing financial relief through leasing companies was actually being implemented on the ground or was it just rhetoric in Parliament. In reality, it is not being implemented. That is why there have been protests outside the Presidential Secretariat in recent days by those who had sought the relief but weren’t provided. The 4% working capital loan the Government promised to support businesses and start-ups were not given as promised. The Rs. 5,000 voucher was only given to a select few. Are these minor stimulus packages enough?”
He went on to say that foreign governments had given such invaluable relief packages to their citizenry, which when compared with Sri Lanka makes the latter look as if it had not given any relief whatsoever. “I have with me the relief packages provided by the Indian Government, Pakistani Government, German Government – I will table all these so that the House can see how much these foreign governments have actually supported their citizens in comparison to ours. The reality is that when we compare our financial relief package with these countries, it doesn’t look like we’ve given any financial relief. So the Government must take steps to expedite economic growth; it must provide a far better fiscal stimulus package and the Government must accept that the current economic growth is stagnant. The richest 20% owns 50% of the country’s wealth and the poorest 20% only receives 4% of the national income. This is the sad state of the country.”