Welfare and Austerity
Posted on February 2nd, 2015

Sumanasiri Liyanage Courtesy Island

How do I call this government? This question did not arise in the past as governments were elected with a specific name; UNP (1977- 1994), Peoples’ Alliance (1994- 2002), UNP (2002- 2004) and UPFA (2005- 2014). Although the present government is practically run by the UNP, it is hardly to say this is a UNP government as the UNP has less than 50 seats in Parliament. This is a government of multifarious organisations with diverse and conflicting objectives in spite of the presence of a common goal of defeating Mahinda Rajapaksa and his regime.

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After the event, it has been political power that keeps these organisations united. Since I need some shorthand, I call the present government MR regime taking into account the two key people in the government, President Maithreepala Sirisena and Prime Minister Ranil Wickremesinghe. The word ‘regime’ suits better because so far the MR government has worked arbitrarily even going beyond the constitution. I could not explain the constitutionality of the so-called National Executive Council.

The government has not yet tried even to test that it has the majority in the Parliament. Similarly, the Opposition is hesitant to challenge the government that it does not have the majority in Parliament. In post-presidential election period, the colour of the ‘frogs’ are blurred.

However, the subject of the column this week is not the possible behaviour of the frogs, but the supplementary budget presented to the Parliament by the new Finance Minister, Ravi Karunanayaka. Does the supplementary budget indicate the economic direction of the new MR regime? My submission is that the speech made by the Prime Minister prior to the presentation of the budget together with the supplementary budget presented by the Finance Minister has revealed the economic direction of the government. Let me add. The two speeches have done that in inverse order. What does it mean? I will come to that issue presently.

As The Island reported last Friday, Finance Minister Ravi Karunanayake making a special statement on the 100-day programme of the new government told Parliament the previous day that the government would increase the salaries of public sector workers by Rs. 10,000, the pension payments by Rs. 1,000, and Samurdi payment by Rs. 750. He also suggested the reduction of the price of a domestic gas cylinder by Rs. 300, 400 grams of milk powder by Rs 61 and 400 grams of Sustagen milk powder by Rs 100. The price of a kilo of wheat flour would be reduced by Rs. 12.50. Other price reductions are: price of a kilo of sugar by Rs. 10, a kilo of green gram by Rs. 10, a kilo of sprats by Rs. 15, one liter of kerosene by Rs. 6, price of canned fish by Rs 60, price of Maldives fish by Rs 200, and one kilo of chilli powder by Rs 25.

Making me particularly happy, the Finance Minister announced that the senior citizens would be receiving a higher interest rate of 15% per annum for their savings up to a maximum of one million rupees for funds deposited in commercial banks. As a relief to farmers, loan concession and minimum guaranteed price for selected items were also proposed. Making the MPs happy, he informed that the funds provided to MPs under the decentralised budget would be increased from Rs. 5 million to 10 million each. As a concession to the Colombo City dwellers who had been relocated against their will the Minister said: “Our government will bear the initial advance of Rs. 100,000 per family borne by the relocated and also bear a part of the rental up to Rs. 250 per month over a period of 240 months”. In addition so many other ‘goodies’ have been proposed. As a direct outcome of the budget proposals it has been expected that transport cost would be reduced.

As the budget experts have pointed out these goodies will cost an extra burden for public budget. The loan concession to farmers alone, according to Finance Ministerwill cost the government Rs. 2,500 million.

The Finance Minister has not clearly specified how these extra expenses would be financed. Of course he suggested Mansion Tax of Rs. 1 million, Rs. 500,000 for dual citizenship and a few others. However, the income expected from these tax proposals will not be adequate to bridge the gap widened by new expenditure proposals.

Suggestions have already been made to dilute the proposal of the Mansion Tax exempting many large houses from the tax coverage. The explanations given out from government pundits are not at all convincing. Minister Rajitha Senarathna defined this budget as one based on social market model. The notion of social market model was originated in Germany to designate government intervention in providing social services while sticking to private enterprise in the economy.

The system that now adopted in China, Vietnam or some Latin American countries has no affinity with this model. Deputy Minister of Finance and many others have argued that saving money from preventing waste and corruption would be adequate not only to fiancé the budget deficit but also to advance economic development. This is a very weak argument. Of course, if the new MR regime eliminated waste and corruption, that would save money. Nobody knows its magnitude. Assume it is enough to finance new expenditure, can the government continue with those savings? It is once and for all saving and it can be used only once. So, the argument that elimination of waste and corruption is the chief source of funding does not hold much water unless waste and corruption are seen as continuous, never-ending thing.

In my opinion, answer was given by the Prime Minister in his speech to the Parliament. Referring to the speech by the President Maithreepala Sirisena in Polonnaruwa, he said the country and the people should sacrifice in order to build a sound economy and to achieve economic development.

It really means that as we promised we have given this immediate relief and it cannot be continued unless economy was put on a sound basis. This is story of the IMF and World Bank. This is what EU proposed for Greece. People and countries should accept austerity measures if the countries want to come out of recession. A few days ago, the deputy Finance Minister Eran Wickramarathna referred to a slight decline of Sri Lanka’s ranking in economic freedom index in which Hong Kong is on the top. He said that the intention of the government is to advance the status of Sri Lanka this year to reach the rank of 60 in the index. He also said the country should acquire better place in the index soon. What does it mean? What does economic freedom index signify? Does a higher status in the index necessarily mean a high rate of growth? China is far below of Sri Lanka in the index.

If my memory serves me right it is somewhere near 130. What the Deputy Minister has emphasized is that the new government, as its economic policies are completely in the hands of the UNP, will adopt clear new liberal polices in the future and this relief phase is just a passing and ephemeral phase. So, my conclusion is that the economic policies of the new MR regime does not essentially differ from that of old MR regime.

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19 Responses to “Welfare and Austerity”

  1. NeelaMahaYoda Says:

    Sumanasiri

    You have ignored the most important point on approach to development projects in both old and new MR regimes.

    If you consider very carefully the economic policies of the new MR regime, it is entirely different from that of old MR regime.

    The new MR regime has decided to cancel all the mega development projects launched by the old MR regime and financed by China.

    Apparently the new MR regime has taken this decision on the instruction of US and India to get ourselves away from China.

    However the old MR regime was in the process keeping the money circulation, provide jobs for the work force and anticipated extremely high level of business transactions through the mega projects they have launched with the capital provided by Chinese banks without any strings attached, at an affordable interest rates

    As far as people are concerned this is a great economic loss for the general public and US or IMF will never be able to match that level of investment which is provided by the friendly Chinese government which has got thousands of years of historical links with Sri Lanka.

    If new MR regime is smart enough to understand this simple fact, they should streamline execution of these projects instead of shutting down and run them efficiently to minimise the wastage even with the help of multinational project management companies.

    That will be the win-win situation for Sri Lankans. Otherwise our economy is inevitably heading for a very stagnant situation with unacceptable level of austerity measures that we might have to take to overcome that even with possible recession in the horizon.

    Unfortunately, I don’t think anybody in UNP or Sirisena group has sufficient project management or economic resource management experience to understand this point

  2. Lorenzo Says:

    “The loan concession to farmers alone, according to Finance Ministerwill cost the government Rs. 2,500 million.

    The Finance Minister has not clearly specified how these extra expenses would be financed.”

    President’s allocation has been reduced by Rs. 90,000 million. That is MORE than enough to finance famers.

    You decide which is best. A Rs. 2,200 million corporate jet for the president or loan concession for poor farmers.

    I go with the farmers. Look at the farming districts Anuradhapura and Polonnaruwa. People are suffering. Something must be given. I THANK My3 for doing the right thing.

  3. Lorenzo Says:

    NMY,

    When people SPEND MORE the demand for goods increase which stimulates the suppliers to supply more.

  4. Ananda-USA Says:

    NeelaMahaYoda,

    You HIT THE NAIL on ITS HEAD!

    The Western Neocolonialists WILL NEVER GIVE Sri Lanka development loans like China did. For the PITTANCE in loans we will get from the IMF and World Bank, Sri Lanka will have to SELL ITS SOUL in Social Cutbacks, and ordinary people will bear the BURDEN, not the RICH Colombians!

    That is what is happening in Greece today. The Euro Bank bailout loan conditions, supervised by Germany, brought the people of Greece to their knees, with over 40% unemployment … threatening a VIOLENT REVOLUTION.

    Instead, a PEACEFUL REVOLUTION took place through the ballot, and a new Socialist government was elected. They want to RENEGOTIATE the terms of the loans, including FORGIVENESS of a part of the debt, REDUCTION in interest rates, and EXTENSION of the repayment periods. Behind that is the THREAT that Greece will LEAVE the EU, and restore its National Currency … the drachma … which would allow it more flexibility in MONETARY policy …which is another way of saying that they can allow the currency to INFLATE which they cannot do in the EuroZone.

    This is causing other countries of the EuroZone a lot of heartburn fearing the return of financial instability in many weak, albeit large, countries such as Spain and Italy, and disintegration of the EU. France recently elected a socialist government that also wants the EU to adopt less draconian fiscal rules to help its own financial mess. France has come forward IN SUPPORT OF GREECE for more leniency in the repayment of its bailout loans; this is strongly opposed by Germany.

    This should be a LESSON for Sri Lanka’s “Yahapalanaya” government that is NOW INCREASING CONSUMPTION SPENDING, while SEVERELY DECREASING its EMPHASIS on Infrastructure Development spending favored by the previous UPFA GOSL.

    The UPFA GOSL CORRECTLY focused on Infrastructure Spending to increase the SIZE of the ECONOMY, and create jobs partly through DIRECT infrastructure development work, and partly through the economic growth it created, while holding the fort on CONSUMPTION SPENDING on “Freebie Giveaways”. Infrastructure INVETMENT spending is INFINITELY better than spending on CURRENT CONSUMPTION because it creates the means of future economic growth and production.

    The new “Yahapalanaya” GOSL has no such Conceptual Vision, and is NOW FOCUSED on PANDERING to the citizens with “Freebie Giveaways” while it tries to figure out how it can STOP THAT GIVEAWAY GRAVY TRAIN without having any access to a LARGE INFUSION OF DEVELOPMET FUNDS from China, given that it MUST PLEASE the REGIME CHANGE artists of the Neocolonial West and ease China out of Sri Lanka!

    It is ONLY A MATTER OF TIME before this “Yahapalanaya” Economic Boondoggle Hits the Fan … if you will Pardon my French!

    Aiyoooo Sirisenaaaa … What ARE YOU DOING to our Motherland??

  5. SenaD Says:

    Lorenzo Says:
    February 2nd, 2015 at 4:19 pm

    “You decide which is best. A Rs. 2,200 million corporate jet for the president or loan concession for poor farmers.”

    This is based on a lie!

    This report is about the so called saving announced by MS himself; the claimed saving has been revealed to be bogus.

    Adaderana reported:

    “Though the media had publicized that former President Mahinda Rajapaksa had ordered for an aircraft for his personal use, the highest sources within the civil aviation sector revealed to http://www.adaderanabiz.lk that such a separate aircraft has never been ordered.

    Several VIP Kits were attached only as complimentary offers when SriLankan Airlines purchased several aircraft for its fleet from the Airbus Group recently. The allegation of having ordered a separate aircraft may have been based on this VIP Kit. However, while this VIP Kit is not an aircraft it is only a facility where several seats within the plane could be removed and this cubicle with special facilities could be installed within this space.Airbus has valued this VIP Kit at USD 15 million only to indicate the added financial value of this free offer when these aircraft are purchased. However, this financial value cannot be obtained or deducted from the value of the aircraft by refusing this VIP Kit. Instead, only some other item/s could be requested from the Airbus Group to offset this value.

    Even the new government’s interim budget has stated thus on this VIP Kit which is not an aircraft:

    “The recent Airbus purchases made by the loss making national airline brings out another wanton exercise of utter waste where a VIP kit had been attached valued at US$ 15 million offered free of charge. Whereas a question could be asked as to why the cost had not been renegotiated without including luxury equipment or is it another episode under the mega deal category.”

    On this basis, while accepting this VIP Kit has been stopped on the advice of a very high SriLanka Airlines official, http://www.adaderanabiz.lk learns that SriLanka Airlines is examining whether any other Airbus Group product instead of this package.

    According to the information provided on the Airbus Group website, this VIP Kit is not a separate aircraft. It is only a separate cubicle with extra facilities which could be fixed inside an aircraft within around eight hours.

    There could be around six twin seats with facilities within this cubicle, states Airbus.”

    So, there is no saving of $15m announced by MS is a bogus claim and there is no saving at all.

    Like the false story that the finance minister floated about an account (~ Rs. 8b) held by GR the announcements that were made about floating armouries being found too were found to be run legally.

    When the account held by GR being held legally and the floating armouries are legally run operations were reported by the new defence secretary the man was asked to explain why he is divulging the truth.

    One by one the claims are being shown to be bogus.

    There are the other clams by CR, the power minister, and the ones being compiled by the rathu sahodarayas. My guess is that they will continue this clamour about ‘horrendous corruptions’ until the GE is over.

  6. SA Kumar Says:

    Aiyoooo Sirisenaaaa … What ARE YOU DOING to our Motherland?? divide into four ( not two as We-Tamils wants) !
    at last We both community lost the battle only India/Western won !

    better I joint with wining party – Appe Sirisena ……

  7. Susantha Wijesinghe Says:

    OH LORD !! OH LORDIE

    LORENZO ! YOU HAVE STARTED TO LIE THROUGH YOUR TEETH. THE PRESIDENT IS NOW ON WORLD NEWS, SPREADING UNTRUTHS TO THE COUNTRY ON THE WHOLE. HIS IGNORANCE OF THE PRICE OF A CORPORATE JET AND A JET SPECIAL VIP KIT, IS ASTOUNDING. HE HAS A SET OF BUFFONS ADVISING HIM WITH MALICIOUS INTENT. YOU ARE COMPLICIT IN SPREADING FALSE RUMORS. SHAME, SHAME, LORENZO. DISGRACE. SO WHAT YOU SAY IS NOT WHAT YOU HAVE ANALYSED. IT IS PARROTING BUFFOONERY. HOW LONG WILL IT TAKE TO PICK UP YOUR CREDIBILITY ????

    NOW YOU LORENZO IGNORAMUS, YOU ARE PARROTING THE SAME LIE OF THE PRESIDENT ABOUT A CORPORATE JET. DISGUSTING. YOUR CREDIBILITY IS SHIT-TERED, ON LANKA WEB. KEEP GOING KADE IN YOU AMUDE.

    A Rs.2,200 million Corporate Jet for the President. MY FOOT LORENZO. You are being utterly malicious. Keep going.

  8. Lorenzo Says:

    Where is that statement DENYING the jet by anyone?

    This is a serious issue IF false. My3 should know the election is OVER.

  9. Ananda-USA Says:

    ADO Yako, “Facebook” Lorenzo!!!

    When Susantha says ……..

    “OH LORD !! OH LORDIE

    LORENZO ! YOU HAVE STARTED TO LIE THROUGH YOUR TEETH. THE PRESIDENT IS NOW ON WORLD NEWS, SPREADING UNTRUTHS TO THE COUNTRY ON THE WHOLE. HIS IGNORANCE OF THE PRICE OF A CORPORATE JET AND A JET SPECIAL VIP KIT, IS ASTOUNDING. HE HAS A SET OF BUFFONS ADVISING HIM WITH MALICIOUS INTENT. YOU ARE COMPLICIT IN SPREADING FALSE RUMORS. SHAME, SHAME, LORENZO. DISGRACE. SO WHAT YOU SAY IS NOT WHAT YOU HAVE ANALYSED. IT IS PARROTING BUFFOONERY. HOW LONG WILL IT TAKE TO PICK UP YOUR CREDIBILITY ????

    NOW YOU LORENZO IGNORAMUS, YOU ARE PARROTING THE SAME LIE OF THE PRESIDENT ABOUT A CORPORATE JET. DISGUSTING. YOUR CREDIBILITY IS SHIT-TERED, ON LANKA WEB. KEEP GOING KADE IN YOU AMUDE.

    A Rs.2,200 million Corporate Jet for the President. MY FOOT LORENZO. You are being utterly malicious. Keep going.

    ……..You should RECOGNIZE that your AMUDE has slipped its MOORINGS, and your LITTLE ALL IS EXPOSED for ALL THE WORLD to see! Well done … Susantha!!

    PAU ANEY, amude nathuwa GANDAI, Apita Iwansanna Baha…. WAHA-GANING Puthey, Wahaganing ……….IKMANATAaaaaa!!!

    Lajja Naddaaaa?? Akulagena Duwapan, “Facebook” Lorenzo!! War-Games Expert …. MY BLOODY FOOT!!

  10. Susantha Wijesinghe Says:

    LORENZO ! The Air Force has confirmed that it is not a Jet, but a Jet VIP Con Kit, valued at $16 million. It is in the news everywhere. Probably if read the news you would not have written that but shied away.

  11. Susantha Wijesinghe Says:

    ANANDA ! You and Lorenzo must be very good friends Eh ? I have a very lovable friend, who whenever he sees me or talk to me, he shouts, Yakko

  12. Ananda-USA Says:

    Susantha,

    Well, actually … when I was a schoolboy, “BUGGER” was the NORMAL way to refer to another friend!!

    Although we knew what the term meant, it was never used as an INSULT! That hallowed English idiom is never used in the US, but is still very much in evidence in Sri Lanka!

  13. Lorenzo Says:

    Fantastic Under-USA!

    “ADO.”
    “Yako.”

    Doesn’t your language show your upbringing and education! Please carry on. Loving it. :))

  14. Lorenzo Says:

    President My3 on Moday gave the armed forced POLICE powers in ALL districts.

    I think it has something to do with the drowning of a youth in Thalawakele. GOOD MOVE. But it has another motive. MR is trying to shake things up with his new party PEOPLE-NATION FRONT due to be formed this Thursday.

    Now the people crying dictatorship will go to town with it. They should remember WELIWERIYA.

  15. Independent Says:

    Regard this “private Jet”, I must explain that, as a person very familiar with aviation business, I understood what he said correctly, even though initially I thought it could be a small luxury aircraft.

    What he said was ( all in Sinhalese – unlike most other politicians who use some English words)

    1. A new “official airplane” with luxury “status” ( which he is not prepared to give details) was ordered using treasury money of $16m.

    2. This plane is to be exclusive use of the President and they have cancelled it and money is to be used now to buy spare parts for Sri Lankan airlines.

    Knowing that SL Airlines ordered new Airbus Aricrafts recently, what I gather from this is SL Airlines ordered this luxury pack , so that when the president wants to travel he will be using “the Airbus JET” which is fitted with this pack, most likely to a part of it.

    The main point here is, ex-president had the intention to use this jet to travel with all his 40 odd companions to party, not for saving of motherland. This is worse than ordering a new “luxury jet” which usually means a very small Cessna Citation or Lear jet type aircraft. In this case the whole Airbus is wasted on that day of travel.

  16. Ananda-USA Says:

    Ado, Yakko “Facebook” Lorenzo,

    When dealing with DEVIOUS LYING SLIME, Ado and Yakko is appropriate.

    When Sri Lanka was under the JACKBOOT of the British, the Buddhist priests who participated in the Panadura Debates didn’t mince their words either.

    Nor did Anagarika Dharmapala in his speeches in his defence of our “Sinhala Buddhist Culture” against the Missionaries who, in their ignorance, demonized and demeaned us.

    You are an UNREPENTANT TRAITOR, an EELAMIST and a HYPOCRITE par Excellence, who has advocated and done far worse things at LankaWeb than use words like Ado and Yakko! You are UNQUALIFIED either to ASSESS or to CHASTISE others on education and upbringing; that is why you are a HYPOCRITE!

    If the Kitchen is too HOT for you; then DON’T STAY IN IT! LEAVE ….Right Now … SHOO!

  17. Susantha Wijesinghe Says:

    LORENZO !!

    My lovable class-mate friend whom I have mentioned above, is a millionaire. His son is a billionaire. There are well educated. Calling a friend, Ado or Yakko, does not reflect upbringing. When I was Manager of a Company, I used to call some of my staff, Yakko. Just a friendly gesture.

  18. Lorenzo Says:

    What a HYPOCRITE this Under-USA is!

    “Ananda-USA Says:
    February 3rd, 2015 at 1:40 pm

    (Adapted from Anglican MISSIONARY the S. Thomas College song)

    Patriots Young,
    Patriots Old,
    Patriots Staunch and True,
    Rally around the Lion Flag,
    The Red, and the Gold, in Hue!

    To Your Mother Lanka Sing,
    Patriots Near and Far!
    Loudly Let the Echoes Ring,
    For All We Have, and Are!

    Esto Perpetua!
    Esto Perpetua!
    Esto Perpetua!
    The Red and Gold Lion Flag, Forever!

    ……………………………………………………………………………………………………………………………………………………………………………………..
    Ananda-USA Says:
    February 3rd, 2015 at 4:48 pm

    “Ado, Yakko “Facebook” Lorenzo,

    Nor did Anagarika Dharmapala in his speeches in his defence of our “Sinhala Buddhist Culture” against the Missionaries who, in their ignorance, demonized and demeaned us.”

    Within 3 hours you changed your position AGAINST Christian missionaries after glorifying them!! You insult Anagarika Dharmapala with your surname “-USA”.

  19. Ananda-USA Says:

    Ado, Yakko “Facebook” Lorenzo,

    What you say “Within 3 hours you changed your position AGAINST Christian missionaries after glorifying them!!” ???

    Where did I do that to wit “Glorify Christian Missionaries in the last 3 hrs”, or for that matter at anytime????? EXPLAIN YOURSELF!

    I have NO PROBLEM with people of ANY religion, as long as they don’t try to CONVERT ANYONE in Sri Lanka.

    We have our own clergymen of all faiths; let them attend to their own flocks. We don’t need foreign Missionaries piling into Sri Lanka to transform our people in their own image! Generally, religions that have co-existed in Sri Lanka for a long time are quite tolerant of other communities; but new strains of related religions being brought here by new Missionaries are QUITE INTOLERANT and SPELL TROUBLE for ALL Sri Lankans! KEEP ALL OF THEM OUT OF Sri Lanka!

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