Posted on March 10th, 2019


The budget Speech with the proposals for 2019 presented to the parliament clearly reflected that the government has failed to develop or open right policies to take the country to a right path for rapid development and a sustainable growth. Since 1957 Sri Lanka has been sticked to wrong budget policies and during the President R. Premadasa the budget policy was seriously poisoned by spending with printed money.  Mr Mahinda Rajapaksa, during his the last few years of presidency attempted to correct budget policies but he lost power in 2015.

The main reason for this comment is, the Minister of Finance should clearly understand that the budget policy must focus to get away from the traditional Keynesian theory which was based on more government spending to increase aggregate demand of a country with a view to expanding national income and employment. This was a conditional strategy for developed countries but not for developing countries to competitively uplift the economy.  The improvement of international competitiveness, improvement of productivity, lowering inflation and many other factors are the fundamental requirement for Sri Lanka. The Keynesian theory-based policy was successful after the Second World War as there was an excess capacity of the economy of countries involved in the World War.

The economy of Sri Lanka is not in an excess capacity to pouring money with a view to increase production and employment. In fact, it has overutilized the capacity and required to improve more investment in productive fields by non-government organizations.  The Keynesian theory was awkwardly criticised later when spending more money in an economy with a lower capacity, the multiplier process will create an inflation, which is to be controlled by increase in the rate of interest by the Central Bank. It would negatively impact on the expectation of development and growth. The Gamperaliya is also a highly inflationary measure in addition to budget spending and has Gamperaliya got excellent bank policies to prevent pouring money to increase regional inflation and increasing indebtedness of rural people is the main issue.

After the cold war, the World Bank and Associated Monetary Organizations identified that the policy correction is the most important policy direction for the countries like Sri Lanka where there is a nature of highly depending on injecting debt and printed money to the economy.  Has the Minister of Finance understood this simple economics when the minister was preparing the budget for 2019 or he was sticked to a mental strategy to winning elections?  What was the aim of the Finance Minister protecting the economy turning to the right path or indulging money spending for winning elections?  Finding right economic policies is the job of the government and the Minister of Finance should give leadership to the government educating the members of the government.  A son of Khema may not such a skilled and educated person for a broad policy education to his colleague.  That may be the reason Mr Wickremasinghe passed public hint at his anniversary celebration.

After 1956, the socialist pathway of strategies obviously failed and Sri Lanka faced to serious macroeconomic problems, which complicated politically created and motivated micro economic issues in public enterprises. Late 1960s Professor Dudley Seers pointed out in his report of Matching Employment Expectations and Opportunities a Program Action for Ceylon that export promotions through diversification of exports, reducing capital intensive projects, population controls, less investment in public enterprises, enhancement of productivity, logical and indirect foreign exchange controls such as FEECS and promoting private sector participation in the economy were vital policy initiatives than taking stress to the government increasing debt and taxes which are not affordable to the community.

After the 1970 election, the new government attempted to go back to old socialist strategies without considering the weakness of budget strategy in Keynesian system and Dr N. M. Perera gradually aligned to monetarist strategy for budget management and taxation. During this period, the world oil crisis emerged creating serious problems to the capitalist world as well as to Sri Lanka and other countries and the budget strategy of Sri Lanka was structurally changed by increase in taxation such as business turnover tax, wealth tax and many other taxes, which discouraged the private investments and the budget policy began to worsen the macroeconomic problems. Socialist strategy gradually became a bitter swearing word to common people in Sri Lanka as the government did not initiate essential reforms in education to open and attract developing international labour market for Sri Lankan graduates under the international labour movement, after the oil crisis in Middle East.

If the government developed Technical Vocational Education and Training policies to convert increasing arts graduate production from the universities with a view to diverting the traditional literacy-based arts education to promotion of entrepreneurial education and skills training, it would have used as the best budgetary strategy in the country. Instead of productive education policy, a vicious ideology was promoted among rural poor to take weapons into hands to change social fabric of the country and to destroy the imperialism and to achieve the liberation to poor people.

Although the government had a good foreign policy and a political strategy to confirm the sovereignty of people through constitutional reforms, the government failed to persist the right economic policy to solve macroeconomic problems such as unemployment, trade problems, debt, exchange rate, investment and many others. While cheating public, the government attempted to show off that the right thing could be done by misguided political authority, which divided people at regional level on political party basis.  Vicious economic and political rhetoric ignored the essential micro economic reforms in public enterprises and promoted rural educated poor to demand government jobs and nationalise good private enterprises.

After the election in 1977, people of Sri Lanka agreed with economic liberalization with a view to attracting private sector for investment and to give a right price to rural products and services, however, the foreign policy of the government misguided liberal economic policies and open the way for LTTE terrorism, which was the mouth of shark, which ate all benefits of liberal economic strategies and promotion of corruption for providing war services. The budget strategy of 1978 was focused on elimination of corruption, which has been developing little by little in Sri Lanka.  The budget speech for 1978 was commenced by Mr Ronnie de Mel singing a poem of John Milton against the corruption.  In order to gain good benefits from the liberal economic policies excellent economic discipline, authoritative political leadership, understanding the operation of liberal economic policies, respecting the law and order and change in education policy to promote entrepreneurial education and training were required but they were not happened.   Tax reforms and administration to attract more tax revenue and idea to achieving a balanced budget massively cutting expenditure and develop rural infrastructure should have been the priority of budget strategy. The government advisors are not practical people who have real experience in understanding the economic issues and capable persons to manipulate actions to reactions.

After 1978 budget policy presentation, I as a government bank in rural area met Mr Ranjan Wijeratne, who was a powerful person of the government and trusted person in private entrepreneurial business to present an idea and business plan to successfully promote private investment, elimination of corruption and obtain greater participation of rural educated youth to economic policy implementation.  My idea was to create peoples’ companies in each electorate with investment of rural people and the government and to decentralize the Colombo Stock Market to district level and list shares of people companies in regional stock market with a view to listing district level stock exchange Colombo Stock Earket and creating strong 25-30 regional people companies and educating daily stock deals among rural poor with strong government monitoring.  My idea was highly appreciated by the World Bank consultants and accepted the best policy strategy for elimination of corruption, promoting capitalism among rural poor with ownership of company shares and changing the social fabric of the country without politics and give dignity to rural poor.  However, Mr Wijeratne had not understanding of stock market operations, finance business and entrepreneurship and his surrounding officers did not understand economic policies, financial operations, stock market operations and they were uneducated estate superintendents, who never know about policy development and implementation. I did not further go about the plan.

The Major weakness of the 2019 budget is that it has not focused on the correcting past economic policies and elimination of corruption in the country.  The government consists of a group of corrupt people, which have become a barrier to correct economic policies.  Sri Lanka needs a fresh start with a general election and empower rural people with right policies and structural changes are needed without a publicity.

I would like to discuss the Gamperaliya and politics in this article. Gamperaliya is a credit project and this type of projects have been implemented in Sri Lanka since 1950s but they were not successful due to weak bank credit policies, political interferences and weaknesses in the project framework.  First it requires elimination of corrupt practices of bank staff, who were the origination of corruption in Sri Lanka.

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