Before 2015 the economy grew by 7%, now it is down to 3%. This Budget seeks not only to continue the downward path but with greater intensity, when it has failed both here and abroad. Even the USA that started the drive for a free market economy is now forced to resort to regulation by the Government to control market forces. But this UNF Government is marching on to economic and political suicide for the whole country unless it is rejected by the people.

The 2019 Budget presented by Finance Minister (FM), Mangala Samaraweera, is based on false premises and promises, and will hasten the deepening of the economic crisis facing Sri Lanka, leading to bankruptcy, in the attempt to win votes for the UNF at the forthcoming elections. The LSSP appeals to the people, not to be misled by the FM’s marketing skills but understand the grave outcome of this Budget for the country and the people, both present and future generations. Mangala Samaraweera is the most irresponsible FM in Sri Lanka’s history.

The Policy is ‘More
Debt, Burden the People Not the Rich’

The income required to fulfil his promises is not going to be realised. When the income rose by a mere 5% in 2018 can his prediction of an increase of 22% in 2019, be achieved? The obvious shortfall will have to come via more loans. Thus the Budget deficit of Rs 685 billion will be much greater and the foreign borrowing will have to far exceed the Rs 450 billion stated by him.

The Government debt-to-GDP ratio that has risen to 83.6% at the end of 2018, from the 2017 level of 77.6%, will sky-rocket to well over 90%. His claim that the Goverment hopes to bring the load of debt down to 72% of GDP by 2022 is a dream, an Ahas Maligawa to quote him.

The third highest contributor to income is going to be Rs 45 billion through the vehicle tax on imports. The FM hopes to increase vehicle imports by removal of the advance payment of 200% which is levied, now. But this will require more forex (US Dollars, etc.) and worsen the adverse balance of trade. This means more depreciation of the value of the Rupee, increasing the cost of living further, and more USD loans. Resorting to printing of more money by Government would also have similar consequences.

The increase of tax revenue is not by extending the tax burden to the rich and super-rich ( the 1%, of the population), whose maximum tax slab remains at 24%, but by broadening the indirect tax (VAT etc.) burden on the ordinary people (the 99%). The cost of living will soar making living impossible for the people.

Election Budget

While we welcome some features of the Budget, like the increase in Excise duty on cigarettes and liquor to realise Rs 370 billion, and also the benefits to the people – drinking water, toilets, rural roads, free milk for school children, student training programmes, steps for women’s welfare, increased allowances for public servants and the handicapped, and correction of pension anomalies, the million dollar question is how much of this will be implemented.

There are various figures on how much of the promises have been implemented by the UNF Government during these last four years, and some say that it may be as low as 30%. Will that be the ultimate outcome of this Budget as well? The fact that there is no mention of the Rs 50 daily allowance promised to Plantation workers in the Budget is a pointer (MP/Digambaran, when do you quit?).

There is no doubt that the bulk of the expenditure will be used for vote catching purposes. For example, we all accept that many who really need Samurdhi assistance, under this pretext the deserving Opposition supporters who are getting benefits may lose out to even undeserving UNP supporters.

Crony Capitalism
with IMF Conditions

The rate of economic growth which was 6 to 7 % of GDP under the previous Mahinda Rajapaksa regime, despite the cost of the war to restore peace and the extensive infrastructure development, has dropped to just 3% with this UNF Government. The FM expects to increase growth to at least 4% with the expectation that Gam Peraliya and Enterprise Sri Lanka, together with an increase of industrial development would achieve this.

But indications are that these two programmes are merely benefitting the UNF crony capitalists and not the country. And in this Election Year the trend is likely to be exaggerated. Amidst much talk of increasing export income, when markets for traditional exports are collapsing, there is no serious attempt to develop industries here even based on value addition to local raw materials that are capable of competing with foreign goods.

The need to have modern (Hi-tech) Science, Technology and Innovation developed locally is not really appreciated, though lip-service is paid. The expectation that Foreign Direct Investment (FDI) will make up for this is doomed to failure. Since 2015 the FDI outflow has exceeded the inflow. The corrupt, unstable political and economic situation in the country is not going to encourage investment.

The UNF Government commitments to the IMF are being stringently fulfilled – dismantling of the social welfare State and the sale of national assets to foreign Multinational Corporations, with draining abroad of our forex (USD etc.). The people and the economy will be badly hit. The running down of State banks and other institutions, in favour of the private sector will cause a rise in interest rates, increased exploitation leading to the sale of farmers’ land and assets of SMEs. The high running cost and interest rates have led to closure of many enterprises.

The unrestricted open market policies are enabling foreign goods to capture our markets and dictate prices. With local middlemen raking in profits both local producers and consumers suffer. In such a context, the Budget rather than improving the life of the people will make it much worse. Election bribes through the Budget will not make up for this.