A Budget which offers no solutions
Posted on March 12th, 2019

N.A. DE S. AMARATUNGA  Courtesy The Island

From a layman’s point of view a budget prepared by a Finance Minister of a government must attempt to provide solutions to the acute financial issues and problems that have a direct or indirect effect on the lives of the people. One need not be an economist to observe that these issues may fall into two groups, firstly those that have a direct impact on the daily lives of people such as cost of living,  employment opportunities etc. and secondly, those which have an indirect effect such as the GDP, inflation, debt ratio, foreign reserves, direct foreign investments, value of the rupee etc.

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Everybody would agree that a good budget must identify the acute problems that affect the  daily life of poor people such as the cost of living, and take short term remedial action so that people may live without undergoing untold misery and indignity. Further, it must also  make long term plans to correct problems that indirectly affect the people such as the GDP. The budget presented to the parliament on the 5th March has departed from this method and has not attempted to address any of these issues. For instance, it has not taken any measures to bring down the cost of living or the prices of essential items. Cost of living is unbearable for the poor people in the villages. Even the children of farmers are malnourished. Farmers cannot get a reasonable price for their produce and have to eek out a living. Similarly, requirements of middle class families are made prohibitively expensive due to heavy taxes.

Regarding long term measures to improve the economic parameters mentioned above, nothing substantial have been proposed in the budget. It does not say, for instance, how the government proposes to increase the GDP or how it would attract foreign investments. The debt ratio, foreign reserves and value of the rupee are interconnected and depend on  direct foreign investments. The GDP which was above 6% in 2014 is about 3% now. In this respect only Afghanistan is below us in South Asia. Debt : GDP ratio which was about 70% in 2014 is above 90% now. The Dollar which cost about Rs.130 in 2014 is Rs.180 now. There are hardly any foreign investments, or even local investments for that matter, due to several reasons.  Bank interest rates are prohibitively high and the currency exchange rates are unfavourable for investments. There is less demand for consumable items as people have no money to buy them and this is another reason why there are no local investors. Germany has said Sri Lanka is not suitable for any investment.

The budget does not present a plan to increase the exports and reduce the imports, whereby our debt trap could be eased a bit and improve our foreign reserves as well. There are no adequate incentives for export oriented industries. Neither are there plans to develop  export substitute industry. This country has the capacity to produce everything it needs, yet successive governments have failed to take adequate action to look at the problem from the national point of view. Instead, it has focused on developing and improving its export oriented economy. Even in this regard  it is too heavily dependent on few traditional exports like tea and garments.

It is female labour that sustains this country and keeps it afloat. If not for the tea plucker, garment worker and Middle East house maid Sri Lanka would be bankrupt by now. We are said to be an agricultural country for our occupation and industry are mainly based on agriculture. Yet the effort the budget makes to develop our agriculture is almost nil. There are no incentives for the farmer, or for the unemployed to take up agriculture as a vocation; there is nothing for the aggro-industry either. None for agricultural research too, so vital activities for a country like ours.

Were all these blunders committed by Khema’s Boy? Is the budget a reflection of government stupidity and incompetence?  No one should think so. This is the type of budget that would suit our western masters, which would prolong our bondage and keep us inside the aid/debt trap. They want us to  produce tea and garments for them and depend on what trickles down through their fingers. We are not allowed to produce our own requirements and be self sufficient. That is why there are no incentives for farmers and local industry that produce our needs. If we become self sufficient in our food and other requirements we will be economically independent. The Western powers will do their utmost to stop us achieving economic independence. They want the poor countries to just subsist with the pittance earned from their  exports, and eternally remain poor. We will produce tea and garments, Middle East would supply oil, another country iron, and so on. Nobody is allowed to develop the ability to produce everything they need. They buy their needs at their price and sell to us what we need again at their price, we have no say. Though it is supposed to be a free market global economy they manipulate the market.

If we are to come out of this rut we must try to develop self sufficiency in food, clothes, building materials, electricity, medicine, and other items we need. Our industry should be developed to support these projects. We must change our export  / import economy to a self sufficient economy. The Island Editor in one of his recent editorials had spoken about the importance of being self sufficient. We fully endorse his views. If we achieve those goals no one can force us to co-sponsor a Resolution against ourselves, harass our war heroes, and enact laws adverse to the country at the dictate of foreign powers, and make constitutions that suit them rather than us. To achieve those goals we must have courageous governments which would produce  a budget that is geared to develop a national economy.

One Response to “A Budget which offers no solutions”

  1. Dilrook Says:

    A short-term election budget.

    More high interest rate borrowings via ISBs must be made to grant these election sweeterners.

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