Budget deficit-unscientific solutions
Posted on March 31st, 2019

By Prof. O. A. Ileperuma Courtesy The Island

The budget 2019 reports a massive 2000-billion-rupee deficit. This is going to affect the man on the street via taxes, both direct and indirect and cause severe economic hardships to ordinary people. Combined with the depreciation of the rupee, prices of all consumer items will increase. This budget is full of rhetoric but no substance. Massive handouts in the form of building toilets, houses and other welfare programmes will certainly add to inflation. This budget lacks even a single project where national productivity can be enhanced. It is only through increasing national productivity that economic salvation is possible. Economic pundits at the Finance ministry are capable only of increasing taxes on cigarettes, liquor and services provided to generate revenue. They are woefully illiterate about using our natural resources to bridge this gap. Let me give at least two examples. There was a proposal to commence a soluble phosphate fertiliser plant using Eppawela apatite last year during the period of the previous minister of agriculture. This plan never saw the light of the day owing to some unknown reason. This could have saved Rs. 5 billion annually in savings from the fertiliser subsidy. The other example is the ilmenite deposit at Pulmoddai which is currently sold in raw form at around US $ 150 a tonne. It is possible to produce pigment grade titanium dioxide using a simple process which fetch a price of about US$2000 a tonne. Our politicians and the economists who advise them totally ignore such productive ventures because of their ignorance. Another case is our rare metal resource at Beruwela which has a ready market and even the raw sand has a price of about US$ 500 per tonne. This valuable resource can be sold to bring substantial economic benefits.

Another neglected area in the budget is the lack of emphasis on agriculture. We import spices, dhal, mung beans, potatoes, onions, milk powder and a host of other food related items. All these can be produced in Sri Lanka and it is possible to become self-sufficient in milk powder if there is a will on the part of the government. Massive amount of foreign exchange goes to import these items and our governments, both the previous one and the present one, have never considered this as a priority.

Spending massive amounts of money on social welfare projects such as housing do not help an ailing economy. What is required is to empower people economically so that they can build their own houses. As the ancient Chinese proverb goes “give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime”. Instead of working hard to build a house, some people wait for the government to give them a house free of charge. There must be a different mechanism to provide houses such as low interest bank loans and encouraging entrepreneurship. Building hundreds if not thousands of houses is not going to solve the housing problem. Is there any country in the world that provides free houses for its people? Scare resources from tax payers’ money meant for development should not be spent on projects such as free housing. Of course it helps to enhance the images of politicians who want to grab political power at the expense of the tax payers. The same applies to toilets. It is hard to understand why this was ever brought up at a budget speech.

Politicians of this government never had it so good. Recently they got an increased allowance of Rs. 100,000 merely for postage! These are ruses to get the allowances of MPs increased. Duty free car permits enable members to the parliament to earn millions by selling these permits. A single day’s sittings in the parliament costs the taxpayer around 4.6 million rupees! My personal opinion that the parliament of Sri Lanka is a waste of resources and should be closed for at least five years and use the money saved to bridge the budget deficit. The provincial councils are all dissolved and this has created no problems for the general public and in the same vein, closure of the parliament will be no big deal. It has been reported in the newspapers that every time a ministry changes hands, the new minister wants to buy a new luxury car for his personal use. Ordinary public have to watch these antics and cannot voice any dissent except at an election. However, this government which came to curb the corrupt practices of the previous one is acting even worse. Extravagant spending by politicians for their personal glorification and for earning millions in kickbacks goes on unabated. No leader has the courage to say that austerity should prevail. Leaders are busy trying to keep their members of the parliament happy by giving them various perks and privileges. Recently prime minister reported that the government will recruit 7500 A.L. personal assistants to work on government policy implementation, again a ruse to provide jobs to party supporters. This will make only those M.P.s happy if they get a quota of jobs to be given to those in their electorates.

Mr. Anura Kumara Dissanayake raised in parliament, the issue on the need to import two bullet proof vehicles for the prime minister at a cost of Rs, 594 million. Minister Sagala Ratnayake claimed that these were necessary since there is a security threat on the prime minister. There are enough bullet proof vehicles imported during the previous regime and the government can surely use them instead of ordering new ones. According to Mr. Dissanayake, the government is slapping the people with taxes, the farmers can’t sell their crops, tea and rubber industries are in crisis, but the government has money to buy two vehicles for almost Rs. 600 million.

Our leaders should learn from what the Prime Minister of Pakistan, Imran Khan is doing to reduce government expenditure. It has been reported that the earlier prime minister had 524 employees, 33 bulletproof cars, helicopters, aeroplanes and lived in a super luxury house. The country also had massive Governor’s houses and elected officials were enjoying all luxuries. Prime Minister Imran said that he would keep only two servants and only two vehicles and the rest of the fleet will be auctioned and the money returned to the treasury. `It is inconceivable that our leaders will act like how the Prime minister of Pakistan has done. They are hell bent on glorification, promoting corruption and working for the next election.

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