Rajapakse?s Economic Ruination
Dilrook Kannangara
Financial ruination is what the nation is experiencing today. The task
of the patriots is not to blindly support the government but to put
effective pressure on it to change cause. If not by the time we have
won the war, the economy would have bled the country to death, not so
much due to acts of terrorism, but due to irresponsible financial mismanagement
by the same administration that is fighting the war.
Extreme waste
It is no doubt that the foreign reserves are straining out to finance
the 44% increase in defence spending and other superfluous spending
initiatives. The jumbo cabinet costs an additional 650 million rupees
a year. Although it is better than having elections which would cost
at least 30 billion rupees plus continued political instability, 650
million is a colossal amount especially considering the fact that there
is no corresponding development work. Ultra luxury vehicles are imported
for no benefit for the country and its industries. What is worse is
that it is the likes of Rizana who pay for these crap out of their sweat,
blood and life. This is a very pathetic situation and must be redressed
immediately. How can one reconcile this nonsense with the aspirations
of SLFP’s five forces (clergy, teachers, medical workers, farmers
and laborers)? Simply the five forces will desert the government pretty
soon. Already sections of these groups have aired their anger at the
extreme waste of the government. If the UNP’s newly formed peasants’
group swells its membership, the SLFP has only its leader to blame.
Financial mismanagement
There is no sense whatsoever to impose additional taxes outside the
budget to cover-up the misdeeds of financial mismanagement. Its will
further aggravate the situation as the tax money in the pockets of the
people would do much more good than in the government coffers. Add to
this the enormous administration cost of these new taxes, it makes it
ridiculously wasteful. One may even wonder whether the Rajapakse administration
is actually and deliberately following a strategy of financial ruination!
Replacing wheat with rice flour
In economic terms this will give a huge saving on foreign exchange outgoings.
However, this cannot happen overnight and we have seen similar campaigns
collapse silently over the past decades. In the absence of any real
financial returns (increased profit and cashflow) for the farmers, it
is unlikely that any such ambitious project would work. What needs to
be replaced is waste. However, in the same token the reawakening of
the Paddy Marketing Board should be appreciated. If managed on commercial
terms, this can cut a lot of fat in the retail trade of rice. On the
other hand if it ends up an ‘ambalam(a)’ (a sanctuary for
the unemployable) then it would create yet another public burden.
Taxing the votebase
Another fatal mistake committed by the present administration is to
impose taxes on creature comforts branding them as luxuries. The absurdity
of the new tax regime is heightened by the flat charges it imposes irrespective
of usage. This is likely to be a major obstacle in sustaining the support
from SLFP votebases. Instead what the government should have done was
to impose taxes with minimum political repercussions on the ruling party.
The present administration has a lot to learn from the UNP; when the
UNP was in power they ensured that new tax systems did not burden their
particular voters to a significant degree. Cutting the fertilizer subsidies,
dissolving the Paddy Marketing Board, tax amnesty for the tax defaulters
(mostly top rung UNPers), politicized Janasaviya/ Samurdi /land distribution
projects are good examples. No wonder the UNP has a rock solid votebase.
Other forms of waste/corruption
Consumption related subsidies must be phased out over time; these add
a very heavy burden on the economy. Public sector reforms are a necessity
though forced upon us by the World Bank and IMF. Employing unemployable
graduates costed the economy a few billion rupees a year. What is more
corrupt is taxing productive salary and income earners to feed the heavy
government payroll. If 60% of all government taxes go into salaries,
there must be something very seriously wrong with the administration.
How independent is the Governor of the Central Bank?
This was asked by a prominent banker recently. Now it is upto the economists
to ask this. As a very accomplished accountant, the preset Governor
should have reason to believe that the economy is in doldrums and worse,
things are likely to get worse if we continue like this. Then why is
all this false optimism in his views? Is he still a politician crossed
over to the SLFP from the UNP? If so there is no point having him as
the Governor of the Central Bank, he should rather get back to politics.
This may lead to a serious credibility issue concerning the country’s
monetary and fiscal management body which will in turn have dire consequences.
The corruption barometer and Transparency International
Transparency International uses a ‘corruption barometer’ to
rank countries. This is not actual corruption but the public perception
of corruption. Therefore it is about media and the publicity given by
them to actual and alleged corruption. It is a fact that most corruption
allegations are nothing but personal character tarnishing endeavors
against government bigwigs without any proof. If actual corruption is
suspected, anyone can lodge a complaint at the Bribery and Corruption
Commission. None of the exuberant corruption charges made by Laxman
Keriella has been taken to the Commission! If the UNP is serious about
these charges they can do so without mere publicity stunts. On the other
hand making false allegations must be punished severely.
However, it is of paramount importance to keep a clean public image
by the government because it affects the ‘corruption barometer’
(public opinion about corruption). This index is used by many foreign
investors, financiers, NGOs, donors and many others for decision making.
They do not go behind the ownership of Sri Lankan media institutions
and their political aspirations. If false allegations are punished and
actual acts of corruption is kept low, corruption could be tackled more
efficiently.
UNP is no alternative
However, the UNP is no viable alternative for the SLFP-led government.
In fact bulk of corruption found by COPE relates to UNP times and the
UNP has been worse of the two parties in mismanaging foreign aid. It
still has a stake in cost of living via its big time financiers. Its
biggest financiers use huge price increases they have levied on milk
powder, retail trade, bus fares, etc. to bolster the UNP financially.
They have no regard for the COL or the suffering public; in fact they
benefit from both the huge profits and public anger towards the government.
In the unfortunate event of them coming into power, expect much more
inflation. Else they would cross-over to the SLFP!!
How to correct the government
The corrupt in the government must be punished; a movement within the
government should commence demanding the punishment of these unscrupulous
elements, else defection. This must be started before the opportunity
is exploited by the UNP and its new leader - Chandrika. The JVP can
exert pressure on the government especially at the time of the budget;
a precondition for its support at the budget should be sizable elimination
of corruption and waste. Failure to correct after such light measures
should lead to public disobedient campaigns with abstinence to pay taxes
on the ground that it is against natural justice to pay for corruption.
If this sounds serious and illegal, that is exactly the point; corruption
and waste is serious and illegal.
|
