Growth in Sri Lanka vs. Governmental Expenditure
Posted on September 30th, 2024

by Prof Sunil J. Wimalawansa

Considering what has happened over the past few decades, it is no surprise that people do not want to see disruptive politicians who once governed the country returning to power. This sentiment is reflected in the over 4.7 million voters (out of 6.9 million) who previously voted for the former President but have now supported the current President, Anura Kumara. This is a clear objection and a mandate to keep them out and initiate a complete system change. Additionally, those who voted for the current President on September 21st, along with a growing number of others, are advocating for legislation that would permanently disqualify corrupt politicians from holding any elected or appointed positions in the future.

Changing Voters Behaviour and Necessary Changes

Most voters expect the new government to introduce enforceable legal restrictions to prevent the nomination of individuals who have harmed the country and its people. While opinions may vary, the basic qualifications voters hope for include disqualification for those involved in financial scandals, misappropriation of public funds, violence, criminal records, or indictment for unethical business practices. People with ties to the country’s bankruptcy deemed untrustworthy and should also be ineligible for nominations or any appointment.

There are other criteria that may be controversial but should be debated and evaluated for the betterment of the nation in the longer term. For example, an age range (e.g., 35 to 75 years at the time of nomination) and a requirement for a university degree, and elimination of those with criminal complaints or convictions. These may be unpalatable for some, and others consider it discriminatory, but one should consider what is best for the country.

To prevent politicians from becoming entrenched and ineffective, a term limit on any elected political position should be introduced. If such policies are adopted, more than half of the current parliamentarians would be disqualified from holding or submitting nominations for government positions—an efficient way to remove them. Most voters hope this will become a reality.

The focus on sustainable growth

The new government should publish immediate, medium-, and long-term economic policies with clear plans detailing how it intends to generate the foreign exchange needed to repay loans, run the country without accruing additional debt, and import essential goods not produced domestically. With the right strategies and a potential restructuring of the IMF loan, perhaps transferring it to a friendly, sympathetic country like Japan, this can be achieved without raising taxes and further burdening the population.

Besides, the government must facilitate and incentivize the growth of value-added exports like graphene oxide and enriched minerals, while implementing sustainable financial and developmental practices. This should include systematically expanding tourism (including ethical medical tourism) and renewable energy sources to reduce dependence on imported fuel and strive for self-sufficiency in energy, essential food, and medicine.

To illustrate its ability to control the situation, the government must also develop a concrete plan to support the growth of small and medium-sized businesses, encourage exports, simplify regulations, and consider tax cuts. While tourism should be developed, it must be done systematically—not haphazardly, as was the case with previous governments. Additionally, the government should avoid relying solely on tourism for economic stability, as it is vulnerable to uncertainties stemming from the rapidly changing world order, travel restrictions, and external economic shocks.

Reduction of government size and expenses

Import restrictions are crucial for reducing the budget deficit and should prioritize promoting fuel-efficient vehicles. In addition, the large contingent of seized high-engine capacity (e.g., V8 engines) government vehicles should be auctioned for export purposes to generate foreign currency. It is essential to ensure that no further import-related commissions or major financial scandals occur. Appointing a committee of genuine experts with a clear timeframe to identify the root causes of financial failures across various sectors—economic, social, and embezzled public funds should go in parallel.

Appointing such commission/committees with retired subject matter expert executives with no conflicts of interest should be empowered to develop a plan for holding responsible individuals accountable and recovering siphoned assets and funds is vital. This commission should work with established international authorities to return those assets to the treasury.

Reduction of ministers and parliamentary seats via the new constitution

It is estimated that reducing the number of ministers and ministries to 20 by amalgamating similar functions without appointing deputy- or state ministers, would eliminate unnecessary expenditures. With the abolition of redundant (and duplicate) provincial councils could each save over a trillion rupees in the next four years. These savings alone would be sufficient to pay off the government’s internal Rupee debt.

Additionally, each ministry should be provided with a modest budget without the option of receiving additional rescue funds. Ministries must adhere to the discipline of living within their allotted annual budget. The failure to do so must lead to losing his position. With re-districting (through the new Constitution) and by reducing the number of members to less than 100, parliament can be run more efficiently with half the current cost. 

Curbing Wasteful Foreign Travel:

Most foreign travel by politicians and administrators does not bring significant value to the country. Therefore, such travel must be minimized and funded strictly through each ministry’s budget, not by foreign embassies, as was previously done, where taxpayers covered expenses. Haveing an independent committee with executive power to approve or deny,” all foreign travel of Government Servants is an effective way of minimizing this wastage.

For a bankrupt country, there is no need for ceremonial openings and lavish events to be conducted at taxpayer expense—they are highly inappropriate. Besides, it is irrational to invite politicians for such constructions, that were funded by taxpayers. Savings from these reductions can be redirected to critical areas like modernizing agriculture, education, research and development, and improving indispensable infrastructure, which are essential drivers of the country’s economy.

Accountability and Enforcement of Laws:

It is the fiscal responsibility of the new government to enforce personal answerability of all ministries, government departments, and state own enterprises and hold them legally and financially accountable. It must be mandated that all state-owned enterprises operate without incurring losses, failing which senior administrators must be terminated at the end of the year. Achieving this requires learning from rapidly developing emerging economies and implementing proper oversight, including mandatory annual audits and robust reporting mechanisms, and enforcing laws.

Cutting Down Government Expenses:

Despite pressure from the public, unions, and NGOs, government expenditure must be reduced. The current government is highly inefficient despite operating at approximately 50% overcapacity. Government departments are both top-heavy and bottom-heavy, with the middle management—the segment that contributes the most to any department’s functioning—shrinking relatively. This has led to rampant inefficiency. Thus, it is not surprising its ineffectiveness, which also allows opportunities for bribery.

Therefore, a program should be implemented to gradually reduce the size of the government , including the over-blown military by eliminating 40% of non-productive positions. Such would make operations more cost-effective and accountable. There is absolutely no justification for expanding the government; instead, public sector jobs must be restricted, and the private sector should be encouraged to expand to foster job creation across the country.

The new government must uphold its election promises without exceptions by focusing on eliminating corruption at every level.  This includes re-establishing independent committees and commissions with legal powers to prosecute, establishing sustainable economic policies and practices, limiting the number of ministers and ministries, reducing perks that ordinary citizens do not enjoy, and ensuring that ministers and government administrators are held accountable. This will become easier if NPP gains the majority in the next parliament.

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