For 23 of the past 30 years, the Head of Government in Sri Lanka has simultaneously held the title of Minister of Finance. Experience shows that combining the two roles is usually a big mistake as the job of the Head of Government is very demanding.
It is almost impossible for any one person to combine that with being an effective Minister of Finance. The tasks associated with being the Head of Government almost always gain priority. Secondly, an effective Minister of Finance needs to maintain fiscal discipline by resisting pressures from the political office. The head of government who is also the head of a party or coalition cannot simultaneously meet this requirement due to such conflicting priorities.
Analysis of Sri Lanka’s public finances further provides convincing evidence that the absence of a dedicated Minister of Finance has undermined revenue collection. From post independence to around 1990, Sri Lanka’s tax revenue averaged over 20 per cent. At present Sri Lanka has one of the lowest income tax rates compared to peer countries as well as a tax threshold which is several times its GDP (Gross Domestic Product) per capita.
The Advocata Institute,, welcomes the government decision to appoint a dedicated Minister of Finance.
Key points:
A dedicated Minister of Finance is beneficial to effective public Finance management.
The Advocata Institute welcomes the appointment of a full time Minister of Finance.
Poor public finance management and poor revenue collection are partly a result of a lack of a dedicated Minister of Finance.
Understanding the seriousness of the present crisis and utilising pragmatic public policies is the way forward.
Advocata is an independent policy think tank based in Colombo, Sri Lanka.
The Political Economy of Long-Term Revenue Decline in Sri Lanka, Mick Moore, ICTD Working Paper 65, February 2017