The seventeenth time is the charm…or is it? | Sunday Observer

The seventeenth time is the charm…or is it?

20 November, 2022

“The Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.” – Ronald Reagan

Sri Lankans have all their eggs (if they are lucky to find any in the market these days, of course) in the IMF basket and are hoping to get the assistance of the US$2.9 billion over the next four years to come out of the economic crisis they have gotten themselves into.

The President presented the much-awaited budget proposal for the year 2023, just a few days ago, to the Parliament and requested all the citizens of the country to help achieving those targets. It is the duty of each and every citizen to support the corrective measures every way possible while rejecting the suggestions that are counterproductive.

They would first have to understand the proposals that are in the 2023 budget and also find out about possible outcomes of them. Since the main purpose of this budget is to start the process of getting the country out of the economic crisis, it is also important everyone to understand how we got into this mess in the first place. If not, there is no guarantee that we won’t repeat the same mistakes again. About seventy five percent of the solution to a problem is understanding exactly what and where the problem is and what are the factors that created the problem.

Immediate goal of this budget should be fulfilling the requirements of the IMF in order to secure their financial assistance.

Comprehensive strategy

IMF recommendations such as, increasing Government revenue through increased taxes and developing a comprehensive strategy to restore debt sustainability have been clearly addressed while cutting the expenditure down perhaps is not that obvious, especially since the total in the expenditure column is even bigger than that of the 2022 budget.

A couple of other IMF recommendations that have been addressed by this budget are implementing a comprehensive macroeconomic adjustment package and strengthening the social safety nets.

Introducing measures to reduce youth unemployment is another IMF requirement and that may have been one of the reasons for highlighting the items in the budget proposal addressing education, training, physical wellbeing, and employment of the youth in the country, during the speech.

Though the IMF had also recommended that the country should introduce measures to increase the female labour force participation there was no specific item addressing the issue.

State-Owned Enterprises

Though the budget has tried to address the IMF staff report requirement of reforming State-Owned Enterprises (SOEs) as a way to reduce Government expenditure it is doubtful whether introducing such reforms on well-functioning institutions as Sri Lanka Telecom or Sri Lanka Insurance, as the budget proposes, is what the IMF expected.

Usually, such reforms are expected to be introduced to reduce the cost of maintaining loss-making institutions that are not in the category of essential services. Though the proposal mentions about fifty-two SOEs that would be restructured under this category they will only be known when the list is tabled at a parliamentary session in the future.

Though reducing corruption and establishing transparency are mentioned several times in the IMF report as two key requirements for reducing unnecessary Government expenditure, the budget doesn’t seem to have addressed it in any noticeable manner.

Since rampant corruption and lack of transparency are two of the main reasons for the economic crisis the country is facing today, it is disheartening, to say the least, to see a ‘way forward’ plan that does not see the importance of addressing those issues.

It is interesting to note the similarities between the 2023 budget speech in the Sri Lankan Parliament and 1981 address to the nation by then President of the Unites States, Ronald Reagan. Reagan also asked the questions, ‘What happened to our great nation?’, ‘Where did we go wrong?’, and painted the picture of the glory days of 60s and 70s.

The difference is that Reagan asked these questions just two weeks after he became the President whereas our Parliament is filled with members who have been there for 30 – 40 years and who know very well what happened.

Not only they know what happened, but some of them may also even have been directly responsible for what happened to our country. It was very interesting to see that the budget speech even highlighted a part of Buddha’s teaching about borrowing and said we borrowed from other countries and spent on our consumption without thinking about the future.

According to the summary, given by the External Resources Department (ERD), of the borrowing Sri Lanka has done, the biggest percentage 47 percent is from the US and European markets borrowed during the period 2015 to 2019 while the current President himself was the Prime Minister.

Reagan, of course, improved the country’s economy beyond anybody’s expectation and went on to become one of the best Presidents the US has ever had.

His approval rating was 70 percent when he left the office after his second term in 1988. If at all such similarities continue, Sri Lankans can also hope for a better future in the material world.

However, we should hope that any parallels to the Reagan administration would end there since Reagan was also the Governor who ordered the state police to crush the students’ protest that was a part of the Free Speech Movement originated in the University of California, Berkeley.

The struggle between the students and the Police on that day ended up killing one student and injuring many writing the Thursday of May 15, 1969 as ‘Bloody Thursday’ in the history books.

Sri Lankans most probably won’t have to worry about anything similar since the 2023 budget discusses all the support and the facilities the country is planning to provide for youth empowerment.

A lot of students were even invited to the Parliament to witness the delivery of the budget speech and there was a special recognition and appreciation of their presence by the President during the speech.

According to the World Bank reports, Sri Lankan economy was showing signs of weakness even before the Covid-19 pandemic.

Economic catastrophe

Restrictive trade regime, weak investment climate, episodes of loose monetary policy, sustained fiscal disparities driven by low revenue collection, 2019 tax cuts with rapid growth of unsustainable debt all have contributed to the current situation of the country.

Sri Lankans are experiencing an unprecedented economic catastrophe due to several reasons, main one of which certainly has been the unconcerned attitude of the citizens while the resources of the country have been mismanaged, misused, and outright robbed by the authorities who were entrusted with making decisions for the betterment of the country.

Even if we get trillions of dollars in aid packages the country will not get the benefits of even a dime of that unless we create a transparent system that is free from corruption.

A country or an organisation can truly enjoy a corruption free environment only if they are led by individuals whose intentions always are focused on the wellbeing of the country or the organisation and not on their personal wealth. Until we ourselves become such people, no other country or organisation will be able to help us develop this country.

The writer has served in the higher education sector as an academic for over twenty years in the USA and fifteen years in Sri Lanka and he can be contacted at [email protected]