Financial Times

Budget: Arduous road ahead
It had many similarities to the last two budgets of the UNP government with one exception; the UNP sought a long-term, pro-investment solution to uplifting rural poverty and lost in the process while the ruling UPFA is gambling on a mix of quick-fix solutions to the nagging problem of poverty, lifting the rural economy and a long-term development thrust.

As anticipated Finance Minister Sarath Amunugama's budget was a take-from-the-rich-uplift-the-poor exercise but not as bad as expected particularly by corporate bigwigs and stockmarket players. "Gloom and doom" soothsayers in the stockbroker community are now going ga-ga over the budget as the much hated capital gains tax is not there. Yet the middle class - often known as the new urban working class (NUWC) - will once again find themselves trapped in the cost of living spiral.

The preamble before the actual proposals were made was the usual rhetoric about the difficult past and how things could have been better if not for rising fuel oil prices.

The UPFA government's maiden budget was clear in its direction: raise production, uplift the small and medium industry and protect marginalised groups. In that process, it had to raise revenue and thus bring in more people into the tax net. Wages were increased, VAT reduced on essentials and fuel subsidies done away with after offering some protection to vulnerable groups. The subsidy to trishaws, fast becoming a mode of transportation for low-income earners, was a welcome move. Will they pass the benefit to the traveller? Without meters, I'm not so sure whether travellers would gain much.

The development, productivity-based thrust in the budget is welcome to the lower and poorer groups in society which represent the mass of the country. But the government must ensure that the new tax regime doesn't result in less investment by the affluent and throttling the middle class.

How well the gradual phasing out of fuel subsidies will work remain to be seen. Good luck to the government if it succeeds in this endeavour without heaping too much burdens on the public.

Often targeting specific groups in society for subsidies is a difficult chore as the Samurdhi scheme has proved to be where the bulk of the recipients were living above the poverty line, as a World Bank study once showed.

The tenor of the budget was aimed at cutting down unnecessary expenditure but even before Dr Amunugama could sit down after ending his maiden effort, that rule was violated.

The outsized cabinet of ministers was expanded by one more - Rohitha Bogollagama - which means extra spending for a whole set of officials, secretaries, drivers, catchers and hangers-on.

With the government promising to swell its ranks in parliament before the budget is over to ensure the budget is passed without huffing and puffing, how many more ministerial portfolios - whether cabinet or non-cabinet is immaterial - are on the cards is anybody's guess.

While the private sector would analyse and dissect the budget in the coming week to ascertain its gains and losses and as the urban working class tightens its belt, lower income groups would go about their daily life of drudgery without any change or fanfare.

To them few governments have delivered on their promises and it would be the same this time, "Balamy Koo Mahathaya (lets wait and see, Sir)", said a farmer we spoke to from the town of Hingurakgoda when asked about the budget.

On a more positive note if the government deliver on its promises, that would be the most welcome news from a population that has got tired of politicians who don't deliver.

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