With state revenue expected at Rs.986.1 million and recurrent expenditure totalling Rs. 1.07 trillion in the budget, all the public investment has to be funded from borrowings, said a top economist.
The government should attract 30-35% investment to achieve 8-10% GDP growth targeted in the 2011 budget while on the other hand it has to depend on borrowings to service the huge debt which is more than total revenue, said Dr Anila Dias Bandaranaike, former Asst. Governor of the Central Bank.
Panellists at a post-budget discussion organised by the Business Times in Colombo share some light moments before making their presentations. From left: Attorney-at-law Chrismal Warnasuriya, Dr Anila Dias Bandaranaike, former Asst. Governor of the Central Bank, and Singer Chairman Hemaka Amarasuriya. Pic by J. Weerasekera |
She was speaking at a post-budget panel discussion on Wednesday organised by the Business Times at the Wijeya Newspapers Ltd auditorium in Colombo. The other panellists were Singer Chairman Hemaka Amarasuriya and Attorney-at-law Chrismal Warnasuriya. Earlier Mr Amarasuriya, while welcoming tax concessions granted to corporate, banking and financial service sectors in the budget, stressed the importance of stimulating Small and Medium Scale Enterprises (SME)– a sector that hasn’t progressed over the years due to many reasons.
He said Sri Lanka’s SMEs are still lagging behind and struggling to survive as no proper attention has been paid to them. Citing the Taiwan model, he noted that SMEs from that country are dominating markets all over the world.
Mr Amarasuriya said it’s important to strengthen these sectors to allow Sri Lanka to integrate with global production process, and become a part of global supply chain.
Commenting on Sri Lanka’s ever increasing trade deficit, he said that under the present set up Sri Lankan imports will increase at least by 20 % and the country will have to depend on inward investment as there are no signs of a pick-up of exports. Allowing foreigners to invest in local currency corporate debentures and opening of business offices and bank accounts will bring both positive and negative results, he said. Chrishmal Warnasuriya, in an out-of-the box view of the budget, emphasized the need to create awareness on the rights and the duty of the people to monitor as to whether public funds are spent for its intended objectives.
If it is not so they have the right to challenge in courts in accordance with the constitution,he added.
Members for the executive and legislature are elected by the people and they should be under public scrutiny. Under this set up the general public has the right and duty to monitor the budget, he said. He stressed the importance of setting up of citizen committees at district level to entertain public complaints and make representations against corruption and waste before the respective authorities without political or any other differences.
Dr Bandaranaike said the intentions of the budget is very good but its achievement is doubtful as there was no indication as to where the funds are going to come from.
Achievements have been well below targets for previous two years, she said. “When I see the confusion in economic numbers and the statements that have been coming out, I wonder what the long-term plan is?”
She noted that “while numbers and statistical information are most useful to the public, the public needs to look at the numbers and analyse them”. Links between assumptions, calculations, budget proposals and financial outcomes inadequate for serious analysis, she said, expressing concern on the lack of transparency and accountability in the whole budgetary process.
Analyzing the recent 2011 budget proposals she said that expenditure was more than double that of revenue in recent years, and recurrent expenditure alone exceeded revenue. The tax base was small and non tax revenue was low. The government can collect the 2% contribution from employees and another 2% t from employers to the new Citizen’s Pension Fund, but without widening the tax net it will be difficult to inculcate the informal sector like three wheeler drivers, fishermen, farmers and self employed into this fund, she said.
Debt servicing exceeded revenue by 17% in 2009 and another 35-40% of revenue went for salaries. Not having a budget in 2010 has set a bad precedence, she added.
Government debt is rising while debt servicing now absorbs more than total revenue. She said the government has to increase local and foreign investments to meet this situation. But she noted that the investors have been kept guessing due to wrong signas of the government given to them by taking over Shell gas company, etc.
This contradicts the government’s intention, she said, adding that no one can say as to whether the government’s gamble of attracting foreign investment in this backdrop is going to pay off or not.
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