Financial Times

Mixed reactions to budget
The budget for 2006 has not generated the usual excitement that accompanies such matters – either before or after the event. This is one budget that no one seems to be interested in, except for the politicians who predictably resorted to jaded slogans to either support or oppose it.
This marked lack of interest and the guarded reactions that have emanated from the business community is obviously because of the uncertainty surrounding the whole affair – given the quite high probability that it stands no chance of being passed by parliament as the UNP and other key opposition parties are against it.

The budget appears to be a continuation of the ruling coalition’s economic policies based on a medium-term budgetary framework and some of the numbers trotted out by various government spokesmen appear quite impressive, such as the growth rates and increases in revenue. But at the same time there have been speakers who have been sharply critical of the budget, likening it to a fairy tale that stands no chance of becoming reality.

While the budget has generally drawn favourable comments from the business community they have also pointed out flaws and gaps in the proposals and particularly stressed that implementation is critical. Implementation is an area where successive governmets have failed. Even the most well-meant proposals would be of no use if they are not implemented or implemented properly.

Furthermore, it should be borne in mind that what has been reported so far, especially the comments from the business chambers, are official reactions to the budget, which usually are guarded.

What is of equal, if not greater, importance are the reactions being expressed privately. And these are very critical. The biggest concern appears to be whether this budget stands any chance of being implemented – either because the ruling party candidate at this week’s presidential poll gets defeated, in which case the opposition would want to have their own budget, or because the government lacks the voting strength in parliament to have the proposals passed after the debate.

There are doubts whether the ruling coalition would be able to muster enough votes in parliament to have the budget passed. There is also much uncertainty about the proposals as some of them have been rather vague and no dates have been announced for when the proposals take effect.
Fears that this would be an election budget have proved to be overblown. Nevertheless there have been some very valid criticisms of the budget proposals.

For instance, the incentives given to encourage companies to relocate their business in the outstations have been welcomed by the Ceylon Chamber of Commerce. But they have quite rightly pointed out that such relocation depends more on the provision of the required support infrastructure rather than financial incentives.

It points out that despite measures to stimulate certain sectors of the economy, the budget lacks the “vitality” required to energise the economy.
The chamber still objects to the timing of the budget, its rationale being that the soon-to-be-elected president should be afforded the manoeuvrability to implement the vision for which he had received a mandate.

One of the biggest flaws in the budget – as the opposition has rightly pointed out - is that the budget does not spell out how the ruling coalition candidate at the presidential poll will implement all his promises if he wins.

The budget was an opportunity for the government to show how the election promises being made by its presidential candidate can be implemented.
Not doing so is an indication that many of the promises are just that – promises. But of course, the same can be said of the opposition UNP’s own candidate as our lead story points out.

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