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| Separation from Mahinda Chinthana to embrace IMF |
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(Lanka-e-News, July 13, 2010, 10.30PM) The opposition accuses that the budget forwarded on 29th June to cover the expenditure for 6 months for 2010 prepared to tally according to IMF proposal. The government says they have given more space in 2010 budget to control the deficit and to safe guard the long term investments of government and the local entrepreneur. But we can see government main intension is to reduce the deficit. Government target was to decrees the deficit in2010 to 8% which was 9.8% in the previous year. Before the budget IMF declared there realizing the third & fourth trench of USD 2.9 Billion which was 406M USD issued against SDR
Going away from Mahinda Chinthana falling in to IMF
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This government has ruled the country from2004 to present spending frequently about the national pride, to wining the world by domestic business but at last they have to depend on IMF loan for survival, when the foreign reserves drop down drastically.
The government had to take steps to reduce the budget deficit up to 5% in 2005 according to fiscal responsibilities management act but it has taken steps to increases the deficit. At this instance IMF has to flee the country closing their office. Bloating of the budget deficit in 10%, inflation going passing 20% mark, facing in to balance of payment crisis was the direct results of ruling the country from 2004 to 2010 according to Mahinda Chinthana. Printing money in big amounts and taking commercial loans at high rates are the other features of this period. The rules and there advises realized that they are at the bay when there short of funds even to import necessary consumer items. They had to fix the plug that removed in 2004. Their last resort was to take loan of 2.9billion to settle balance of payment. All this are due to applying non intelligent mahind chintana in economical sphere. |
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| Reality of budget figures |
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According to 2010 budget government has to keep the budget deficit Rs.438 billion or 8% of the GDP. To face this challenge the government expects to increase government revenue up to 817 billion. It is 16% more than the figure of 2009. The government expenditure has estimated as Rs billion 1279. The debt servicing cost has not been included in this amount. To balance the budget deficit government hopes to get Rs. Billion 312.9 from locally and Rs billion 123.5 from foreign sources. When comparing with the amount borrowed locally in 2009 it is the increase of 7% or Rs. Million 7.3. Due to this the funds receivable for privet sector will be reduced and you can't avoid the rising of interest rates. |
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The borrowing from foreign sources has been dropped little but the debt servicing cost going to 108% when comparing with income. Though the amount to take in debt service for the year 2010 not mention in the budget, Dr. Amunugama has said it will come up to Rs billion 565. But we can't believe that figure due to the discrepancy found between appropriation bill and the budget figure. According to the appropriation bill estimated installment payment to be Rs. 475 billon interest to be paid this year Rs billion 370 then the total amount to pay comes Rs. Billion 794.
Main point of the 2010 budget is the controlling of budget deficit according to the forecast government target is to reduce the deficit to 5% in 2012. It seems to be a very attractive idea but the way to reduce is not given. There should be long term process of doing that. When we go through the agreement sign by the government with IMF we can trace facts. According to the agreement to achieve the target of reducing deficit to 5% 2012, the government must have to take decision regarding Ceylon petroleum, Ceylon Electricity board, Water board and CTB. Dr. Saman Kellegama analysis of economy development given at Sri Lanka Foundation centre clarifies this point. He has stated that the government has agreed to restructure CPC, ECB, Water, and CTB which has running with huge losses.
Defaulting of government financial responsibilities
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For the economical stability of the country it is important the nature of the fiscal policy controlling recurrent expenditure must keep the budget deficit in low limit. Increasing the government income by achieving the target is very much important of the stability of macro economy. It will contribute to create employment and it should honor the parliamentary financial act for the transparency is essential.
Using public funds to maintain the government corporations which were running at the losses and political interference of administration must stop immediate. Due to the government purchasing of shares of Sri Lankan Air Line own by Emirates previous loses of Rs. 10 billion will be increase. To this purchase the government has already paid 53million USD through Bank of Ceylon to Emirates provisioning for funds for this purchase not include in the budget.
European Union has been already announced that they are going to cancelled the concession of GSP plus and USA also considering their GSP plus tariff concession to Sri Lankan goods. Government says the lost from this canceling of GSP plus is 150million USD. But according to the Joint Apparel Forum it will be more than 500million USD.
Government has to face so many challenges like this to gain 8% economy growth but they knows it is difficult target to achieve With out increasing 10% GDP growth end of this year. Therefore government must understand one day for this purpose they have to cooperate with foreign forces instead of removing plugs. |
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| By Thilina Samarasinghe |
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