Features
Some Strengths and Weaknesses of the Budget Speech 2022
By Dr Laksiri Fernando
The budget speech that the Minister of Finance Basil Rajapaksa delivered in Parliament on 12 November 2021 was fairly structured with the following sections. That is a positive.
1. Preface.
2. ‘Global Challenges.’
3. Our Strengths.
4. The Challenges Before Us.
5. Policy Synopsis.
6. Development of the National Economy.
7. Revenue Proposals.
8. Macro-Economic Vision for Revival.
9. Conclusion.
But its content was the question owing to boasting, half-truths, contradictions, and unachievable pronouncements. If the Opposition was serious about countering the wrong policies, weaknesses, errors, etc., of the Budget, it could have possibly used the same format. Democratic politics is not about a ‘gang war’ between the government and the Opposition as appears to be the case in today’s Parliament. Debates should be more critical on the flawed policies with alternative perspectives being offered. .
In parliamentary democracies, there are ‘shadow cabinets’ and ‘shadow ministers.’ There should be a ‘Shadow Minister for Finance.’ It is mainly his/her role to present counter arguments, expose false data, and criticise misleading policies. The Opposition also should have a ‘official website’ where they could publish counterarguments or counter budgetary policies. Of course, it is also the duty of the media (as it is fairly done), academics and journalists to do the same critically and objectively.
A Family Preface?
The Preface correctly says, “We are passing through perhaps the most painful period of human civilisation.” This should mean the environmental disasters, Covid-19 pandemic and deaths, increasing poverty in poor countries, and evolving economic crises worldwide and others. Of course, these are challenges even in Sri Lanka. As a solution, he says:
“I first come to learn the concept of ‘Challenging the Challenges’ for the betterment of the public in my ancestral home in Madamulana. The Rajapaksas have a history of never being daunted by challenges. Mr. D. M. Rajapaksa, who is known as the “the Lion of Ruhuna”, who represented the second State Council in 1936, is known by the entire country. He is my father’s elder brother (loku thaththa).”
If the Minister was serious about the public nature of the challenges, he should not have given purely a family perspective on the subject. His phrase ‘Challenging the Challenges’ is a common phrase in many languages and in quotations of many authors. Tracing it to Madamulana may be suitable to a D.M. Rajapaksa oration, but not to a preface of a Budget speech.
He does not stop there. In the remaining eight paragraphs of the Preface (1.4 to 1.11) he boasts of his family, loku thatha, thatha, aiya, malli, thama, and their achievements. This is undoubtedly a record in Budget speeches in the world. He places Mahinda Rajapaksa at the center of this legacy who, in fact, got disgracefully defeated in 2015. This is what the Minister says: “The Hon. Prime Minister Mahinda Rajapakse, who is today in this House, is at the centre of the Rajapaksa Political Legacy.”
There is no mention of other Ministers, the Cabinet, or its collective responsibility. Not a word about other parties or its leaders other than what he has created as Podu Jana Peramuna.
Challenging the Global Challenges
The Finance Minister is correct in briefly outlining five global challenges: (1) increasing global social and economic disparities between the rich and the poor, (2) the slow progress in achieving the (UN) sustainable goals, (3) increasing environmental catastrophes, (4) limited assistance from bi-lateral and multilateral institutions, and (5) challenges in adopting to the post-pandemic ‘new normal.’
The degeneration of moral and ethical standards worldwide, particularly among political leaders with corruption, deals, misdeeds, and authoritarianism, is not mentioned at all.
However, without much relevance, he states, “The impact is worse on countries with trade focused economies such as ours compared to those economies dominated by the manufacturing sector.”
Even if his ‘vision’ of turning the present economy of Sri Lanka from ‘trade focused’ to ‘manufacture dominated,’ is commendable, the global challenges that he has outlined have nothing much to do with the difference. To my knowledge of economics, trade and manufacture are complimentary. While Sri Lanka undoubtedly should promote manufacture, a balanced approach might be the best without promoting one against the other as he has done. It is in the same section that he has arrived at a figure of Rs. 500 billion.
“The opportunity to provide such services, both domestically and externally has been curtailed, resulting in a loss of income. As a result, the loss of revenue to the country and the Treasury has been unlike any other year before. The loss to the Treasury, according to our estimates, is over Rs. 500 billion.”
The nature of local productions and nature of exports undoubtedly are reasons for our economic predicaments and underdevelopment. Therefore, it will be commendable if the government makes genuine efforts to change the situation. But the claim that this year’s loss to the Treasury of Rs. 500 billion is purely a result of this economic imbalance is unbelievable unless the government supplies concrete evidence for the claim. This loss or a major part of it appears to be a result of mismanagement of imports and exports, and the enormous tax concessions given to the rich by the last Budget. Without direct import controls, higher taxes could have been imposed on unnecessary or luxury imports. Dialogues with importers could have been another measure.
Bloated ‘Our Strengths’
It is quite superficial to talk about ‘our strengths’ just after talking about global challenges as if Sri Lanka were at the forefront of changing the world! At the beginning of this talk is the boast about Rajapaksa family and its leadership again. Both the President and the Prime Minister are praised. If the Budget speech was following a kind of SWOT (strengths, weaknesses, opportunities, and threats) analysis, with the strengths, the weaknesses also could have been discussed. That is the way to go about economic change.
Among the strengths, there is only one paragraph with four sentences on Infrastructure: “Our infrastructure facilities are of high standard. The quality of our ports, airports, telecommunications, highways, roads, and electricity supply are very good.” Of course, there are certain aspects to be ‘proud’ about, but some are still in preparation (ports). What about railways? They are still in the colonial heritage.
The Minister suddenly says: “Also, through the 100,000-kilometre road project and the 5,000 bridges programme, the byroad network will be strengthened further, and the entire country will become a single network.” This 100,000 km roads programme was there even in the last budget, the only addition being the 5,000 bridges. Perhaps, there is a new determination to go ahead because, as alleged by many people, these road constructions are beneficial to political supporters.
The third strength is named “Non-aligned, friendly international relations.” Nine international organisations are particularly mentioned like ‘the World Bank, the Asian Development Bank, the European Union, the Japan International Cooperation Agency (JICA), the Kuwait Fund, the French Development Agency, the KfD, Korean International Cooperation Agency (KOICA) the OPEC for International Development, and the UN.’
There is no mentioning of the IMF under friendly organisations.
It is also surprising and intriguing that China or Chinese organisations are not mentioned as friendly countries or organisations. Mahinda Rajapaksa’s budget speech last year had much emphasis on China. It might be too early, however, to speculate whether this shows a shift of alliances in the international context and relations.
Question of IMF?
However, under the next section on ‘the challenges before us,’ the IMF is mentioned with some negativity. Basil Rajapaksa refers to Dr. N. M. Perera’s budget speech of 1970/71 ostensibly to prove his argument.
“In that he [N. M. Perera] states that instead of building foreign exchange reserves, we have used it for the importation of goods creating a foreign reserve crisis and, thereby, seeking the support of the International Monetary Fund (IMF). From the first IMF facility in 1961, successive governments have resorted to short term assistance from the IMF, and our leaders and financial sector experts have failed in introducing a sustainable long-term programme to manage our foreign reserves.”
There is no question that a country should try to manage its foreign exchange reserves without going to the IMF, if possible. I believe that is what Dr. N. M. Perera said and tried to do it. Of course, there were others who went to the IMF as an easy escape.
However, during recent administrations (Rajapaksa and Wickremesinghe) there has been a tendency to go for various dubious sources to seek foreign exchange loans and assistance when facing depleted reserves. Although no direct conditions are attached from these sources, these loans and deals have been a major reason for Sri Lanka’s deteriorating foreign exchange conditions throughout the years. There is no proper solution proposed in the Budget 2022 to this paradoxical situation.
Sri Lanka should not hesitate to go to the IMF. That is the most reliable and resourceful multilateral organisation, almost like a UN agency to deal with foreign exchange crises and reserves of member countries. It is up to the government to deal with the IMF properly, and negotiate any conditions attached when seeking foreign exchange or other assistance.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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