There has been a mixed reaction to President Mahinda Rajapakse`s second budget. Its focus is on development and, out of the sixty budgets presented so far in post Independence Sri Lanka, it is believed to be the first to have an infrastructure orientation. The government is planning to utilise a large portion of its spending on power plants, highways and the Weerawila airport. The President presenting the budget without melodrama, which other finance ministers are notorious for, outlined a roadmap for creating a robust economy with an eight per cent annual expansion over a period of ten years. It is an ambitious project!
The budget envisages the generation of more capital through the promotion of the capital market and other financial innovations. It aims at increasing revenue for the provision of infrastructure and human resource development etc. to reduce poverty and stabilise the economy. To achieve that goal, the President says, his government has made a commitment to `a fiscal transformation within a medium term budgetary framework to raise revenue to around 19 per cent, reduce the deficit to 5 per cent and national debt below 85 per cent of GDP by 2009`. He also eyes an increase in per capita income to US$ 3,000?if wishes were horses, beggars would ride them!?to tackle the rampant poverty.
Many a pair of shoes is said to be worn out between saying and doing. The implementation is the be-all and end-all of any budget and it hinges on revenue generation. The government is planning to rake in more tax money through the revamping of Inland Revenue. Its ambitious target is Rs. 118 billion, in spite of its failure to achieve the target set for the current year.
President Rajapakse announced in the Budget speech that his government had `embarked on a modernisation programme of the revenue departments to strengthen the tax administration and sustain revenue growth.` But, the target for Inland Revenue looks too high, especially given the high incidence of tax evasion. The already unwieldy salary bill will continue to be a drain on the government income, though the public sector has been called upon to control its finances.
Weather conditions on which the hydro power generation is dependent, oil prices and the war, which has pushed Defence Expenditure up by 45 per cent, are other factors that will determine the economic performance of the government in time to come. The only factor that the President could think of controlling is the war and that may be why he asked the LTTE to give up arms and enter the democratic mainstream. Whether the LTTE will do, as he says, is a different matter altogether.
No sooner had the President presented the budget than the UNP, which has promised support for it, did describe it in not so charitable terms. It called it a budget sans direction and relief to the poor. UNP MP and former Deputy Minister of Finance Bandula Gunawardena jokingly referred to it as a woodapple (divul gediya) swallowed by an elephant. (It is popularly believed that elephants swallow woodapples and extract the pulp without damaging the shell and the fruits so digested end up in their droppings. But, in fact, elephants have nothing to do with hollow woodapples: It is the handy work of a tiny insect known as Ranaya?not to be confused with Ranil or Ranilaya.) If the woodapple is hollow, one may wonder why `the Elephants` are going to swallow it.
Whether the budget lacks direction or not is debatable but the UNP may be right where relief is concerned. It cannot be called a kiri-peni (curd and honey) budget unlike the last one, which showered relief on the people. While it is the bounden duty of the state to look after the needy, overemphasis on relief and subsidy has been identified as the bane of most Sri Lankan budgets. The focus of the budget on infrastructure development, a departure from the beaten track?which is the surest and safest, though one cannot expect much game on it?points to a new direction of sorts. However, the proof of the pudding is in the eating.
More than a hollow woodapple, one may argue, the Budget 2007 seems to be a lump of kurakkan served with a pathola (snake gourd) curry. Whether the people will find it palatable remains to be seen.