UNP Parliamentarian and former Finance Minister K. N. Choksy PC, in his comments on the recent Budget, said that certain sensitive issues present in the economy and which had been aggravated in the last three years, had not been addressed. Rising inflation which presently stands at 8 per cent, cost of living the index of which has risen by 12 per cent, increase in interest rates and the sharp decline of the Rupee as a against other international currencies.
Following is the full text of Mr. Choksy`s speech on the Budget delivered in Parliament yesterday:
I intend discussing the main or salient features of the Budget.
Having presented three Budgets as Minister of Finance, I am conscious of the fact that the preparation of a Budget in a developing nation which is subject to adverse international fiscal trends such as the prices of oil and flour, presents tight-rope walking for its Finance Minister. And yet, we cannot allow ourselves to be swamped ? the challenges have to be faced and met as best as we could. Let us therefore examine the stepping stones of the Budget to see whether these are correctly positioned.
Firstly, I observe that the Budget refers to almost every sector of the economy ? but it presents no clear overall plan or strategy of economic construction. A `home-grown` policy interspersed with basic international requirements is well and good ? but it must lay down a clear path along which development could be channelled. This is lacking.
Secondly, certain sensitive issues present in our economy and which have got aggravated in the last three years, have not been addressed. They are,
? Rising inflation, which presently stands at 8 %
? Cost of living, the index of which has risen by 12%
? Increase in interest rates
? The sharp decline of the Rupee as against other international currencies; the Rupee presently stands at Rs. 105/- against the US Dollar.
Each of the above is an unfavourable tendency in any economy, and particularly in a country such as ours, which imports almost 70% of the requirements. Cumulatively, they will drain our national wealth.
How does the Government intend arresting each of the above? Parliament and the country at large must be told this through the Budget. But the Budget remains silent.
The recently concluded MOU between the SLFP and the UNP is a welcome move. The UNP has agreed to support the Budget in principle. I believe that constructive efforts ? particularly when they are bi-partisan-are beneficial. Yet, we require to be fully informed, so that our cooperation will be more meaningful. Unfortunately, the Budget is not informative on those issues.
The Fiscal Management Responsibility Act of 2003 sets the parameters for the development of the economy, which a government is called upon to meet. The Act stipulates that the Budget deficit at the end of 2006 should not exceed 5% of GDP. Yet, the deficit is 7.3%. This has increased from last year`s figure of 7.1%.
The Minister of Finance has pointed out, not without justification, that the sudden and sharp increase in world oil prices adversely affected the country`s economic indices. He stated that the foreign exchange cost of petroleum imports is US$ 2.2 billion. The fuel subsidy cost the State Rs. 25 billion in 2005, and a further Rs. 12 billion up to June 2006. Timely planning and action could have considerably reduced those crippling figures. The increase in world oil prices also took place during the regime of the United National Front (UNF) government. But with planning, we immediately introduced on automatic price adjustment mechanism, whereby we increased the cost of fuel to the consumer when world prices went up, and gave the consumer the benefit of reduced prices when costs decreased. This formula reduced the financial burden both on the State and the consumer. President Kumaratunga abandoned this beneficial scheme when the People`s Alliance formed the government in 2004. It has since not been replaced, resulting in the adverse results on the revenue referred to by the Minister.
The Budget also states that the fertiliser subsidy costs Rs. 11,000 million and paddy purchases Rs. 2,900 million. The Samurdhi payments are being increased. None can grudge governmental assistance to the needy but is this alone adequate in the long run? Should not parallel steps be taken to systematically reduce poverty and make the people more self dependant? Take for example our rural youth. Should not schemes be put in place to train them to be more self-reliant and self-productive? The demand for services such as of motor mechanics, electricians, repairs to and maintenance of agricultural and electronic equipment, have considerably increased in the rural areas. Why not commence training schemes to enable rural youth to qualify in these capacities. At the end of the period of training, they could be provided with the capital to purchase the basic tools of their trade. In this manner, they enter the stream of productivity and self reliance. The continuous granting of subsidies and doles will not end or reduce poverty. On the other hand, training people to earn a livelihood of their own will progressively reduce poverty and dependence on the State.
Mr. Speaker, we must introduce innovative measures to expand the economy and the revenue is generates. The current position is that on an economy that is contracting. The MOU between the two major parties and its objective of cooperation on the major political and economic issues confronting the nation should be utilised urgently and fully by the government as the catalyst towards urgent economic reforms.