Nearly two decades or more ago, Mr. A.S. Jayawardene, a former Governor of the Central Bank, persuaded the editor of an English morning daily to publish weekly economic indicators which he said the bank would provide on a timely basis. Previously this data was available in the Central Bank`s monthly Bulletin which was invariably several months late. At that point of time, economic statistics were not `sexy` reading matter from a newspaper`s point of view and a full page once a week was a lot of space to devote to material considered to be of marginal interest to readers. Nevertheless, the experiment was begun and now, several years later, its success is self-evident. People are much more aware today than ever before of economic factors like inflation that erode real incomes and painfully accumulated savings, and affect the quality of their lives.
Today there is much more awareness of economic factors in the minds of ordinary people. That is perhaps why, a Lanka Business Online (LBO) report which we reproduce in today`s newspaper, said the authorities are trying `to counter money printing culpability`` in a story that was newsworthy. The UNP which has at long last begun to shake off its lethargy and has begun to play its required role as the major opposition party in the country seized the opportunity of accusing the government of printing billions of rupees last year to pay for what is perhaps the world`s largest cabinet. That of course is not the truth, the whole truth and nothing but the truth. The resort to the printing press last year was intended to fund the budget deficit but the creation of new money also drove inflation to gallop to 19.3% in December.
Deputy Finance Minister Ranjith Siyambalapitiya was quick to point out at a news briefing last week that enlarging the cabinet at the end of last year was after rather than before the money printing. Obviously, the money then would not have been printed to pay for the jumbo cabinet. But the fact is that increasing government profligacy, reflected if we may take a random example by the size of the delegation the president took to China, has added to the need to create new money at the cost of inflation and the erosion of people`s savings. A Central Bank official, present at Siyambalapitiya`s press conference, explained that the country`s reserve money supply had grown by Rs. 42 billion last year, higher than the planned Rs. 30 billion due to many factors including the surge in oil prices. But in a spirited debate on that occasion, journalists who like the general public are much more aware of economics than their predecessors were, pointed an accusing finger at the Central Bank saying that it had failed to tighten monetary policy in time and lost control of money supply, leading to rocketing inflation last year. The fact that the bank was now following a policy of `severe monetary tightening`` demonstrated that the penny had dropped.
In its annual report for 2006 now in the public domain, the Central Bank has somewhat apologetically admitted that the Employees Provident Fund (EPF) has not been `able to declare a positive real return`` to its hundreds of thousands of members for whom their EPF holding is often their only retirement saving. What this means in plain terms is that the interest paid (10.1% last year), presented as above the average weighted deposit rate of the commercial banks, was less than the inflation rate. That means the money the EPF member holds, together with the interest component will, not be able to buy now what he was able to in the previous year. This is a continuing phenomenon and not a one off aberration. Hence the Central Bank`s plea that `although it is not feasible for the EPF to declare a positive real effective return to members annually,`` the EPF is trying to do this `on a cumulative basis.`` There was no word in the report whether such efforts have met with any degree of success in recent years. Retired people, unprotected by pensions like government employees (and employees of the Central Bank, we might add, who enjoy better retirement perquisites than public servants) have unfortunately not felt any such `cumulative`` benefits.
While those responsible deserve to be sharply rapped for the sorry situation the country is trapped in while politicians cosset themselves, lavishly spending public funds in the effort to prolong or perpetuate their rule, there is no avoiding the threadbare cliché to say that people most often get the government they deserve. We have in our contemporary history elected a worse bunch of scoundrels at each succeeding election. Fortunately, with the greater economic awareness already referred to in this comment, public opinion today is more enlightened on these matters than it was in an earlier age. This is all to the good. Just as much as healthy debates in public fora, as demonstrated in the deputy finance minister`s news briefing on Thursday, it also helps educate opinion which can hopefully lead to better governance. Spouting platitudes about economic growth and reduced unemployment with no reference to military expenditure and the creation of uneconomic jobs in the public sector will not do. Greater productivity is what we must all aim for. Alongside that, there must also be an effective demand for good governance and an end to profligate spending of public funds.