Common presidential candidate retired General Sarath Fonseka’s pledge to grant a 10,000 rupee salary increase to public servants and a monthly allowance of Rs. 2,000 for every senior citizen over 60 years if he was elected has triggered a debate amongst politicians, economists and civil society as to its viability.
When contacted to seek the views of the government on this issue, Minister of State for Finance Ranjith Siyambalapitiya said the people will have to bear a huge tax burden to fulfil such unrealistic pledges given by persons with no knowledge of the nation's economy. He pointed out the General had not stated whether the salary increase was for a month or a year, but when one calculated, the Rs. 10,000 by 1.1 million public servants it would cost the Treasury an additional sum of Rs. 132 billion per annum for the salary bill alone.
The Government is spending a sum of Rs.12 billion per month to pay the salaries of public servants and 98% of the cost amounting to Rs. 11 billion is borne from the taxes levied from the general public. Under these circumstances each and every person of this country will have to pay Rs. 600 per day as taxes within a month of realising Fonseka’s wishful dreams, he said. He added that Fonseka had made the promise without knowing the economics of what he had promised.
In response to questions posed by the Business Times last week on economic issues, the opposition candidate took up the position that a lot of development can take place without tasking the people, once corruption is eliminated in the country.
However Dr Sirimal Abeyratne, a senior economist from the University of Colombo said politicians make various pledges during election periods but this type of handouts for public servants will definitely exert an impact on the economy although there was a need to increase the salaries of public sector employees. The country’s budget deficit has risen to 11.5 % of GDP during the first half of last year, although the Government’s target was 6.5% of GDP for 2009. Under this set up it is essential to reduce public expenditure and improve productivity to provide a decent salary for public servants, he said adding however that the Government can borrow money and increase salaries at any time without considering its economic consequences.
Dr. Harsha de Silva, an economist who is among a group of advisors in Gen Fonseka’s campaign team, said this pledge could be fulfilled by eliminating corruption and redirecting the resulting savings into urgent people-friendly development programmes through the public and private sectors. He added that this will result in the improvement of productivity and investments. If not for corruption, "Sri Lanka's growth rate would be raised by a further 2 percentage points without any further increase in the present rate of gross investment or productivity and the loss of the country's GDP for 2008 alone, is approximately Rs 300 billion,” he said. Cumulatively, from 2005 to 2009, it has been estimated, that corruption has denied the people a total sum of Rs. 810 billion, a loss much bigger than the annual Government revenue he added. Dr. De Silva said Sri Lanka will be able to achieve an economic growth of 8% to 10% by eliminating corruption alone.
Sri Lanka must act against corrupt Ministers, politicians, government officials and businessmen and ensure local firms play fair with foreign companies if it wants to attract investors, he said adding that it needs to use the opportunity for economic growth provided by the end of the ethnic war. "It is time for public money to stop going into the pockets of the rich and powerful in both government and private sector," he declared. Corruption is bad for business, and it is bad for the country. It slows economic growth, hinders development, repels investment, damages societies, and eats into the GDP. No investor will come to Sri Lanka if he has to pay 20% commission to government authorities to start a business venture here in Sri Lanka, he added.