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Government has disregarded a Supreme Court (SC) ruling that the 2013 Appropriation Bill should be amended to make Parliamentary approval necessary for securing loans.

Accordingly, the President could continue to raise loans—up to Rs 1,295 billion in 2013—without revealing to Parliament, the terms and conditions under which such credit is to be obtained.

The third reading of the Bill was passed with a two-thirds Parliamentary majority on December 11. The Government only changed it to make provision for a report to be presented to Parliament, after a loan is obtained.

In contrast, the SC had ruled that the Bill was unconstitutional, unless it required the terms of a loan to be placed before Parliament, and for approval to be secured before such loan is taken.

“The Government’s amendment does not give Parliament control over these finances,” observed Suren Fernando, a counsel in the case. “Once loans with unfavourable conditions are obtained, Parliament will not be able to rescind the contract,” he warned. “The people will be left to finance the loans.” According to the Appropriation Bill, loan finance expenses for 2013 alone amount to Rs 1,154 billion.

In October, the Centre for Policy Alternatives petitioned the SC, challenging the Constitutionality of four clauses in the 2013 Appropriation Bill. The court held that two of these were Unconstitutional, because they contravened Article 148 which mandates that Parliament shall have total control over public finance. (Control has been held to include control over the course and allocation of funds).

One of the clauses grants blanket power to the Executive to raise Rs. 1,295 billion as loans in 2013. However, it does not specify the conditions—repayment periods, rates of interest, etc.—under which those loans should be obtained. The court held with the petitioner that this clause violated Article 148.
The other clause states that, with the approval of Cabinet, not Parliament, a minister has discretion to withdraw monies allocated by the Budget to specific “heads” or programmes, if he feels these funds are not required for such purpose.

This, too, was held in violation of Parliament’s control over public finance, since monies allocated by Parliament should only be withdrawn with the prior approval of Parliament. Court said the unconstitutionality would cease, if the clause was amended to require Parliamentary approval, before diversion of such funds.

The recommendations were not adopted by the Government. Instead, its diluted amendments were read out in Parliament, just before the final Budget vote. Deputy Finance Minister Sarath Amunugama said the Attorney General had advised that the Bill could be approved by a special majority.

“Thus it appears that Parliament has decided to enact the Appropriation Bill, knowing that it is Unconstitutional, by merely relying on its two-thirds majority to do so,” said Mr. Fernando.
Government also inserted a provision for a fuller account of finances disbursed from the Treasury’s budgetary contingency fund, to be included in the quarterly reports submitted to Parliament, under the Fiscal Management (Responsibility) Act.

But, UNP MP Harsha de Silva said, recent quarterly reports contained incomplete information. The Act calls upon the Government to list estimates versus actual expenditure, along with reasons for the difference. “In the last three to four years, there have been no estimates, only actual expenditure,” Mr. de Silva said. “The Government hasn’t been delivering.”

The Government’s argument is that the Appropriation Bill for 2013 was drafted using the same language and format over the years. Therefore, the clause related to the raising of loans was identical, except for figures, with the provisions embodied in previous legislation enacted as far back as 1961.

Mr. Amunugama told Parliament that the clause pertaining to ministerial powers was introduced in 1975, and has remained identical to date, but for an addition of the words, ‘to meet any authorised expenditure’ consequent to a 2002 SC determination.

Mr. Amunugama said the Ministry of Finance hasn’t come across the application of this clause for “a long period of time”. This meant that, such provisions are generally of a ‘standby’ nature, used only when grave circumstances so demand, to facilitate the management of public finance.

UNP MP Eran Wickramaratna said, however, that people are now looking more sharply at these issues, because there was a general deterioration in application of law, an increase in impunity and rising financial corruption.

“The legal principle is that, when a clause is challenged, court will look into the constitutionality of the clause, notwithstanding the fact that, other enacted laws may also have unconstitutional clauses in them,” said Mr. Fernando. “After all, the existence of unconstitutional legislation is not a reason to enact more of such legislation!”

He stressed that, it had become more necessary to change the legislation now, because incidents such as the hedging saga in Sri Lanka and the bonds issue in Greek, are becoming more common.
Mr. de Silva was concerned that the composition of loans had changed dramatically. “In the last six years, concessional loans have gone up by 55%, and non-concessional loans by 3,700%,” he analysed, citing Ministry of Finance statistics.

“At a time when the country is moving from concessional to non-concessional loans, it is very, very important that Parliament has full control over finances, to ensure the loans taken are those that can be serviced,” he concluded.

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