Budget: Many a slip between the cup and the lip
View(s):During the tenure of the previous Government, there were sacred cows that abhorred criticism and under the threat of intimidation, were able to contain the flow of objective criticism appearing in the media, in particular, the state media.
Today, the situation has turned 360 degrees where, believe it or not, state-controlled newspapers are also publishing alternate views and, on the bond issue, a critical analysis of the sequence of events
The bond issue (for the right or wrong reasons) has become a punching bag for the opposition (some of the opposition parliamentarians who criticized it are now holding cabinet portfolios – such is the way of politics). However this, in a larger perspective, reflects the breath of fresh air evident today – the air of freedom, the air of a society free of intimidation, the absence of the dreaded white van and the freedom and space for the country’s citizens to debate, discuss, criticise and condemn issues that concern them, and also most important of all, the independence of the judiciary.
For example, the Supreme Court this week suspended a budget proposal imposing a huge tax on the alcohol business. In the same vein, it rejected an application opposing a budget proposal on taxes on some categories of vehicles.
Such freedom to state or semi–state organs and Sri Lankans at large, many people agree, is the sine qua non of this administration.
However the government is confronted with some management issues bordering on the perception that it is deceiving the people with one example being in budget decisions which directly impact on people, particularly middle and lower income groups, and the elderly.
For instance, hard on the heels of the furore over the 15 per cent special interest rate for deposits of senior citizens which caused a lot of heartburn for this category of people due to the unfairness of the proposal is ambiguity over the waiver of interest rates on pawned jewellery.In the interim budget presented in January, this is what Finance Minister Ravi Karunanayake said on this proposal: “Sri Lankans are resilient and the main pillar of this resilience could be termed as the mother of a family who carries the burden without any complaints. The first item which is pawned to a bank at the first call of economic deprivation is the few pieces of family jewelry received from her parents. Our government understands the misery of the people who had gone through numerous hardships in facing up to the rising cost of living. The interest payments on pawned jewellery to a value not exceeding Rs. 200,000 held at state banks will be waived as a special relief to the ladies who at waged a war of attrition with the rising cost of living during the last decade.” Emphasising this in Sinhala, the Minister said, “fmd,sfhka ksoyia lrkj” (free them from the interest component)”.
Now, the implementing instructions to banks tell another story, typical of the way the 15 per cent interest deposit was managed. State banks in a circular (see our story overleaf) have been asked to impose interest payments but not at the rate the item was pawned. In most cases, the interest rates at which jewellery was pawned was higher than rates prevailing now.Thus the only benefit one gets from redeeming the jewellery is being asked to pay the lesser interest rate. This is certainly not a waiver as promised in the budget but a reduction in interest rates.
Why did the Government mislead the people similar to the 15 per cent interest rate issue? Why can’t budgets speak the truth and present the details and guidelines in a proposal exactly the way it is issued later to banks? The previous administration had also resorted to this kind of deception in offering a concession, only to find that in the implementation stage there is a marked difference between the budget proposal and the stage of enforcement.
The 15 per cent special interest rate, as per budget proposal, didn’t refer to any restriction in terms of the quantum an eligible party was required to have in one or all banks.
The same applies to the concession on pawned jewellery. The budget implies a ‘full waiver” on interest payments whereas the implementing instructions restrict it to a concession of a reduced interest rate. It is a deception in both cases and a violation of the basic rights of those who were eligible based on the budget proposals.
Many poor citizens who pawned their jewellery were in for a shock when they went to state banks to happily redeem, in most cases, their family heirloom. It was the same reaction by elder citizens who trudged from bank to bank on the budget promise that they are entitled to 15 per cent interest on their deposits irrespective of the amount they had. That budget proposal had said “… the senior citizens will be receiving a higher interest rate of 15 per cent per annum for their savings up to a maximum level of Rs. 1 million for funds deposited in commercial banks.”
To the average citizen, the interpretation “15 per cent per annum for their savings up to a maximum level of Rs. 1 million for funds deposited in commercial banks” implies this interest is restricted to only Rs. 1 million from one’s total deposits, not (as they discovered later) that it applies to only Rs.1 million or less as the total quantum of deposits held in all banks.
Such ‘vague’ proposals beg the question as to why budgets are not as clear and precise as post-budget circulars. If implementing instructions are also contained in budgets then it is clear to all and leaves out any doubt.
The reality is that budgets win elections and ‘vote’ catching proposals don’t have the financial backing to be enforced as promised.
Thus in the implementation stage, when Treasury funds are counted and there is little money in the kitty, restrictions are then placed. If not for the media exposure, these issues would be confined to affected segments without a voice to express their concerns.
It is imperative that Governments be truthful in budget promises. The previous regime went on a spending spree resulting in emptying the Treasury coffers and leaving an empty barrel behind for the new Government.
A new administration won’t be at fault if it’s honest about the state of finances and the inability to provide concessions to the people, however politically tough that would be.