Budget 2017 has imprint of international agencies and USAID
View(s):The Ceylon Federation of Labour (CFL) has said that next year’s budget has the imprint of the World Bank, IMF and USAID.
“The international monetary agencies such as World Bank, USAID and IMF are bound very largely by conventional economic wisdom and their priorities are quite different from the human priorities espoused by developing countries such as ours. They are most concerned with short-term solvency and financial stability, no matter if this means severe cut-backs in domestic spending. They seek to accomplish this objective by putting up a smooth face,” the trade union said in a media release explaining its position on the budget.
It said the budget, which hides much more that it reveals, must be seen in the backdrop of the economic policy enunciated by Prime Minister Ranil Wickramasinghe last year.
The CFL believes though the voice that delivered the statement is that of the Prime Minister the hand that prepared the script in all its appearances appears to be that of the IMF whose second installment of the loan was eagerly looked forward to by the government.
The US, IMF, World Bank and various economists and financial analyst’s are constantly pressurising the government to slash public spending, eliminate state intervention, introduce flexibility to labour market and open the doors widely for foreign trade and investment in order to achieve rapid growth of income and employment.
“This is the American model prescribed by the IMF and the government has fallen for it hook, line and sinker. The prattle about social market is mere rhetoric. The American model is less concerned about equality and social cohesion. It is more individualistic and aggressively competitive,” the release said.
At the conclusion of the last consultation with the IMF in Colombo, the IMF statement said “It is important that the government expedites the legislative process of implementing the Value Added Tax (VAT) amendments that are needed to support revenue targets for 2016 and 2017”. The government agreed. The revenue increase achieved last year over the previous year is due to a large increase of indirect taxes. Of the Rs. 305 billion of tax revenue only around Rs. 65 billion, just 20 per cent was from direct taxes. The same pattern can be seen in the 2017 Budget. This is quite in contrast to the ratio of taxation announced previously by the Prime Minister.
“In order to enable debt repayment the government envisages to raise US$1 billion through the listing of state owned enterprises. This is one of the demands of the IMF for providing the $1.5 billion loan facility. The reductions in prices of essentials used by the common man though welcome are of marginal benefit as they are not sustainable. The government’s expansionary fiscal and monetary policies are bound to result in inflation having a cascading effect affecting prices and real wages. The increased levy on water imposed through gazette notification is a precursor of things to come. The insurance scheme for school- going children and the proposal to run children’s hospitals on Public-Private Ownership (PPP) basis, the opening of fee-levying beds in state hospitals together with the private sector and allowing the private sector to establish medical laboratories in state-run hospitals are destined to be the pathway for eventual privatisation of the social infrastructure of the country.”
The CFL said the Higher Education Ministry has announced its intention to open up new medical colleges from international universities and this is linked to the offer of loans to selected students ranging up to Rs. 1 million to complete their higher education. However the budgetary allocations have seen a dip. Education is one per cent of GDP from 2.72 per cent for 2016 and health from 3 per cent GDP this year to 2.7 per cent for 2017. These measures appear to be aimed at fostering a culture to acclimatise the people to get familiarized with the condition of privatization, bereft of social benefits.
“The target to bring Sri Lanka within the top 70 nations of the Doing Business Index of the World Bank is to be achieved through a race to the bottom. The country’s existing labour laws that provide a modicum of essential protection to the working people are to be dismantled to make way for fly-by-night robber-baron type investors. Workers hard-earned life time retirement funds – EPF/ETF are being earmarked to bolster the capital market. The government continues the game of playing ducks and drakes with the EPF by following the practice of the Mahinda regime of pumping and dumping to benefit business cronies while depriving EPF member of the present benefits of easy loan facilities for house building purposes. New taxes have been slapped on the EPF depriving members of the full benefit of their savings. Both the Auditor-General and COPE have recommended a probe on the prevailing nexus between the Central Bank Bond issues and the EPF purchase in the secondary market,” the release said.