Strapped for cash
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There was a noisy conversation happening at the gate. The trio was discussing their hobby horse – rising food prices just as Aldoris, the choon- paan karaya, arrived in his tuk-tuk.“Ah den oya giya sumaneta wediya ganan wedi karala neda (Ah… so your prices are higher than last week),” said Kussi Amma Sera. “Monawa karannada. Hema deval valama mila wedi wela ne – paan piti, paan saha gas (What to do: Everything has gone up in price – wheat flour, bread and LPG),” replied Aldoris.
“Me thathve dikgessunoth apita gamata gihin elavalu saha palathuru wavanna wei (At this rate, we may have to return to the village and grow vegetables and fruits),” said Serapina, adding that she heard politicians predicting a food shortage because the use of organic fertiliser would reduce rice production next year.
Joining the conversation, Mabel Rasthiyadu said: “Me davas harima karadara kaalayak ne. Guruwaru saha goviyo virodaya pala karanawa. Aanduwata mewata uththara ne (We are going through troubled times with rising protests by teachers and farmers which the government has no answer to).”
As I ate a ‘kimbula-bunis’ between sips of tea and listened to the conversation, the phone rang – a normal occurrence this time of the day -, on this Thursday morning. Who was calling?
It was ‘Human resource’ pundit H.R. Perera, popularly known as HR, on the line. “Hello, hello,” I said, welcoming his call. “I say, I have been hearing many stories about the government being strapped for cash,” he said.
“That’s because government revenue through taxes fell sharply last year due to limitations in business and trading activity owing to the pandemic. This year, my guess is that government revenue has taken another beating amidst lockdowns and limited business activity,” I said.
“Protests by teachers and health staff over salary anomalies are not helping the government’s case. The discussions between trade unions representing the teachers and principals and the Prime Minister seem to have failed. The government has promised the teachers and principals staggered payments which have been rejected by the unions which are demanding to be paid in one go,” he said.
“This is a huge dilemma for the government. Where does it find the money to make these payments with falling revenue and higher expenditure, particularly for health and COVID-19 related programmes including vaccines and pandemic-related relief payments to the needy?” I said.
“Why can’t they divert some of the monies being allocated for development projects to pay the teachers? These funds are being channelled through local council members and appear to be an election stunt ahead of provincial council elections early next year. That is a valid argument put forward by teacher unions,” he said.
After discussing various other issues confronting the government we rang off.
According to official sources, the accusation of the teacher unions stems from the fact that the 2022 budget is expected to allocate a sizable sum for rural livelihood development and would be given to Grama Niladari divisions, Pradeshiya Sabhas and local government representatives with the intervention of the state machinery. In previous cases, such monies were normally distributed under the supervision of Divisional Secretariats headed by Divisional Secretaries.
“These are goodies which will be distributed among the people during election time,” an economist noted.
While the government has been bashed over rising food prices, increases in wheat flour, sugar, bread and LPG, in some instances it is helpless – facing the brunt of the pandemic and its impact on the economy and revenue collection. In other cases, it was also foolish to launch schemes like gyms for the village and jogging tracks which are the least of the problems that the country is facing. However, these proposals have been put on hold due to growing opposition.
The government is also reluctant to concede that in allowing, as a temporary measure, the import of chemical fertiliser it has stepped back from its ‘firm’ decision to replace chemical fertiliser with organic fertiliser. It’s no doubt mounting pressure from farmers, smallholder tea, rubber and coconut producers and plantation companies that led to the decision to allow chemical fertiliser imports for the tea sector and Maha season. The government, however, stubbornly maintains that the planned shift to organic fertiliser still remains.
The authorities are strapped for cash and lost a lot of revenue through the generous tax concessions announced after Gotabaya Rajapaksa won the presidential election in late 2019. Its tax revenue targets have not been met in 2020, again because of the pandemic, while the same was likely in 2021.
In a bid to ensure state institutions spend wisely, Finance Minister Basil Rajapaksa has reportedly said that financial allocations in the 2022 budget would be made on a quarterly basis and thereafter based on the progress of the projects. This bluntly means that projects that don’t perform according to set targets would get a reduced allocation for the next quarter.
For the 2022 budget, defence will continue to be the big spender. According to official figures, the Ministry of Defence has been allocated Rs. 373.1 billion, while health
is to receive Rs. 153.5 billion and education Rs. 127.5 billion. Another big spender is the Ministry of Highways with
an allocation of Rs. 250.2 billion due to new roads
and highways.
The government says that Sri Lanka will achieve an economic growth rate of 3.3 percent to 4.5 percent for 2021 and will improve this to 4.5-6 percent in 2022. However, both the World Bank (with growth projection of 3.3 percent) and the International Monetary Fund (estimates at 3.6 percent) are more conservative in their forecasts of Sri Lanka’s growth.
As I prepared to wind up the column, Kussi Amma Sera walked into the room carrying my second mug of tea and asked: “Sir, aanduwa karadare wetilada inna (Sir, is the government in trouble?”
“Eh wage thama penne (It looks like that),” I replied and reflected on the enormous fiscal challenges facing the administration as it meets head-on the mounting protests from farmers, teachers and frontline health workers.