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Honeymoon
over? Get down to brass tacks The government says economic growth has picked up in the first half of the year but economists argue this has nothing to do with government policy. It is ess entially a recovery
- which has traditionally been the case - from a bad year. The new regime
hasn't succeeded on two fronts - revenue collection and infusing
enthusiasm in the economy. The much expected boom in tourism in
the wake of the peace process and truce has not materialised although
there has been some increase in arrivals while foreign investment
hasn't taken off as anticipated. Things have
not worked according to plan for Prime Minister Ranil Wickremesinghe
and his United Front Front (UNF) government. Six months after taking
over the reins of office, UNF policymakers are still struggling
to find the money for spending. The UNF inherited
an economy that was hit by a recession and a sharp fall in tourism
and investment flows after sentiment was affected following the
Tamil rebel attack on the Colombo airport, and an unexpected fall
in export earnings. Treasury coffers were depleted if not empty
leaving few choices for the new regime. Six months
down the road, the economic performance is mixed as our analysis
shows. But all the flamboyance, economic theories and excuses trotted
out by key figures involved in economic management and reforms like
K.N. Choksy, Ravi Karunanayake, S.B. Dissanayake, Milinda Moragoda
or Bandula Gunawardene are not going to solve one problem - the
rising cost of living. The public
and industry are struggling to cope with an across the board rise
in prices. Government proposals to raise revenue rely on increasing
taxes, which would put more pressure on prices. Inflation is rising
and is set to reach double-digit figures by the end of the year.
Ministers are
working at cross-purposes. A top government advisor himself admitted
that the cabinet was not working at the same efficiency as the Ranasinghe
Premadasa cabinet in the 1990s. Everyone - except ministers - agree
the cabinet is oversized with a lot of overlapping duties. Arrogance
seems to have replaced concern about the difficulties faced by the
people. One cabinet minister was recently heard to say, when asked
about the cost of living; "let them (people) learn to undergo
hardships." Public sector
salaries have fallen in real terms. Government servants are also
demoralized because most of the ministers have hired high profile,
costly aides and consultants. In such a situation how does one expect
the public sector to work on salaries that are not enough to make
ends meet? Can they then be blamed for being corrupt? What about
ministers and their business affiliations? Shouldn't they cut off
all ties with business when taking up cabinet appointments, so that
there is no conflict of interest? Another issue is the number of
foreign trips ministers have made in recent months. If the country
is struggling through an economic crisis, shouldn't the prime minister
stamp down on foreign travel by his ministers unless it is essential? The shocking
reality is that essentials like dhal, coriander or cummin are still
taxed at seven percent in addition to canned fish and dried fish
being taxed at 12 percent, the last two items being subject to a
total tax of 35 percent if one adds GST and NSL. Widely used vegetable
oil is taxed at 35 percent. Milk powder is taxed at 35 percent with
Rs. 65 going to the government coffers on every kilo sold. Fuel
prices are rising, compelling an embarrassed Ceylon Petroleum Corporation
to offer suggestions to curb rising costs. "The ideal situation would be for the government to implement price controls on essential commodities and public services through regulation and realistic formulae and absorb the monthly variation of prices for a period of at least six months through a special fund," the CPC said in a statement, a suggestion the government should consider seriously. |
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