Budget debates in recent years have not been very enlightening of the financial and economic issues raised by the budget. This is indeed unfortunate as the budget is the centrepiece of the government’s economic policy. Members of Parliament, especially the ministers of the government owe a responsibility to the people of the country to justify and explain the expenditures of their respective ministries and lay out the policies they expect to follow. It is also their responsibility to ensure that the funds allocated to their ministries are spent prudently and overruns in expenditure are not incurred. This is the essence of parliamentary accountability and good fiscal management.
The opposition has no lesser a role in ensuring parliamentary control of public expenditure. It is the role of the Opposition to point out where the allocation of finances could be improved in the interest of good financial management and the best use of finances for the economic and social welfare of the country. It is the content of the budget debate that is important, not the final vote which is a foregone conclusion. This is especially so as the government has an overwhelming majority in the House.
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The role of the opposition in the budget debate is especially significant. It is the quality of the discussion and the relevance of the issues raised that would render the budget debate an important instrument of good governance. In as much as the government should endeavour to present the relevant issues and explain government policy and its expenditure for the next year within its overall economic policy framework and strategy, it is important for the opposition not to sling mud at the government or be concerned about unimportant issues. They should concentrate on the most important economic and financial concerns.
The details of the budget estimates with respect to each ministry could be taken up at the committee stage when it is relevant to dwell on details of each ministry’s activities. The Committee stage offers the government an opportunity to make mid course corrections in its administration with the advice of the opposition. If the opposition chooses to merely sling mud and make criticisms of the government for the sake of discrediting it and gaining some political advantage then the budget debate in its several stages would be a waste of time.
What then are the most relevant issues that must be addressed? Undoubtedly the containment of the budget deficit is the central fiscal issue. Containment of the fiscal deficit has been repeatedly stressed by the Central Bank, the IMF and other international donor agencies. In fact in December 2002 the Fiscal Management Responsibility Act (FMRA) was passed by Parliament. This made it mandatory for the government to take measures to ensure that the fiscal deficit is brought down to 5 per cent of GDP in 2006 and kept at that level thereafter. In fact what happened was that the fiscal deficit was 8 per cent of GDP that year and averaged 8 per cent of GDP during the five years (2004-2008). In 2007 and 2008 the fiscal deficits were 7.7 per cent of GDP. In 2009 despite an objective of keeping the fiscal deficit at 7 per cent of GDP, it reached 8.9 per cent. In the current year it is expected to be brought down to 8 per cent and in 2011 it is expected to be reduced to 6.8 per cent of GDP.
A fit and proper issue to discuss is whether the budget proposals are likely to contain the deficit in 2011 to below the targeted level. This means a discussion of the realism of the taxation measures in achieving the revenue targets and whether the expenditure is excessive. The latter would of course be discussed at length and in various ways as it has a huge political mileage for the opposition. The expenditure on the Presidential vote, the losses of public enterprises especially of Sri Lankan Airlines and Mihin Air would no doubt generate a lot of hot air in the assembly though to no result. The Defence vote increase to Rs. 214 billion would no doubt come to a lot of criticism. The government needs to explain this. There appears to be a justification as it is not the result of increased recruitment or purchase of equipment but the repayment of debts incurred that have been lumped into the defence vote. The public are curious to know about this increase in defence expenditure.
Fiscal consolidation is of significance for good economic management and good governance. Although successive governments have paid lip service to the need to contain the fiscal deficit they have not had the political resolve to follow prudent fiscal policies to reduce the fiscal deficit. A large deficit means that it would generate inflationary pressures that increase the cost of living and causes severe hardships especially to the lower end of wage earners, lower income receivers and pensioners. Inflation would increase the costs of production and erode the country’s competitiveness in international markets. This necessitates the depreciation of the Rupee to remain competitive with other countries’ lower rates of inflation. Otherwise the loss of export earnings would increase the trade deficit that would be a strain on the balance of payments. Reduced export earnings imply loss of employment and lower incomes to workers in the affected industries, as has been experienced recently in the garment industry.
The opposition is also likely to raise the issue of inadequate increases in expenditure on social welfare, especially education and health. These are two areas that have been under funded and require much better financing to make up for neglect in the past. Economic infrastructure on the other hand, has been one area where the government has spent adequately. It is to the credit of the government that it has invested in the development of energy, improved roads and ports. However the budget debate should question some of the priorities of the government and the financing of some of these large expenditures.
It is the essence of parliamentary democracy that the accountability of public expenditure must be under parliamentary control. Parliament, and especially the opposition are the watch dogs of the public finances. The government’s majority in Parliament should not be allowed to dilute the quality of the budget debate or render the accountability of parliament for the management of the public finances a futile exercise. |
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