Poor Mahindananda Aluthgamage. When the compere at the Trinidad-born Billy Ocean music concert on Tuesday, announced the attendance of the Sports Minister as the chief guest, there was a long hoot before everyone joined in the ‘chorus’ of catcalls.
Whether the embarrassed minister was ridiculed for his ‘unsporting’ decisions; whether it was city folks’ general distain towards any politicians or a general reflection of public anger over rising fuel prices and cost of living, one would never know.
The economic woes of the government vis-à-vis a disenchanted public are mounting and the bus strike followed by angry protests by fishermen resulting in the death of one protestor in police shooting this week is a reflection of this anger.
The mandarins at the Treasury and the Central Bank appear to have woken up at last to a major economic crisis fuelled by weakening foreign reserves, rising oil prices and runaway state spending.
From all accounts, as two polls (the Ceylon Chamber of Commerce and BT-RCB survey) have shown over the past two weeks, the country is heading towards an economic debacle by mid-2012 with a last ditch effort by the government to avert the crisis.
The twin blows of rising global fuel prices and the ‘free float’ of the dollar has not only affected the people but also the government budget planners.
According to one of our reports, the government’s local bank borrowing plans have been torpedoed by the crisis and just two months after the budget, the borrowings needs have apparently shot up by nearly 200 % to over Rs 180 billion from a budget estimate of Rs 64 billion in 2012. Some sources said it could be as high as Rs 300 billion by the end of 2012 given the exposure to rising fuel prices and a galloping US dollar.
However this jump is nothing new. In calendar 2011, total bank borrowings rose to Rs 160 billion from budgeted Rs 42 billion.
Nevertheless what cannot fathom why the Treasury mandarins chose to provide a (small) double digit figure as the estimated bank borrowing needs when it was known by November 2011 (at least) that actual borrowings had been overstepped by more than 300 times the budgeted figure.
One of the explanations trotted out is that budgeted figures are just estimates and doesn’t take into account any external factors like fuel prices, currency fluctuations or additional spending, and that this has been the practice in the past.
Using the same argument, budget planners are most likely to continue to resort to a low double digit (borrowing) estimate (maybe Rs 80 billion) even in the 2013 budget, to be presented next November, knowing very well – and at least nine months in advance – that the 2012 actual has overrun the estimate by again 300% +.
In 2009, the estimated bank borrowings was Rs 49 billion which came down to Rs 45 billion in 2010, though the actual borrowing was much higher.
A national budget is where the people are informed about the government's expected income and expenditure for that year. Is this what happens?
Very rarely, in the Sri Lankan case, have governments’ (present and past) stuck to the estimates and often the actual expenditure (revealed in the following year’s budget) is much higher.
However to have a budget overrun by several billions of rupees for just one item and ending up much more for the total budget is in some ways cheating the people.
If an Rs 1 trillion + budget is going to be increased by several billions of rupees, what’s the purpose of a budget at all? “The actual budget has been rising sharply against the estimates over the years that I have given up analyzing the budget. How do you examine a budget that is not the actual figures?” said an economist attached to a broking house.
The budget, in recent years, has become a big bluff couched in technical terms and economic jargon aimed at foxing the man on the street.
Inflation measured by the Colombo Consumer Price Index is also seen as a measure to juggle figures and give a distorted version of actual consumer costs. It would be interesting to see the March index as to whether it would realistically reflect rising fuel and LPG prices and the chain (price) reaction of other essential commodities.
Apart from sharply rising bank borrowings at a time when interest rates have risen, the two state banks – Bank of Ceylon and People’s Bank – are also under pressure to use their deposits to lend huge sums to the government.
Economic difficulties owing to external situations cannot be blamed on a government unless the prescription ignores realities like large-scale corruption, unlimited spending and lack of austerity shown by cabinet ministers and powerful government politicians with a devil-may-care attitude towards spending public money for their personal use.
The honeymoon is over. Euphoria over the end of the war is also over while the economic war is mounting. Extracting itself from a difficult economic situation is not going to be easy for the government with a slight advantage however – no real political opposition. |
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