Train that headed to a wedding
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The government is struggling to pay private contractor bills for road development and construction.
Only after arriving at the Colombo Fort Railway Station just before dawn that Kapila came to know that there was a railway strike that day. Kapila (not his real name) took the day off from his workplace to go to Kandy for a court case of a relative being heard on that day.
This particular event took place many years ago even before his retirement, but he still remembers it. When I met him a couple weeks ago, he again started talking about this train journey.
Passengers who had come to the Fort Railway Station to get early morning trains were annoyed by the news. They started grumbling, while walking towards the Pettah Bus Stand hoping to join the bus queues. As the Railway Station was getting deserted, Kapila also thought of walking to the Bus Station. It was at this moment, he heard someone calling his name.
Train journey in smart dress
It was Jeevan, one of his neighbours from the same vicinity in Pannipitiya area; and he was a railway employee! After hearing that the friend, Kapila wanted to catch a bus to Kandy, Jeevan said: “No, no, don’t go there. Wait here … there is a train to Kandy!”
Kapila was surprised: “Really? There is a train to Kandy?”
Jeevan answered: “Yes, there is; it will come soon. I am also going to Kandy. You go and buy the ticket!”
Kapila had no reason to be doubtful about what Jeevan said; after all, he was a railway employee! He bought the ticket and went to the railway platform with his friend. As most of the passengers had already left for the Bus Station, unlike the other days, the platform was empty.
To Kapila’s surprise, then came the train. He and Jeevan together with a few others got in. The two friends could easily find a seat to sit together, because the train was not crowded.
However, Kapila noticed something strange. Quite unusually, the passengers in this train were well dressed. Males were in full smart attire wearing black trousers, coats, a bow or a tie and shiny shoes; some of them had folded coats on their arms. Females with full make-up, were wearing colourful sarees, expensive jewellery and high-heel shoes!
He could not resist asking his friend, Jeevan who also had a coat folded in his hand, about the strange “smart dress code” of the passengers. Jeevan explained: “One of our colleagues, working with us in the Railway is getting married; his wedding is today in Kandy. We all are going there!”
I am not sure whether Kapila remembered those passengers who had to walk to the Bus Stand; whether he had an idea that the special train going to a wedding runs on public money; or whether he realised that the railway employees who boarded the train as passengers, perhaps, had been covered by their statutory leave entitlements or trade union rights, all with full-pay salaries.
Social media on retirement parties
The front page heading of the Sunday Times on November 27 read as “No retirement parties at state expense for public sector officials”. The government decision to revise the retirement age of public sector employees from 65 to 60 years has resulted in a sudden increase in retirement of about 18,000 public sector employees by the end of the year. The practice of holding retirement parties at government expense is also, thus, set to increase the total party bill to a colossal amount to the government budget.
After reading the above news about banning the retirement parties on public expenses by the Treasury, I recalled the story of the “train that went to a wedding ceremony” on public money. There were a couple of social media postings too about the news on retirement parties with comments and responses. They had brought forward various parallels from the public sector offices.
Some of the notable comments added various ways of using public money. A common practice that had been reported in social media was the use of office vehicles for private work, including for family shopping and children’s schooling; all a cost to the government coffers.
It has been customary to attend funerals and weddings of the co-workers or their families – no matter where such events are in the country from the north to the south and from the east to the west, all with transport costs borne from public money and participating in religious and social activities too on public money and during office hours.
If there is a loss of office work because there are no employees in the workplaces as they have gone to attend such events, it is a cost to the economy; if there is no visible loss of work as such, then it implies that there is excess employment in the workplaces draining public money.
Bankrupt public sector
The drain of public money in a wasteful and unproductive manner as mentioned above may be too small to account for. Nevertheless, the point is that the deterioration of responsibility and accountability over the use of public money has created leaking holes – big and small both, throughout from top to bottom.
The continuity in such practices has made the leaking holes bigger and bigger over time, converting corruption into normalcies in the public sector; no wonder why public sector has become so attractive to work, even sabotaging the private sector businesses.
As we discussed at a high-level policy discussion this week, there has been two more “dangerous” developments over the past 15 years, which have added to the disarray of public expenses. The first is hiding of “big bills” in the balance sheets of statutory bodies; as a result, it has been difficult for the Treasury to find where public money has gone and, accordingly account for them in the budget.
The second is the piling up of “unpaid bills” to the private sector. According to the Treasury sources, the value of total unpaid bills amounts to Rs. 205 billion by the end of October 2022, while 40 per cent of it is owed to the transport and highways and, rural road development activities.
It’s not difficult to understand the fact that when the government is bankrupt and being unable to pay off its bills, it makes the private businesses bankrupt too. Those private sector suppliers, contractors, and service providers have performed their tasks; they must have used their retained profits or bank loans for such work. Now they are too bankrupt, and their employees are also without jobs!
Need for more borrowings
The spillover effects and their spiral effects of bankruptcy are ultimately translated into a negative rate of economic growth. As per the current estimates, the real GDP for this year is estimated to contract by 8.7 per cent and, in 2023 by 3 per cent. According to the nature of an economic crisis, economic contraction is set to create far-reaching multiple issues for the people, the businesses and, for the government itself.
People may lose jobs and livelihoods as well as incomes, while increasing poverty and vulnerability of larger social segments. While businesses collapse, the government may also lose tax revenue resulting in budget deficits; it requires further borrowings while the borrower is already “unworthy” for lending, according to international credit rating!
Since 2020 entire budget deficits have been financed on a net basis through borrowings from domestic sources, particularly by issuing government securities and money printing. Although, there has been a significant effort to raise government’s revenue and cut down some of the expenses – all against the currents of the economic crisis, there still is a Rs. 2,400 billion budget deficit.
And this amount should be financed by selling government securities or printing more money. The big question is even after we fell to the worst economic crisis in history, have we done enough to establish fiscal discipline, which has created a terrible disarray in the past?
(The writer is a Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).
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