Editorial

The JVP-NPP Government’s maiden budget was debated this week in Parliament with as little on its content and as much on the political ideology of the ruling party.

It was a confused mix all round. Government MPs were straining to justify why the once-upon-a-time Marxist party was now sailing with the Washington-based IMF and its reform programme initiated by their predecessor government for the economic recovery of the country since its bankruptcy in 2020. The Opposition benches were, on the other hand, relishing taking digs at the Government for the 360-degree turn. They could not resist accusing the Government of preventing the economic growth it now envisages by recalling their obstructionist actions to those very plans when in Opposition. Having rubbed that part in, they went on to congratulate the Government for continuing with what they termed the ‘neo-liberal’ policies of the previous right-of-centre governments.

Karl Marx’s Das Kapital and Adam Smith’s treaties were freely quoted, but there was little debate on the ‘dialectic materialism’ of the former or the merits of free trade of the latter. Not to be found wanting on economic theory, it was left to the ruling party’s theoretician, the Agriculture Minister, to take his entire allocated time to explain what the Government’s current ideology was and what political direction the budget was taking—he coined the words ‘aarthika prajaathathrawadaya’ (Economic Democracy) as being the economic philosophy of the JVP-NPP administration.

The Minister said the JVP-NPP rejects both extremes, i.e., the old Soviet system where the commanding heights of the economy were entirely in the hands of the State as well as the ‘neo-liberal’ policies of the post-1977 era.

‘Thus far,’ the Minister said, ‘our economy had been undemocratic and monopolised by a few. The uniqueness of the budget, therefore, was that for the first time, the economy aims to be democratic (inclusive); foreign investors, the government, individuals, the private sector, plantation workers, cooperative societies, public servants, and pensioners all will be stakeholders and will receive their due share. Just treatment will be meted out by the Government to all those who were previously marginalised, giving priority to the oppressed classes.’ It all sounded nice in theory, with a tinge of the old Left rhetoric mixed with an assurance to the private sector that it will be a sort of ‘business as usual’.

There is unanimity, though, that the old socio-economic-political theories that were part of the Cold War are now a thing of the past. The world is witnessing a reversal of what countries once preached and practised. The United States, for instance, once the self-appointed champion of the free world and advocate of free trade, has recoiled into protectionism to shore up its economy, having earlier used economic sanctions as a weapon of war against nations it disagreed with. While the US retreats into a cocoon, its nemeses Russia and China have opened up their once insular economies to the world at large, pursuing free trade.

It was significant that the joint statement issued at the end of President A.K. Dissanayake’s visit to a China run by the Communist Party (CPC) referred to Sri Lanka’s support for China to build “a great modern socialist country”. It is what they call ‘Socialism with Chinese characteristics’—the’ Chinese path to modernisation. What is significant is that there’s no longer a reference to a ‘Communist’ country. This is not a mere play of words but carries a deep import.

Despite being shackled to the IMF, one cannot believe the JVP-NPP has turned full circle from its ‘Red’ past. It has, like the CPC, accepted the realities of the world order and appears more sympathetic to the Chinese path of modernisation, which stresses a difference from Western-style modernisation. President Dissanayake’s budget seemed to give weightage to rural development and social inclusivity, prudence in public expenditure, fostering Small and Medium Enterprises (SMEs), an export-driven economy, and the growth of industrial production, services and agriculture.

As the present-day Chinese leaders shed their Mao tunics and switched to Western suits, many JVP-NPP legislators could be seen in well-tailored Western attire in common standard issues (probably by the party) of red or black ties reading off prepared notes (probably by the party)—all seemingly choreographed. All that is well and good, except that the Chinese model is of a one-party state.

If the Government is following the Treasury line of its predecessor Ranil Wickremesinghe’s Government, notwithstanding the barbs from the Opposition about its about-turn, it is a positive turn of events as it ensures continuity, something lacking in Sri Lanka’s fiscal policies before, due to the vagaries of domestic politics. Even if the Government cannot be credited for being its architect, it must be commended for reinforcing the complex yet fragile economic foundation put in place by its predecessor for the economic recovery of the nation, albeit tied in knots to the IMF, the Paris Club, and private creditors abroad. Any deviation would have spelt disaster, particularly when there is no alternative route suggested, or possibly, available.

The budget is only the start for the new Government. How successfully the Government achieves its objectives will depend on its ability to monitor and manage its implementation, including timely establishment of the legislative framework. Its social spending element is unprecedented. The social spend on health (604 billion), education (619 billion), and universal social protection (749 billion) totals Rs. 1.9 billion—almost two trillion rupees. On page 10 we run some details of the Government’s social protection and social infrastructure spend. Over a million public servants will also get a phased-out upward salary revision.

The daunting task, however, is to generate the revenue to meet deficits and build up reserves, including meeting the debt repayment obligations by 2028. Any new printing of money triggering inflation will defeat the purpose of providing for higher pay packets. Since 2022, there have been healthier macro-economic indicators which will pave the way for supplementing the ‘safety net’ for the vulnerable sections of the population.

In the upcoming budget year, the economy will need to leverage to its advantage the evolving global geo-economy. That world order is facing a tsunami of devastating waves generated from the new dispensation in Washington, the ‘multipolarisation’ and its trade wars, and protectionist tendencies among this country’s external partners.