Budget proposals in disarray, trigger macroeconomic imbalances

Business

The economic policies of the newly elected government are said to be based on the concept of a “Social Market Economy” built on social justice principles. Social market economy, which combines market economy and social security, became the hallmark of ecnomic policies in Germany in the 1950s.It is a rather imprecise term though it would be politically appealing nowadays. This may be the first time that this phenomenon is appearing in the policy documents in Sri Lanka, but its elements in different forms could be found in the economic policies adopted throughout the post-Independence period.

While it is important to provide social security to the vulnerable groups, it is also equally important to execute economic reforms so as to rectify the macroeconomic imbalances. The reforms included in the Budget 2016 have been confined to a few tax revisions and expenditure cuts. As the government has failed to withstand the pressures of trade unions and other lobbying groups against such proposals, they had to be withdrawn shortly after the budget speech, thus, keeping the imbalances intact.