National Prosperity Budgets Promoting Development or Inflation?

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By 2018-01-02

By Ananda Ariyarathne

It is high time we became sincere and gave our most serious and committed assessment of factors that contribute towards the economic wellbeing of our nation so that there are no illusions any more. What is important is not the political party or leader who comes into power, when some are rejected as undesirables for a variety of reasons. Out of them, the most deciding aspect is the degree of development and its effect that can be felt and seen. Whether we like it or not, there are two main aspects connected there, and those are the degree of development that can be seen against the degree of the same that can be felt.

Visible Development
We are in a hurry to look at the physically evidence of development efforts and there is nothing wrong in resorting to such. Such factors for Development Evaluation cannot be avoided as they contribute towards the creation of an environment through enhancement of positive aspects that would enhance the overall capacity of the economy that in turn shall make the lives of the people easier.
The aspect that cannot be ignored is the 'cost' involved and at what cost has such an achievement has been realised. That is where the Government becomes important through the relevant line agency. As no government is capable of shouldering the complete burden of financing such through any reserves accumulated, it is natural that provisions have to be envisaged and provided in the 'National Annual' Budgets to fulfil national Commitments that may come up.

As it becomes unavoidable that commitments have to be recognized and honoured, there should be corresponding areas of activities to generate the required wealth in a planned manner so that repayments will not end up as a crisis. That can be through additional Foreign Exchange generation and savings achieved through Import Substitution. The net result shall leave volumes of Foreign Exchange which can settle such commitments. Now, let us ask how seriously we have been sticking to such a cardinal requirement.
The absence of avenues to meet such requirements pushes the nation to desperation and we know how often we hear such blaming others for not having the ability to pay back. The worst is the desperate decisions to scrape as much as possible from people who are subjected to bear the burden through a series of Direct and Indirect Taxes. Although there can be infrastructure facilities of a 'Monumental scale' created to become pleasing sights, the general burden that has expanded due to no fault of the people will become a feature of development.

Tangible Development
It shall be one hundred per cent accurate if we say that we have been dragged into an economic environment where we spend before we earn. As there is an obvious gap between National Revenue and Expenditure, the national need for Credit Facilities becomes unavoidable.

Problems related to housing and transport are facilitated through a variety of 'Credit' facilities which get a hold of needy consumers by way of easy loans including Credit Cards which help them enjoy life and postpone payments. Facilities which were arranged and monitored through banks at their geographical addresses have now become connected online through mobile phones and Telecommunication Companies which promote highly-advanced mobile phones through unbelievable easy payment terms. All those are features that have come to stay as we move towards the future.

Tangible developments such as the Super Highways that have come into the very centre of our life styles have definitely made life easier for people, but at a cost camouflaged in a variety of ways into an unavoidable necessity. A Government cannot have specific answers to different areas in the whole economy.

In a country where people live in 'statistical illusions,' matters look very simple and unsophisticated. Our unemployment is just a little over 6% only. As it was indicated recently, a little over 40% of the citizens have been identified as poor. It really looks funny to have an unemployment of 6% and for the poor people are to be over 40%. Figures do not show any sense. It is only a figure less than 3% that represents youth entering Higher Education Institutes and can we take for granted that all of them become employed without fail?
How connected are the Budgets?

How far are National Budgets connected to the 'Enhancement of the National Productivity' of our country? Do we have a serious policy for the development of resources for Import Substitution or for Export Promotion which would conserve the existing Foreign Exchange Reserves and strengthened it through new opportunities to build and expand such reserves? While allowing a Free and an Open Economic policy, nothing could have prevented government budgets from offering incentives to fortify the national productivity and production in a well synchronized manner.

This is where we have misunderstood the principle of Open Economy. Everything has been allowed to be guided by 'Market Trends' and the initiation and the involvement of the Government has become a half hearted exercise. The dependency on 'Trickle -Down' effect of the inputs has become something like doing meritorious acts with the hope of receive benefits in the next 'incarnation,' something that cannot be tracked and kept in line. It is further worsened by the manner the 'tax benefits' are offered to large investing companies without having any reciprocal benefits to the nation.

Is it not really hilarious to note the regular annual declarations of profits showing huge volumes to show the success level? A simpleton's approach to a Telecommunication Company would try to fathom out the origin of the volume of profits made in such a Service Industry. In how many ways is a Telephone Subscriber fleeced in both the equipment sales as well as in the provision of services? The Consumer does not have the time for details and he or she bears the burden as there is no other choice.
Take the private sector in Health Services and it is notable that this country now has world standard Public Health Services offered by the Private Sector Investors in that field. But how many of the people are in a position to enjoy those facilities? How will even the 'Trickle -Down Effect' work in such a case?

Absence of Objective Orientation
Especially, in a country like ours where there is no synchronized system efficiently maintained by an effective Administration to harness, engage and monitor services as well as production in an ethically controlled framework, how can there be such a commitment as all the 'Partners In Progress' are not in 'Participation but in a Fray to grab the maximum.'

State Revenues can be enhanced only if flourishing enterprises are in existence. Public and private sector participation would have been the most ideal as it is the best way a more sincere 'symbiotic' relationship can become possible. State Sector Revenues are an unavoidable necessity in order to run the Government administration in the first place. But what indications can be found in such an approach, in the recent past as well as the present.

Cost of Living
This is an area for exploration for universities as no original scopes have been identified to understand the true developments as well as the trends. If a careful study is done on Government Budgets, starting with the First Budget of our country as an Independent Nation with a fairly comfortable revenue structure to ensure the standards maintained by British Colonial Rulers.
Government Railways provided a highly-disciplined Public Transport which existed as an exemplary service provider. The Road transport that became monopolized by the Government as Ceylon Transport Board had a fairly effective public transport system until such time the efficiency of management got affected by sickening

Most of the people lived in the rural regions and no people died of hunger as the subsistence agriculture could sustain the population. The development efforts in an environment where the population was steadily increasing, with a trail of other social needs that needed attention, following. It affected all the sectors, starting with housing, education, public health and food security. The developments that continued as the rehabilitation of Rice Cultivation through the renovation of irrigation systems looked promising until such time rural labour started migrating to urban areas seeking better revenue sources.

The value addition industries that started after 1970s became an additional Foreign Exchange Earner and the Import substitution set a base for better Foreign Exchange Reserves. The economy that was opened after 1977 pushed it into the promotion of Mega Investments to generate opportunities for 'Trickling-Down' solutions.

In early 1950s, a measure of rice was 0.25 cts and a loaf of bread was 0.25 cts. Today, a kilogram of White Raw Rice is Rs 90.00 and it is an increase by 360 times for almost the same quantity. A loaf of bread is Rs 50.00 minimum for such a weight and it is a 200 times increase. A poor labourer could have his breakfast for something less than 0.15 cts to 0.25 cts. In that example, the quantities consumed could not have increased after all those years. But what happened to prices which in turn affected such a poor wage earner. Linked to the same is the earning capacity which did not increase at such a rate.

A careful study would show that the effect of Budgets that were introduced kept on increasing the unit prices of consumer items while revenues remained same. Only good thing that happened during the early days was that Agricultural Research Stations did a marvellous job in developing highly productive varieties and the newly-cultivated lands sent their produce to the markets, and the guided marketing support through Paddy Marketing Board helped the government in increasing foreign exchange savings through Import Substitution. The national Drive to preserve Foreign Exchange through Import Substitution helped farmers in the whole country and that marked the Golden Era for farmers in Jaffna.

[To be continued ]



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