RaviK says policies set out will be test of his professionalism

Wi t h t h e 2 0 1 7 budget set to be read today, Finance M i n i s t e r R a v i Karunanayake recently said that the policies set out will be a test of his professionalism. “In the next seven days, the government of Sri Lanka and Finance Ministry— myself representing the two—will certainly try to ensure and display a sense of professionalism in governance in order to ensure that there’s a sense of acceptability of what we’re doing,” he said. Speaking to a gathering of accountants, one of whom Karunanayake is by profession, he noted that he cannot sacrifice his professionalism

“I have to play a dual role. I’m a politician but I’m also a professional, so without sacrificing the principles of professionalism, I’ve got to be realistically appraising the political issues and how they will focus on the people,” he said. Karunanayake, who has been named as the world’s first CIMA-qualified Finance Minister, has recently said that he would be presenting a revolutionary budget for 2017, which would nevertheless be people-friendly. The two past budgets presented by Karunanayake were not well received by economists, who have been calling for fiscal consolidation, the lack of which restricted the country’s flexibility in setting investmentfriendly, stable monetary policies. The budget deficit for 2015 reached 7.5 percent of gross domestic product (GDP) compared to the 4.4 percent of GDP projected by Karunanayake in the January 2015 interim budget. Sri Lanka’s budget deficits are a result of the country’s brand of democracy, with elections won through promises of wide-scale handouts, which the winner has to finance through borrowings and foreign aid, due to the lack of tax revenues, which also had been cut under populist policies. Former Singaporean Prime Minister Lee Kuan Yew had called Sri Lanka’s democracy ‘a periodic auctioning of non-existent resources’. While the country’s interest payments on past debt takes up almost all of the government revenue, Karunanayake had legislated massive salary increases for the public sector and had also asked the private sector, which cannot justify such increases without similar increases in productivity, to increase salaries as well. The wage increase for the 1.2 million-strong public sector had played the biggest role in the deterioration of the fiscal deficit last year. This year however, Karunanayake has managed to keep expenditure targets below those legislated, while he has recently said that revenue may fall below targets. The Value-Added Tax Bill, which was supposed to account for majority of the revenue growth this year, was not implemented till October, since its implementation in May was found as unconstitutional by the Supreme Court, since the legislation enactment had not followed the proper procedure. Karunanayake said that the expenditure cuts this year were motivated in order to become eligible for the US $ 1.5 billion International Monetary Fund (IMF) loan, which is being used to ease the country’s balance of payments. “In order to ensure that we have walked into a voluntary acceptance of the IMF conditions—there are certain requirements that are there—spending is controlled,” he said. Karunanayake has repeatedly told the local media that the government is under no obligation to do anything the IMF tells it to do. However, continuance of the IMF loan tranches depends on the government meeting the fiscal and monetary policy targets set out by the IMF as part of the 3-year programme. (CW