The 2014 Budget of President Mahinda Rajapaksa is an opening for a class war. Though it addresses many subjects such as infrastructure, health, education, business, banking, agriculture, fisheries, housing, pensions and anything and everything, it cannot conceal the essential class nature. It is for this reason that it is confusing and difficult for some people to criticise it. What is the economic policy vision and strategy and what are the priorities in the Budget? The 2014 Budget is a continuation of the open economic policies since 1977, and particularly, a reinforcement using the fascistic state power of the accelerating neo-liberal policy trajectory after the war ended in 2009. What is clear in policy priorities is the scale of investments in urban construction and infrastructure disregarding the necessities of the poor. It displays without any shame the lack of re-distribution and increasing inequalities promoted by the tax policy. The greed for finance capital, supported by this Budget, could inevitably create an economic crisis. Already many liberals and social democrats have predicted such a catastrophe.
" State sector salaries and allowances are Rs. 390 billion, pensions amount to Rs. 125 billion, fertiliser subsidy, pharmaceutical drugs and welfare transfers are Rs. 100 billion. The point here is that the pseudo- populist measures that include salary increases and subsidies are not going to satisfy anybody because these are liquidated in the real trajectory of our economy "
The regime has gone deep into chauvinist electoral politics. And more, the regime has been able to make fascist styled attacks to take the wind out of many mounting struggles. Bourgeoisie political parties are broken and their members are bought over. Some militant struggles are appeased with handouts. As the regime becomes more and more authoritarian and arrogant, it has lost its sense of the pulse on the ground. Hence the Budget reflects the pseudo-populist grounding of this regime.
The Mahinda regime has hoisted the neo-liberal flag so high – thereby pushing the opposition to seek refuge in social democratic economic critique and also open the way for revolutionary vision. On the other hand it has aroused the wrath of the trade unions and sections of the rural masses through disgraceful handouts that are already burned out by the increase in taxes and duties. Indeed, the regime used to boast about the full spectrum of political parties under its fold from the “Sinhala Buddhist” chauvinists to the bankrupt old left. The regime had the confidence that through buying parliamentarians for a pittance, it could buy the masses for even less. So, backed by such idiocy everybody is given something. Public servants and pensioners are getting a cost of living allowance. The pension scheme for farmers, which was abandoned a few years ago, has been re-initiated, albeit with the age of qualification now at 63. University lecturers, who were credited with putting together the second longest strike in the history of the country last year, will be given a raise next year. Hostels are being built for university students and labs for secondary schools. There is going to be greater investment in healthcare, vocational training, SLTB buses and rural roads. The questionable major fertiliser subsidy will continue and there will even be a subsidy for government field officers to purchase motorcycles. Are these real gains? Contrary to the claims of the Mahinda regime, Government spending as a percentage of GDP is only 20%, and compared to other countries, it is quite low. State sector salaries and allowances are Rs. 390 billion, pensions amount to Rs. 125 billion, fertiliser subsidy, pharmaceutical drugs and welfare transfers are Rs. 100 billion. The point here is that the pseudo- populist measures that include salary increases and subsidies are not going to satisfy anybody because these are liquidated in the real trajectory of our economy.
" What is clear in policy priorities is the scale of investments in urban construction and infrastructure disregarding the necessities of the poor. It displays without any shame the lack of re-distribution and increasing inequalities promoted by the tax policy "
What economic changes are prioritised through public investment? Much of the capital expenditure is going to be on infrastructure, particularly roads, irrigation, ports, power plants, airplanes, hospitals and housing. Millions from government-led development projects are controlled by the family centre. In other words, the physical and economic geography of the country is going through a major transformation.
The important questions are whether such investments will provide the necessary returns to sustain this transformation? Is this transformation going to pull the masses out of poverty? One major criticism of the Government’s economic policies is the lack of revenues to sustain its level of expenditure. The total tax revenue is even less than the recurrent expenditure.
So, where will the funds come from to pay for public investment and the accumulated debt? While the Government has some plans to expand the tax base, much of it continues to be indirect taxes, particularly the VAT as opposed to progressive direct taxes targeting the income of the wealthier classes. This means inequality will increase in giant steps. The tax logic in the Budget is not about redistribution but about incentives to investors and businesses.
The question is whether such incentives in fact work and who do they serve? Mahinda has opened the gate for a dramatic class war!