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Dollar will hit 160- Bandula

25 Jan 2016 - {{hitsCtrl.values.hits}}

In an interview with the Daily Mirror the Joint Opposition’s Economic Affairs Spokesman, MP Bandula Gunawardane said that people would be compelled to endure economic hardships in the form of rising price and the lack of employment opportunities in the new year. He said it would not bode well for the country, because of budgetary provisions.

Excerpts:

* What kind of impact do the 2016 budgetary proposals will have on the country’s economy?

The originally estimated government’s revenue and expenditure, budget deficit and the way for financing it have now been changed because of amendments introduced during the debate in an unprecedented manner.

The budget lost its originality because of amendments brought in with the intervention of either the President or the Prime Minister. The government even lost its credibility because it failed to work out an acceptable budget at once.

If someone looks at it from the mindset of a frog in the well, it will be seen as a unique feature of Sri Lanka. Yet, the international financial organisations that observe budgetary financing and affairs and the local business community have been alarmed by what happened in the budget.

Especially, the Prime Minister presented a policy document ahead of the budget to draw the international attention to it. However, the entire policy statement was negated after the budget was presented together with amendments incorporated in the process.

It resulted in confusion. In that perplexed situation, the Finance Minister failed to act with responsibility and prudence, albeit it is what is expected from a member holding such a portfolio.

International Monetary Organisation (IMF) cautioned about certain proposals introduced due to personal interests of the government bigwigs. IMF warned of fragility in Sri Lankan economy in this context. IMF is duty-bound to make such economic forecasts because Sri Lanka holds IMF membership.

Whether we like or not, our country is doing export-import economic activities. Then, the balance of payment is part of our economy. The IMF contributes to maintaining the balance of payment and the stability of exchange rate at a healthy level.

That is why, there is an IMF office functioning under the Central Bank. It is unacceptable for anyone to dispute IMF articulating its position in this regard. We have already set a bad precedent. The rupee value has depreciated to the lowest in 38 years against the US dollar. It has depreciated during every rule. Yet, it stabilised after the end of war. During the post war period, the international official reserves were high. It stood at US $ 8.2 billion by the time of the government’s change. Within one year after the change, the rupee has depreciated to 151. It is bound to hit the 160 mark next year, according to economic forecasts.

The local economic scenario will be worst compounded by the decision of the United States to increase its interest rates last month.

In consequent to this move in the US, investors are now encouraged to withdraw their money invested in our bonds to be reinvested in US bonds. It is more profitable for them. It will add to the present woos of our economy. It will affect the Stock Exchange and the local credit market.

In the last budget of this government, they imposed taxes with retrospective effect such as Super Gain Tax. This time, the government has taken over Avant-Garde, a profitable venture. Next, they suspended the Port City Project. Doctors went on strike. So did bank employees. Even scrap iron traders protested.

Against this backdrop, the President repeatedly says that the government will not collapse. He says he will not allow anyone to topple it. Such repetitive remarks are made because the government’s stability is actually at stake. In this context, nobody is prepared, even to do a feasibility study, let alone any investment.

The budget deficit is estimated to be eight percent. The interest rate will also surge, and inflation will be over 7 percent. The growth rate will be slowed to 5.9 percent.

* How will ordinary people feel the effects?

Ordinary people will be in a dire predicament under the spiraling cost of living. Theoretically, it is bound to increase. There will be price hikes of imported food items such as sugar, dhal and tinned fish, and intermediary goods such as chemical fertiliser, and capital goods like building materials. It is triggered by the rupee depreciation.

Compared with 2014, people have been taxed more. It means the rate of indirect tax has increased by 58 percent. After January, people will experience the impact of these taxes by way of price hikes of items they purchase for consumption in the market.

Secondly, investments have been ground to a standstill denying employment to many thousands of individuals, let alone the creation of one million employment opportunities-the much hyped slogan of the government. Likewise, self employment activities have suffered a severe blow. For them, the cost of imported raw materials has increased resulting in the rise of their cost of production. So, they cannot sustain their industries.

In addition to mega projects, small and medium scale projects have also been affected at village level. In the construction industry, the government is in arrears of payment worth Rs.500 million to contractors for work already completed. As long as it is in arrears, construction projects cannot be pursued. It will deny jobs for many persons working as masons and carpenters.

* Some say there was no enlightened debate on the policy matters outlined in the budget. It is said speakers were more concerned on concession reduction and all. What is your view?

This is the least enlightened budget debate I have ever witnessed in my life. The reason is the main Opposition in Parliament, the Tamil National Alliance (TNA), is supportive of the budget. The Janatha Vimukthi Peramuna (JVP) was also supportive of the government in an indirect manner.

The time meant for the Opposition was mostly allotted to these two parties during the debate. When analysing JVP speakers during the debate, it is crystal clear that they were more concerned about attacking the previous rule rather than focusing on the present budget. They also concentrated more on mudslinging at those who served in the Cabinet of the last government for personal reasons.

There was lack of debate on the actual contents of the budget. We, in the joint opposition, actually received less time to articulate our positions. We educated people outside Parliament as a result. The educated segments of society listened to us and understood what we said.

As a result, doctors went on strike, for example. In Sri Lankan Parliament, there is a dearth of MPs with a sound economic knowledge. It is a tragedy because Parliament, as the supreme authority overseeing public finance, needs such legislators more and more.

The media is also not giving adequate coverage to economic affairs taken up in the House. Instead, they tend to highlight frivolous talks uttered to and fro.

* In the budget, the government has tried to seek a departure from the economic model hitherto adopted in the country, and to liberalise economy more. What is your opinion on this?

All of a sudden, the economic model cannot be changed radically. If the government intended to do it, it should have sought a mandate from people at the election. It did not do so. It, instead, promised the sun and the moon to people. It said nothing was impossible if corruption and malpractices were rooted out. Ahead of the election, it pledged to add the allowance of Rs.10, 000 to the basic salaries of public servants.

It vowed to give free motorcycles instead of giving them at a concessionary price. It said fertiliser subsidy would never be curtailed. It promised everything on earth to people and asked them to vote against the Rajapaksa government. Finally, what happened?

It is characteristic of the United National Party (UNP) to have such weaknesses. Yet, it pledged to be more welfare oriented than the Rajapaksa government in the run up to the election.

* How practical is such an economic model to Sri Lanka?

For a country like Sri Lanka, the extreme end of any model is unacceptable. Education and healthcare are free in Sri Lanka, a phenomenon to different to most other countries in the world. Of course, it is a huge burden to the government. But, the successive governments did not do away free healthcare and education facilities since Independence.

No government can deviate from it now at once. Today, we see a quantitative development in education. We need to improve it quality-wise now. Today, students pass exams but fail in life.

Radical changes are needed in the education sector for skills development. Schools should not close at 1.30 p.m. They should function till 3.00 p.m. like in Japan, China and Korea. We should do away with exam oriented system.

Privatisation of education will not help. Today, even businessmen are harassed. (KB)

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Dollar will hit 160- Bandula

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