Baseless Budgets?

The Parliamentary Committee on Public Finance (CoPF) has issued a highly critical reporting finding the Budget proposals presented in Parliament as lacking accuracy, proper estimates, and basis for proposals not being included in the documents presented. The Committee has raised concerns over successive Budgets having overestimated revenue and underestimated expenditure, that eventually resulted in many of the proposals being left unfulfilled. 

This issue has been highlighted many times, but the CoPF has joined the chorus calling the proposals ‘misleading’ and guilty of using ambiguous terminology to propose changes that at times could not be justified, according to Parliamentary CoPF Chairman TNA MP M.A. Sumanthiran. 

The report titled ‘Committee on Public Finance Report on the Budget 2019’ outlines the issues of the Budget presented in three main points; missing estimates, mismatch of estimates and Informational Standards and Due Diligence raising serious concerns with regard to the internal consistency of data provided and the professionalism and accuracy in the process. 

The report has also recorded several case studies extracted from Budget 2019 and has carried out a detailed analysis of the estimates or the lack of such with regards to proposals presented. Sumanthiran has questioned the confidence the Budget can have when its estimates are baseless and therefore unreliable, and has warned that some proposals are actually contrary to public expectations. He has cited the betting and gaming levy of $ 50 proposed by Budget 2019, which the parliamentarian pointed out is actually to reduce an existing tax of $ 100 which has not been collected, but presented as a new tax.

When there is no basis for the financial direction of the Government, the cost is public confidence and trust. Public interest is also lost along the way as politicians promote policies that match their political agendas rather than what is needed to restructure Sri Lanka’s economy and set it on a sustainable growth path. Maintaining shrinking Budget deficits is important for Sri Lanka given its high debt dynamics, with rating agencies estimating Sri Lanka’s debt to GDP ratios increasing to 84%, partly due to currency depreciation. This means that Budget proposals need to revolve around increasing exports and investment to encourage stronger economic activity and not providing short-term growth boosts by reducing interest rates and pumping excess demand into domestic markets.

Policy consistency has been the bane of many governments, including the present one. A Budget should be the bedrock upon, which at least a large part of the Government’s national policies should be built on. But the CoPF insists in its report that there were differences or changes in the macroeconomic assumptions used, without an attempt to provide reasonable justification, and without making Parliament adequately aware of these very significant changes that might result.

Taking the GDP growth numbers as an example, the report points out that three different figures has been mentioned in different documents. There is also no method of tracking proposals outlined in successive Budgets and what their impact has been on the economy. The way the Budget is structured also does not promote transparency, as there is limited information on implementation voluntarily released by the Government during the fiscal year and the Budget department has discretionary power to reallocate funds as it wishes. 

Clearly a complete re-think of the national Budget is necessary for it to have genuine impact.