Keeping it simple

The Finance Ministry has renewed called for public proposals to formulate Budget 2019 but the fresh efforts could be an attempt to reinvent the wheel as the Government had already formulated a Budget that was to be presented in November and further proposals could have limited impact given economic conditions have remained largely unchanged. 

The earlier edition of the Budget was formulated after exhaustive consultations with stakeholders. The new Budget, which aims for a 3.5% deficit, is likely to include populist measures targeting upcoming elections. The Government has already begun discussions with the International Monetary Fund (IMF) to put the $1.5 billion Extended Fund Facility (EFF) back on track and is likely to also negotiate fresh fiscal targets to accommodate large programs such as Gamperaliya, Enterprise Sri Lanka and an expanded Samurdhi program. 

This would mean that any additional proposals, while perhaps making the Budget more inclusive, could nonetheless make it more complicated and provide too many goals. Structural reforms remain critical for Sri Lanka to break out of its slow growth situation but a Budget with too many policy recommendations is likely to make that target harder to attain.  

Budgets are notorious for being long, complicated and rambling, with little being accomplished at the end of the day. Budgets, when they are complicated, are also difficult to track, particularly in Sri Lanka where transparency at ministerial and institutional levels remains negligible.    

What all this underscores is the need for the Budget to prioritise the most important economic and political agendas and then actually achieve them, because a Budget is essentially the catalyst for a policy agenda. 

Sri Lanka, with its significant debt and governance issues, can no longer afford to have budgets that do not walk the talk. Key reforms, including State-Owned Enterprise restructuring, improving exports and imports, and implementing pragmatic social welfare nets, need to be outlined in the Budget to give all stakeholders, including the private sector, a chance to base their planning on something solid. 

Many key proposals in the past such as the contributory pension fund, interest subsidy for housing, double tracking of railway lines, private free trade zones along expressway corridors, global marketing campaign to boost FDI, credit scheme to encourage domestic solar power generation, ensuring basic facilities of water, power and sanitation for all schools were among proposals that were either partially implemented or skipped over entirely. 

It is imperative for continuity that at least the best Budget proposals are taken to their full implementation even if it means extending them over several years. Adding fresh proposals may not be feasible in such a situation. 

Keeping Budget proposals simple and targeted is also important because the Government will have a tough year balancing out expectations for populist policies ahead of elections. Policy stagnation and contradictions over the past four years, which eventually manifests in public impatience, will also need to be tackled. 

Governments have much to gain from being practical about what they can achieve and actually getting those policies done, rather than giving into the temptation of dishing out public jobs and increasing consumption only to have to withdraw those goodies the moment polls are over. Budgets need to walk the talk as structural changes become more painful the longer they are ignored.