Saturday, 4 October 2014 00:00
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As the buzz over possible presidential polls in early 2015 grows to a fever pitch, more and more attention is being directed towards the upcoming Budget. People, long used to election handouts, are expecting relief that will tangibly reduce the cost of living but are understandably reserved about whether such measures will actually be handed out.
An LMD-commissioned poll conducted by TNS Lanka reveals that the people are “sceptical about the forthcoming Budget offering any relief on the cost of living front.”
The magazine notes, however, that 44% of those polled expect Budget 2015 to offer concessions to the crucial SME sector, with three-in-10 disagreeing with this view and a quarter saying they’re ‘unsure’.
According to LMD, 25% of TNS Lanka’s sample population says the Budget will announce reductions in tax rates. But a massive 56% of the survey sample disagrees with this statement, adding that they expect tax hikes to be announced in the forthcoming Budget.
Nonetheless, ever hopeful, the people also urge the state to reduce prices, increase salaries of public sector workers and take measures to strengthen the economy through Budget 2015. Interestingly, some 55% of respondents to the survey say that the Budget will reflect the prospect of elections in 2015. This is even more likely given the announcement of pending electricity and fuel reductions announced during Chinese President Xi’s visit.
Therefore putting these two statements together makes for the interesting point that whatever relief is given in the form of salary hikes or reduction of stable services such as electricity will likely be taken away by tax hikes in consumer goods.
This is in line with practices carried out during previous budgets that critics have pointed out bring little relief to salary earners who see ‘relief’ either targeted at other sections of the public or its expenditure recycled into more taxes. These sort of short-term election-specific steps have been long criticised by monetary organisations and economists alike but are unlike to sway a Government long entrenched in favouring ‘goodies’ before polls.
Cabinet spokesman Minister Keheliya Rambukwella admitted at this week’s Cabinet briefing the Government had presented the Appropriation Bill early in parliament to make room for an early Budget indicating it will be a significant pawn in the upcoming election game. He also insisted that the burden of the Budget lay with the Opposition as time for debate is largely allocated to them and therefore if they wish the Budget presentation date unchanged it should be brought up at a party leaders meeting.
The Government of Sri Lanka has already estimated that it will need Rs. 1.812 trillion (approximately $ 14 billion) as expenditure for its services in fiscal 2015. According to the Bill, government expenditure for next year will be increased by 17% from this year’s estimated expenses. The Appropriation Bill for 2014 estimated Rs.1.54 trillion as expenditure.
The Appropriation Bill 2015 also targets a Budget deficit of 4.4% of Gross Domestic Product (GDP) for the next year while expecting a growth rate of an ambitious 8.2%, which would be a return to the heady initial post-war days.
Providing election incentives for the political welfare of the Government in such an environment could create a tricky economic front to navigate. An election without incentives would be unprecedented but promises soon forgotten can bring their own repercussions during a later general election. So could this be an exercise doomed to failure?
