Fright of fighter planes

Just two weeks after the Central Bank raised interest rates fearing the Government would be unable to meet its revenue targets for 2016, Cabinet this week gave permission to import eight fighter planes for the Air Force, generating more consternation over contradictory policies on expenditure.

Economists have voiced concern over Sri Lankan’s economic fundamentals time and again, calling for macroeconomic consolidation founded on fast-track reforms aimed at boosting Government revenues to cut the fiscal deficit, improving foreign exchange reserves, cut public debt and Sri Lanka’s risk of debt distress, and improve public financial management. The decision to purchase aircraft comes just days after Government decided to give sweeping tax concessions to public servants for vehicle permits.

As the public is well aware, Sri Lanka’s finances are in a precarious situation because of high external debt, partly due to heavy infrastructure borrowing under the previous Government. However, austerity measures remain deeply unpopular and the Government rather than leading from the front has continued its handout program to political elites regardless of the massive revenue loss to the State. The latest decision on fighter jets comes at a time when the war has been over for seven years and the country faces no external threats, at least not the immediate violent kind.  

Last week, the Government also announced plans to release vehicle permits. The face value of each concessionary vehicle permit is $ 30,000, increased from $ 25,000. A permit holder is entitled to 50% tax waive of the total tax to be paid for his or her selected vehicle.

The Government suspended the Concessionary Vehicle Permits (CVP) in November citing the huge drain on foreign exchange, air pollution and traffic congestion. Interestingly it was Finance Minister Ravi Karunanayake during the 2016 Budget proposed to end the practice of giving tax-free vehicles to State workers and elected ruling class. During his speech Karunanayake admitted the Government had lost Rs. 147 billion in revenue from 2012 to August 2015 and acknowledged the system was “politicised” and “misused”.

Principle was short-lived as the Government returned to doling out permits freely and even rolled out an additional Rs. 1.17 billion supplementary estimate to purchase vehicles for dozens of ministers. Under vehement public protest, Prime Minister Ranil Wickremesinghe called for the imports to be postponed but subsequent reports found the funds had already been released by the Treasury. 

The Government has also steadfastly refrained from introducing a framework to define the type of vehicles that can be purchased by politicians and kept quiet about the thousands of vehicle permits likely to be released in stages under the new regulations. Vehicle permits are freely sold on the market at colossal prices and have sprouted a culture of corruption where the person the permit is issued to often sells it to richer buyers who import luxury cars at taxpayer expense.

Though a case can be made for deserving public servants, at a time when the average Sri Lankan finds vehicles beyond their buying capacity, it is unconscionable that the Government continues to feather the pockets of politicians and elites, especially those on the top rungs of loss-making public enterprises who routinely make fat salaries. They then add injury to insult by proposing unnecessary expenses that will place even more of a burden on the public.