Parliament and public finance

Monday, 17 December 2012 00:00 - - {{hitsCtrl.values.hits}}

The erosion of balance of power is reaching serious proportions in Sri Lanka. The recent decision by the Government to disregard a Supreme Court ruling that calls for Parliament to peruse loans before they are accepted could push Sri Lanka’s entire economy onto the edge of instability.

Transparency and accountability are new words to most Sri Lankan politicians – ones they do not like much. Development within a democratic framework means that the people have to be aware of what is taking place because ultimately they literally pay the price for it. As the lawful representatives of the people, Parliament has the constitutionally-empowered right to debate and decide on financial transactions carried out by the Government, particularly steps that pertain to loans.

Several UNP members last week alleged that Government has disregarded a Supreme Court (SC) ruling that the 2013 Appropriation Bill should be amended to make Parliamentary approval necessary for securing loans. Accordingly, the President could continue to raise loans — up to Rs. 1,295 billion in 2013 — without revealing to Parliament the terms and conditions under which such credit is to be obtained.

The third reading of the Bill was passed with a two-thirds Parliamentary majority on 11 December. The Government only changed it to make provision for a report to be presented to Parliament, after a loan is obtained.

In contrast, the SC had ruled that the Bill was unconstitutional, unless it required the terms of a loan to be placed before Parliament, and for approval to be secured before such loan is taken. The highest court in the land is insistent that Parliament has the right to decide on public finance thus ensuring that there are checks and balances in place to stop unwise and hasty decisions. It is also an important step in assuring transparency and minimising of corruption –points that will now be harder to achieve.

Parliament being given the details after a loan has been finalised means that any room to turn back or negotiate more favourable terms is effectively nonexistent. It is shocking that such basic steps are taken away from Parliament despite the Government insisting during the Chief Justice’s impeachment process that they respect the will of the people, ostensibly expressed through Parliament.

Ironically China, which is the largest loan provider for Sri Lanka, despite not being a democracy, has checks and balances in place. This is proved in a report that said a Chinese company has suspended funding for a local electricity project until Sri Lanka pays a Rs. 627 million insurance fee to a Chinese public company. This was after the Sri Lankan Government issued a guarantee for the project earlier this year. Such caution is commendable, but sadly a much poorer Sri Lanka that claims to be a democracy is unable to follow similar protective mechanisms.

Results of haphazard loan taking are serious and prolonged, as the euro crisis has shown. Loan unsustainable loans will eventually undermine the development potential of Sri Lanka at a very serious level. It also expands long-term financial vulnerabilities, cronyism, and corruption. By ignoring the sane counsel of the Supreme Court, the Government has set an official standard for undemocratic use of public finance at the highest level. The consequences of this could be dire indeed.