Fiscal discipline essential to prevent economic collapse: Karu

Saturday, 6 July 2013 00:00 - - {{hitsCtrl.values.hits}}

Economists have warned that Sri Lanka will face economic collapse unless the Government takes immediate steps to instill fiscal discipline and change economic policy, Opposition Parliamentarian Karu Jayasuriya said this week, citing the Moody’s downgraded forecast for the country and the massive losses incurred by state institutions in the year 2012. Addressing a media briefing, the United National Party MP said the Government was looking to raise Rs. 172.6 million from the banking sector to bridge the budget deficit.

“The Government’s budget deficit for the first four months of the year is Rs. 343.5 billion,” Jayasuriya said. In the face of higher State debts, higher bank foreign debts and widening budget deficit, Moody’s Investment Services Institution has down rated the forecast from ‘B’1+ to ‘B’1-. “The Moody’s forecast shows that under the present economic administration there will be an environment where weaknesses in the ability in repayment of loans could emerge. This could cause an additional pressure on external payment procedure,” the senior Parliamentarian warned. He said Moody’s forecast had challenged the Central Bank’s claims that Sri Lanka’s growth rate will be 8.3% by 2015 with foreign reserves exceeding US$ 10 billion. “However, Moody’s say in the presence of internal policy challenges and global economic trends, it will be a challenge to realize these predictions of the government,” the UNP MP said. Jayasuriya observed that Moody’s had emphasised political instability after the war victory and dissension among races and religious instead of co-existence and retrogression that will reduce foreign investments in its report. “Under the circumstances, there should be immediate financial discipline in the country. But what is happening is the opposite. Wasteful Government expenditure is increasing. There is no concern for public funds. Irrelevant diplomatic missions are being established in different countries of the world. Relations and close friends are appointed to these missions, not experienced officers of the Foreign Service,” Jayasuriya charged. Quoting from the Central Bank’s Annual Report for 2012, Jayasuriya said that the CEB and the CPC were the biggest loss-makers in the State sector while Sri Lankan Airlines had incurred losses of Rs. 20 billion and the budget carrier Mihin Lanka had made a loss of Rs. 1 billion in the year 2012. (DB)