National Budget 2016: A decisive step towards a new strategic direction

By Chamindra De Silva 

In compiling and presenting the inaugural Budget of the new Government, politician-turned-accountant Ravi Karunanayake seem to have a taken a cue from the advice ‘Spiderman’ received from his father: “With great power comes great responsibility.”

No doubt the wide-ranging mandate the present Government received was a decisive one that yearned for change from a variety of dimensions. As much as freedom of expression, a country to be successful also needs inclusive, equitable and regional growth. The Innovative thinking is the ultimate energiser of initiatives towards growth and heartening to note the Budget included some truly innovative proposals in that direction. 

Recognising the role of financial markets in this noble endeavour, the Budget introduced a revolutionary proposal to direct banking institutions to increase their efforts and lending towards developing industries, instead of less productive auto leasing and hire-purchase. During the recent past the lending of our banks have been unduly skewed in favour of such low risk products, at the expense of financing geared towards financing opportunities and proposals with a development focus. 

The Budget has also proposed some meaningful mergers of underperforming long standing financial institutions such as HDFC/SMIB merger, the controversial Lankaputra Development Bank with RDB. Such consolidations will bring about increased vitality and progress in these sectors and contribute towards economic development.

The Budget also has afforded the registered finance company sector (RFCs) an immense impetus by guaranteeing all deposits in such companies, perhaps acknowledging the yeomen service of this sector in the country’s economic development by serving the financial needs of less-privileged economic and social segments, perhaps the backbone of the concept of small and medium enterprises. 

Another very timely initiative of this Budget has been several encouragements afforded towards Micro, Small and Medium Enterprises (SMEs) as well as in favour of business start-ups. On the same token, no doubt the financial systems in our country require an immediate regulatory framework that will govern and monitor thousands of institutions entering the micro-finance industry. Several economic and social reforms covering many sectors such as agriculture, fruit and vegetable, diary, fisheries, etc., including much-needed allocations to coconut cultivation rehabilitation and tea, rubber and coconut research introduced by the Budget are truly commendable. Revival of the rural economy such as rehabilitation of small tanks and to establish economic zone in Vavuniya have been allocated with considerable budgetary provisions, epitomising the development and inclusive focus of this budget.

The Minister of Finance in this Budget seems to have leveraged taxation quite articulately towards energising industrial and economic growth. Considerable tax incentives have been afforded to agriculture, housing, construction, and tourism and in development of SMEs, while application of some disincentives for industries in betting and gaming. 

Development of capital markets (inclusive of corporate debt securities); education and research and development have received tax concessions, signalling the Government’s recognition of such initiatives as vital ingredients and drivers of economic growth. 

Social justice and welfare for deserving segments too has not escaped the attention of the Minister of Finance with a range of measures from youth empowerment to protecting the ageing population. As an island nation, fisher community of our country is an integral sector contributing significantly to our national economy and a state sponsored life insurance cover for them is a commendable Budget proposal.

There have been instances where a Budget has been relegated to the status of a mere income and expenditure statement. This year’s Budget is an extremely comprehensive budget that covers all spheres and sectors as well as development, restructuring and regulation and moderation wherever applicable and required. It is satisfying to note keeping in line with the true spirit of an effective national budget, the Budget 2016 is attempting to operationalise the long and medium term strategic direction spelt out by the Prime Minister in his policy statement to the nation.

Perhaps a lesser known fact is that Ravi Karunanayake, our Minster of Finance is the first professional accountant to be privileged in a position of a Cabinet Minister and moreover, first ever as head of the country’s finances. Quite accustomed in the task of preparation of budgets, a core-capability of a typical management accountant, Ravi has aptly displayed his prowess of his professional competency in budgeting. Carefully trading-off between alternatives, constraints, opportunities and threats he has brought about a budget, effectively a short-term tactical plan, underlying the strategic priorities of this entire nation. 

Presenting a budget to achieve many national and strategic priorities, we need to be cognisant of the difficulties in trading off conflicting goals and objectives as well as numerous constraints and limitations. For example, during the time span of approximately a year, the increase in salaries to the public sector alone at the rate of Rs. 10,000 for nearly 1.3 million work force is a staggering sum of Rs. 13 billion per month; indeed a huge toll for an economy of our proportion. Hence it is imperative we assess the merits of this Budget in its strategic flavour and as the stepping stone and foundation for a new era of social and economic justice, financial and regional inclusion.

Given our nation is at a critical juncture, it is the fervent hope of all citizens that in being critical, a right that they resolutely fought for, such opposition will display characteristics of being responsible critics, placing the desired deliverables of the general citizens and our country as a whole, at the highest level of national priority. Hence, disruptive practices for the benefit of one’s or a group’s parochial interests and at the expense of wider national interest and benefit, are not bound to receive the blessings of our citizens. After all they have shown signs of enough courage, maturity, wisdom and as being discerning adjudicators of those governing them, not long ago. 

[The writer, a senior Chartered Accountant, is a former Course Director for Finance – MBA program, University of Colombo, a former Vice-President of the Sri Lanka Branch of the Association of Certified Accountants of UK (ACCA) and a former Member of the Council of CIMA (UK) – Sri Lanka Branch, Colombo 5.]