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Debate over constutionality of Sri Lanka’s March-May 2020 mini-budget

ECONOMYNEXT – A mini-budget from March to May 2020, drawn up by the Treasury purportedly under presidential powers is unconstitutional as a vote-on-account has already been passed by parliament up to April, ex – Finance Minister Mangala Samaraweera had claimed.

He said a pre-election budget report referred to the newly drafted mini-budget as a vote-on-account, which was not correct.

“Only Parliament can approve a Vote-on-Account,” he said.

“This Presidential action is prima facie inconsistent with the Constitution and usurps the Parliament sanctioned Vote-on-Account. ”

Section 150(3) of the constitution read as follows.

“Where the President dissolves Parliament before the Appropriation Bill for the financial year has passed into law, he may, unless Parliament shall have already made provision, authorize the issue from the Consolidated Fund and the expenditure of such sums as he may consider necessary for the public services until the expiry of a period of three months from the date on which the new Parliament is summoned to meet.”

“As is evident above, the provision places two important limitations on the president’s ability to draw from the Consolidated Fund after an election is announced,” Samaraweera said.

“First, it states that the President can draw from the Consolidated Fund, “unless Parliament shall have already made provision”. Through the Vote-on-Account ending 30 April, Parliament has made such provision.

“Therefore, the President cannot authorize any funds from the Consolidated Fund till then. Second, after April 30, any funds authorized from the Consolidated Fund can only be those “necessary for the public services.”

“In laymen’s terms this means government salaries and continuance of essential government services.

“This becomes evident when 150(3) is read in conjunction with 150(4), which provides specific authorization for the President to draw funds for a purpose other than paying government salaries viz the conduct of an election.”

The Treasury in a pre-budget report has claimed that the vote-on-account passed by parliament did not amount to a budget under the Appropriation Act.

“In the meantime, there was no Appropriation Act as approved by the Parliament for 2020. Instead, in the wake of the 2019 Presidential elections, Vote on Account for 4 months commencing from January 2020, has been approved,” a Treasury report said. “The Vote on Account had did not have adequate provisions to meet all such unpaid bills and it has been a challenge to maintain a smooth supply of fertilizer and pharmaceutical products even in the first two months of 2020.”

Samaraweera said the government had spent 36 billion rupees as capital expenditure in January and February but planned to spend another 150 billion rupees in capex from March to May.

“These measures constitute a usurping of Parliament’s constitutional role by the executive,” he said.

“Such a weighty violation of the separation of powers is a grave threat to democracy, the rule-of-law and the check-and-balances essential for accountable use of public funds.

“This unfortunate situation could be easily have been avoided by passing a Budget prior to the announcement of polls or by summoning Parliament to pass another Vote-on-Account. ”

Samaraweera also warned that the central bank is acquiring large volumes of Treasury bills with newly printed money triggering currency depreciation.

“Already, the Government has purchased Rs. 100 billion in Treasury securities over the last fortnight – a major cause for the depreciation of the rupee,” Samaraweera warned.

A part of the T-bill purchases seemed to be a reserve appropriation analysts who watch the central bank closely say.

However in 2018 also the central bank injected liquidity and triggered monetary instability,e shattering Samaraweera’s economic program, with the introduction of call money rate targeting with excess liquidity and real effective exchange rate targeting .

Real effective exchange rate targeting involves the Mercantilist debasing of the currency ahead of the worst central banks included in a trade weighted basket (India in particular in the case of Sri Lanka) and temporary falls in floating rates in a trade weighted basket to destroy real incomes of factory workers and the rest of society, in the hope that exports will go up. (Colombo/Mar29/2020)