Sri Lanka should stop auctioning non-existent resources for elections: Pathfinder
ECONOMYNEXT – Sri Lanka should stop auctioning non-existent resources for elections, which will result in hardships for the poor later, a think tank has said, as higher spending on state worker salaries is beginning to pressure the credit system.
Pathfinder Foundation, a Colombo-based think tank said a budget in later 2014 which was again revised in January 2015 had seriously undermined state finances.
It could be further worsened by self-seeking, anti-people promises made in manifestos in upcoming budgets.
"In this connection, Sri Lanka needs to follow good practice which is being pursued by an increasing number of countries around the world," Pathfinder said in a report Charting the Way Forward: Prosperity for All.
"All handouts, subsidies and other welfare measures, included in the manifestos, should be costed and specific measures should be identified for financing the incremental costs involved. T
"This will enable the voters to assess the financial viability of the promises included in the manifestos of political parties. "
"It should also assist in making a clean break from the ‘auction of non-existent resources’ which have characterized party manifestos in the past."
In 2014 the budget deficit as 6 percent of GDP exceeding a target of 5.2 percent.
"There is likely to be further deterioration in the fiscal position without urgent remedial action on both the revenue and expenditure fronts," the report said.
"It is crucial, therefore, that the manifestos of political parties exercise far greater fiscal responsibility in the preparations for the Parliamentary Elections.
"The people of this country should not be misled by ‘giveaways’ which will eventually have to be either eroded through higher inflation or reversed through taxes/administered price increases."
Most Sri Lankans do not understand that they have to pay high rates of interest for housing loans due to political entrepreneurs living beyond its means and borrowing heavily to sustain subsidies, themselves and a bloated state worker cadre.
They also do not understand that the rupee falls and inflation goes up, destroying their salaries and lifetime savings, when money is printed to finance the very subsidies that they are deceived by.
A government has only three sources of money. Taxes which only takes specific amounts of money from the people and borrowings which burdens them and their children with future interest and repayment.
The third measure is printing money or central bank credit, which Sri Lanka has resorted to since 1951 when a central bank was created by then Finance Minister J R Jayewardene, which causes the rupee to fall and inflation to rise.
The corrective measures involve higher than-usual-interest rates and a sharp economic downturn.
Sri Lanka’s rupee is already under pressure from rising domestic credit some of which has been financed by the Central Bank which has released liquidity.