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A new foundation

Coming as it does, close on the heels of the local government elections, the Government Budget has been given a political fillip that it could well use. The Budget has unveiled a well co-ordinated set of fiscal and economic development strategies that, while not radically different from the PA's policies, is in stark contrast to the more hesitant, piece-meal approach of the last PA regime.

The new strategy clearly lays the foundation for a concerted effort to revive market-based growth after decades of doldrums and stagnation due to the war.

The cease-fire, completing its third month today, was an important first step, creating some social stability and opening up certain minimal opportunities for more dynamic economic life islandwide. However, the current cease-fire is only a stop-gap awaiting a more lasting political settlement. Much more has to be done to bring about political stability and normalcy.

Given the rapid moves initiated by the Government with just that goal in mind, the local government election provided an useful opportunity to test the public mindset on the peace process.

While many issues had been raised concerning the current peace process, the results of the elections last week made it clear that the vast majority of Sri Lankan citizens wanted the process to continue, notwithstanding the reservations raised by some.

The popular endorsement of the Government's principal political project was but one outcome of the polls. The other was the consolidation of the electoral power of the UNP-led United National Front at least at the local body level.

In all, we now have a regime in which public confidence resides to a far greater degree than it has done in nearly two years.

It is this political foundation that has been made available to Finance Minister K.N. Choksy's first Budget and the economic strategy emanating from it.

The cease-fire and the sweeping victory of the UNF in the local elections have created a political space to be utilised. They cannot, in themselves, generate economic dynamism. For that, sound economic strategising is required. The country's fiscal management needs to be refined in ways that will enable productivity increase on the one hand while consumer buying power is also strengthened, or at least, not weakened too drastically.

With economic growth approaching the zero mark, a most strenuous effort is required to get the wheels of the economy grinding again.

Before the peace process was revived last December, such an effort, even if initiated, would not have gone far. The political conditions, both North and South were simply not conducive.

Today, after three months of cease-fire, a permanent cease-fire treaty in place, and after a major electoral poll has shown public confidence in the peace process, the political conditions have opened the way for Mr. Choksy's Budget. The 'peace dividend' as conflict resolution experts call it, is beginning to show its value, if only a hint.

How the new Budget measures impact on the economy on the one hand, and how they affect the lives of the mass of ordinary people on the other, will decide the future success of this effort at economic revival.

The immediate measures taken under the Budget do not directly affect the basic living standards of ordinary people either way. But the generous incentives given to business are bound to, in the long term, add to the ever-widening income disparities.

A persistence of stagnation of growth as well as income will then serve to fuel social discontent, a discontent that may add to the political complexities surrounding the peace process.

The Finance Minister and his Cabinet colleagues would do well to remain vigilant to identify such problems of inequity that may arise and tackle them before they fester.

While the enormity of the crisis does not allow for wild optimism, country can only look forward to a fruition of the current effort.

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