A new strategic direction

by Chaminda de Silva

In compiling and presenting the inaugural Budget, Finance Minister Ravi Karunanayake seems to have a taken a cue from the advice 'Spiderman' received from his father, "with great power comes great responsibility".

The mandate the government received was decisive which yearned for change. As much as freedom of expression is important, for a country to be successful it also needs inclusive, equitable and regional growth. Innovative thinking is the ultimate energizer of initiatives towards growth and the Budget included some truly innovative proposals.

Recognizing the role of financial markets, the Budget introduced a revolutionary proposal to direct banking institutions to increase its efforts and lending to develop industries, instead of the less productive auto leasing and hire-purchase.

During the recent past, lending by banks was skewed in favour of low-risk products, at the expense of opportunities and proposals with a development focus.

The Budget has also proposed some meaningful mergers of under-performing financial institutions such as the merger of the HDFC and SMIB, and the controversial Lankaputra Development Bank with the RDB. Such consolidations will contribute towards economic development.

The Budget has also afforded Registered Finance Companies (RFCs) an impetus by guaranteeing all deposits in such companies, perhaps acknowledging the yeomen service of the sector in economic development by serving the financial needs of less-privileged economic and social segments, and perhaps the backbone of small and medium enterprises.

Another timely initiative of the Budget was the encouragement of Micro, Small and Medium Enterprises (SMEs) and business start-ups. By the same token, no doubt the financial systems in our country need an immediate regulatory framework that will govern and monitor thousands of institutions entering the micro-finance industry.

Revival

Economic and social reforms covering many sectors such as agriculture, fruit and vegetable, dairy and fisheries including the much needed allocations for coconut cultivation rehabilitation and tea, rubber and coconut research introduced by the Budget are commendable.

Provision has been made to revive the rural economy by rehabilitating small tanks and setting up an economic zone in Vavuniya.

The Minister of Finance has leveraged taxation to energize industrial and economic growth. Considerable tax incentives have been afforded to agriculture, housing, construction, tourism and developing SMEs, while applying 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 with a range of measures from youth empowerment to protecting the ageing population. As an island nation, the fisher community is an integral sector contributing significantly to the national economy and a State-sponsored life insurance cover for them is commendable.

Comprehensive

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 extremely comprehensive and covers all spheres and sectors and development, restructuring and regulation and moderation wherever applicable. Budget 2016 will bring into operation the long and medium term strategic direction spelt out by Prime Minister Ranil Wickremesinghe in his policy statement.

Perhaps a lesser known fact is that Ravi Karunanayake, is the first professional accountant to be appointed a Cabinet Minister and the first ever to head the country's finances. Quite accustomed to the task of preparing Budgets, a core-ability of a typical management accountant, Ravi has displayed the 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 the nation.

When presenting a Budget to achieve many national and strategic priorities, we need to be cognizant of the difficulties in trading off conflicting goals and objectives and numerous constraints and limitations.

For example, during the span of approximately a year, the increase in salaries to the public sector alone at Rs 10,000 for nearly 1.3 million people is a staggering 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 that 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 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 courage, maturity, wisdom and as being discerning adjudicators of those governing them, not so long ago.

The writer, a senior Chartered Accountant, is a former Course Director for Finance - MBA program, University of Colombo.