|
|
 |
  |
| Sunday, 26 September 2004 |
 |
|
 |
Politics |  |
| News Business Features Editorial
|
Finance Minister confident of stabilising the economy Staff Reporter of the Sunday Observer Rohan Mathes interviewed a fatigued Finance Minister Dr. Sarath Amunugama Thursday, at his residence in Colombo. Here are some excerpts of this interview. Q: You are the 17th Finance Minister of Sri Lanka. You are confronted with many economic challenges which your predecessors have not. How confident are you in overcoming them? A: All Finance Ministers in the world have had to face controllable and uncontrollable factors which are inevitable. Most of them could be managed at national level as a policy matter. Some of the foreign factors although could be tackled satisfactorily to some extent, some remain problematic. This scenario exists not only in small countries like ours, but also with economic giants such as USA, when faced with issues such as the current oil crisis. This crisis has an impact on all other economic decisions directly or indirectly. So I have taken over the Finance Ministry at a crisis juncture, my colleagues have not experienced ever before. However, I am quite confident of coming out of this bleak economic situation by creative and timely action, to keep to the promises made to the nation. Q: Nowadays everyone talks about the fuel crisis. The President just two weeks prior to the Provincial Council Elections, in a "Thulawa" TV programme, pledged not to increase fuel prices under any circumstances. Furthermore, your government also promised to bring down the 'Cost Of Living' (COL). However now, the fuel prices have risen sharply and prices of essential items have sky-rocketed. What has been your reaction to this? A: Actually, we are saddled by the fuel crisis on one side and the severe drought on the other. If not for the drought, COL would not have become so acute. When essential items such as rice, sugar, flour, dhal and onions go up in price, it is assumed by many that COL is up. The drought made a great contribution to this. Sri Lanka to a great extent is self-sufficient in rice when the climatic conditions are favourable. This could be attributed to our progress in the agricultural and rural sector under all governments in the past. We are the least urbanised country in the Asian region comparatively. Land reforms and the 'Universal Franchise' may have been the reason for this, I think. Nonetheless, this time around due to the drought, we could not reap the benefits envisaged. Within our own camp, there is an on-going dialogue within which some oppose the import of rice, which according to their view, would drastically affect the farmer, the miller and the small-time retailer. Nevertheless, our monthly rice consumption is around 160,000 m-tons. If this quantity is not supplied to our domestic market, price increases are inevitable following a scarcity, regardless of any other economic theories of anybody. So now we have no other alternative but to take a decision to import 20,000mt initially, via the State institutions such as the CWE, Markfed and the Cooperative. This would undoubtedly be a fine opportunity for these State sector institutions to display their efficiency and credibility in handling the distribution of this 20,000MT, sans corruption and irregularities. If they fail in their task, we may have to hand it over to the private sector as well. I think that time is up for us to contemplate on a sustainable and permanent solution to this matter. This is the 'need of the hour'. We should have a 'Buffer Stock' of rice as in some countries. This would preclude a scarcity and a price-hike artificially or otherwise. This is the pragmatic solution in an open-market situation. We will now see whether we would succeed in our venture, sans resorting to other remedial measures. We will know the results soon within a month. Q: The Central Bank Governor has again warned that there could be another price hike in the prices of diesel and petrol in the future. Do you affirm this? A: We are heavily subsidising diesel and kerosene but less on petrol. We will not touch kerosene as it is the poor man's investment. Diesel and petrol prices heavily depend on the world situation. If the oil prices fall, then we would not have to increase. But if it does rise further or we have to continue subsidising as done now, then we may have to re-consider again. The oil prices are fluctuating around US$ 45 per barrel due to the warring situation in Iraq. Last week when I had discussions with the OPEC authorities, they said that production has not fallen. Saudi Arabia has virtually increased their production. The increase is caused by the 'Oil Commission Agents' who are operating in the oil market. They have increased their commission by US$ 10 per barrel on the premise that the demand for oil is on the rise in the global market, in correlation to global development. So we are now going through a difficult period. Moreover, we see that the Middle-Eastern oil-producing countries in particular, are trying to place President Bush on a difficult and embarassing footing at the forthcoming US elections in November. Q: The Chamber of Commerce has made a request to refrain from levying taxes on other items in order to ease the burden of oil price hike on the consumers. What is your reaction to this as Finance Minister? A: Fuel price hikes cannot be linked with taxes. They should be considered separately. Oil prices have been a challenge to all successive governments. The last UNP regime had worked out a plan to adjust oil prices in accordance with world oil prices. However, just three months prior to elections, they commenced subsidising. This means more foreign exchange going out of the country. When prices go up, the consumer has to bear the increase. Then the demand would drop. It is not that prudent for a responsible government to consistently subsidise the petrol and diesel consumer. Q: The US$ has appreciated from Rs.93 to Rs.104 against the rupee during your tenure of office as Finance Minister. This is an added burden on the consuming public. Alliance Parliamentarian Wimal Weerawansa and Media Minister Mangala Samaraweera has repeatedly and openly blamed the Deputy Central Bank Governor Wijewardena for this. What is your view on it? A: Firstly, we cannot say that the depreciation of the Rupee against the dollar is a 100 per cent loss. There are two facets to this. In our economy many, such as the Sri Lankan expatriates working abroad and those of the Garment industry among others, benefit by the depreciation of the rupee, as they get more rupees. Of course there is an all-round increase especially on imported items such as pharmaceuticals and a host of others. Nevertheless, when the demand for dollars increases, proportionately to oil price increases, the local currency depreciates due to the increased demand on dollars. This is a common phenomena even in countries like USA and India. Anyway, I really appreciate the efforts made by the CB officials to keep the rupee stable sans falling further. They have taken stringent measures and used all means at their disposal to maintain the rupee at the present rate, under pressing conditions. This is highly commendable. Anyway these exchange-rate decisions are made on a collective basis and not by any one individual. It all depends on the 'balance of payments'. Q: The people are anxiously awaiting a substantial wage increase at the forthcoming budget. Although the government promised to grant a 70 per cent increase within three months of assuming power, the rumour now is that there would only be a nominal increase by about Rs. 1,400. They expected at least a Rs. 3,000 as an interim allowance. What do you say about this? A: I cannot tell you now. Only when the budget is presented you will know. As otherwise I would be disclosing the budget now. Q: Then how about your promise of increasing the salaries promptly on assuming power? A: I don't think there was any other government in Sri Lanka's history, which had fulfilled gradually all the promises given. We will definitely increase the salaries. There is no doubt about that. We have confirmed this even to the trade unions. Q: Regarding the employment of graduates, there is considerable doubt as to whether those jobs are permanent, as they have not been channelled via the Public Service Commission. A: There is no problem whatsoever in the permanency of these jobs. I have personally discussed with the Public Service Commission (PSC) on this matter, and they have given written confirmation on this. Q: Are you implementing the 'Lottery System' which the JVP spoke about recently? A: We have asked the Peoples Bank to work out a lottery system for those who are working abroad, as an incentive, in order to bring more money to Sri Lanka. |
|
| News | Business | Features
| Editorial | Security
| Produced by Lake House |
