Focused Budget . . . needs serious implementation strategies

President Mahinda Rajapaksa presented his seventh Budget for 2013 on November 8, 2012. Many Chambers of Commerce have welcomed the Budget, while the small and medium sector in particular had been highly encouraged by its direction and thrust.

The policy philosophy is clearly enunciated by the Minister of Finance during the Budget at the initial stages, the middle and at the end of his speech.

Such philosophy and thrust is worthy of recollection. At the outset, the President spoke of the need to move the country towards a $100 b economy, and to realise a $ 4,000 per capita income by the year 2016.

At the mid stage of the budget speech, he emphasised the need to strengthen the SME sector and towards that objective, enunciated a series of qualitative and quantitative measures to do so.

At that stage, he also stressed the need for the capital markets to be developed, together with foreign capital both in FDI and debt form flow into the country. More specifically, his speech also stressed on the need to support new savings into the country, from local and foreign sources, so that the economic growth targets could be achieved.

In that context, the fact that local resources by itself will not be sufficient was acknowledged, and therefore a series of facilitation measures that would encourage the flow of foreign savings into the country, were proposed. In the final stages of the budget speech, he explained the aim of the budget was to reduce poverty in the country.

The progress that the country has achieved in the past few years in each of the identified fronts, such as moving towards $4,000 per capita income, supporting the SME sector, and the alleviation of the poverty, have been laudable.

The increase in the per capita income from just over $1,000 in 2004 to over $2,800 by 2011 is perhaps the fastest increase in per capita income that Sri Lanka has ever recorded.

In the meantime, the sharp drop in poverty levels of 15.9 percent in 2006/07 to 8.9 percent by 2009/10 could also be termed a major advancement. All indications are that when the poverty assessment is made in 2012/13, the overall poverty level would reduce quite substantially to around four percent.

At the same time, the growth in the SME sector has also been remarkable with a large number of loans having been granted by banks and financial institutions to this sector. Such loans seem to be in the range of Rs. 5 m - Rs. 20 m, and those loans and advances together with the equity investments of small and medium entrepreneurs, has led to large scale contribution to the national GDP by the SME sector.

Notwithstanding these developments, the next phase is likely to be even more challenging, particularly because the base is now stronger and the expectations are high. In that context, policy enunciation alone will not suffice and it would need a strong commitment and dedicated implementation if the required results are to be achieved.

Already, there are many persons who are well versed and knowledgeable in the implementation of policy, but redoubling of these efforts would be needed if the goals are to be realised.

The Ministry of Finance has a Budget Monitoring Department under its purview, which now will have its work cut out to ensure the implementation of the President's vision. Further, every Ministry needs to focused on their outputs and outcomes being established, with the respective ministries being held accountable for each of those outcomes. Perhaps a system whereby the budget speech is broken down into a simple 'To Do List' for the different ministries with work areas being identified and published, will place some urgency and pressure on those who are expected to deliver the expected results within the expected time frame.

Sri Lanka is now moving towards a new phase as a middle-middle income nation, and the systems and work ethic of the country too, will have to change if the goals set by the President are to be realised and the improvements envisaged are to be sustained.

Those expected improvements, both quantitative and qualitative, will also have to be implemented with immediate effect, so that those newly improved systems will be ingrained in the different ministries, departments and also in the private sector, so that a new work ethic could then be established. As is well known, Sri Lanka's productivity levels have been languishing at rather low levels, although in the past few years some improvements have been recorded.

As is also known, one of the best methods of dealing with inflationary pressures in an economy is to continuously improve the country's productivity levels.

Such a strategy has also been recently enunciated by the Central Bank, and it is best that all stakeholders in the economy take this challenge seriously and continuously improve the productivity levels in all spheres of activity.

If that too is achieved, the goal of reaching a $100 b economy with a $4,000 per capita income, together with the sharp reduction in poverty will be well within Sri Lanka's reach.