Budget 2016: fixing the economy

Finance Minister Ravi Karunanayake may be receiving kudos from the country's business elite for his broadly well-crafted, maiden Government Budget presented on Friday, but the middle classes and the nation's poor have been dished out a mixed bag of some benefits along with the prospect of a persistent high living costs.

This government, however, is not to blame for the huge financial burden and excess liquidity generated by the wildly speculative economics of the previous regime more famous for its war machismo than any intelligent political and economic management. With massively extravagant local and international debt piled up over the past nine years of fantasy projects that helped line egos and political and business crony pockets, it is unrealistic to expect any quick fix from a successor regime. Thus, the financial costs that must be borne by the national economy and its corollary burdens on those millions most unable to bear them.

All credit is due to the current government for its Herculean efforts in repairing both economy and polity 'on-the-go', as it were. After all, a country's economy cannot take a 'break' while it is repaired in this highly competitive global market. It must keep performing. It is in this unmerciful global environment that Minister Karunanayake must operate and manage the transition from an unkempt economic governance to a more systematic one.

It was inevitable, then, that this first proper annual Government Budget by the new National Unity government became a highly complex balancing act between the imperatives of rapid economic growth and fiscal repair on the one hand and maintenance of socio-economic safety nets on the other.

Even if the Budget - in its income tax relief, for example - does make attempts to meet some of the social equity concerns of the middle classes, the emphasis on the rural economy has focussed more on encouraging rural entrepreneurship rather than addressing current socio-economic pressures facing many agricultural families. This focus is, no doubt, laudably forward-looking in terms of boosting rural productivity and greater integration with the national market. However, the interim social pressures have to be borne. The new price controls on some consumer essentials are welcome but cannot provide the wide relief that some social sectors may seek.

This is something that a socially sensitive regime must keep in mind and may require some mid-term course-corrections. It is to be hoped, however, that such adjustments are not made purely with short term electoral gains in mind.

Meanwhile, the business community, offered the new economic policy foundation by the new regime, must now take up the challenge to risk more and invest.

For this, the government must also provide the assurance of a level playing field, free of cronyism and ad hoc policy gimmicks. As long as the danger of a return to favouritism and ad hoc fiscal and other economic policy measures remains, the business community cannot be expected to take greater risks on its own accord without the assurance that one's entrepreneurship is not ruined by uncertainty and an uneven playing field. Persistent reports of major recurrences of political favouritism and even nepotism even in this so-called 'new era' are not at all helpful.

The Maldives and Sri Lanka

The Government and, especially the Ministry of External Affairs must be commended for its care and sensitivity in dealing with the recent political upheavals in our Indian Ocean neighbour, The Maldives.

The Maldivians are, linguistically and culturally, close cousins of the Sri Lankans, and our only small neighbour that relies on our support and friendship as a fellow developing island nation.

The progress Sri Lanka has made politically and socially are important models that many in the Maldivian intelligentsia follow keenly and aspire to emulate in their own island republic. The lessons of dealing with religious and cultural extremisms are of particular importance and interest to our neighbours.

While India has served as an off-shore sanctuary to many Sri Lankan dissidents and democracy activists, Colombo has similarly served as a sanctuary for the Maldivians over several decades and through succeeding regimes in Malé. At the same time, however, Colombo cannot be seen as taking one or the other side when it comes to political rivalry in Malé.

It is inevitable that many currents and under-currents bring the two countries together. Recent events such as the seeming assassination attempt and subsequent close investigative support provided by Colombo, as well as the apprehension of a Sri Lankan with weaponry in Male, all indicate the closely parallel political lives of our two nations.

So far, Sri Lanka has navigated inter-state relations with much maturity and sensitivity in keeping with both international norms as well as the necessities of good-neighbourliness.