Private sector view: Political stability is key

Local govt. election outcome

“Sri Lanka’s ruling alliance was humiliated in Saturday’s local elections as the party of former strongman President Mahinda Rajapakse pulled off a stunning landslide victory,” foreign media reported last Sunday.  

Former Defence Secretary Gotabaya Rajapaksa, who arrived in Sri Lanka from the USA yesterday morning, was also quoted as saying, “People have spoken and the message is clear. People cannot be fooled all the time,” hitting out at the current government. 

Serious inconsistencies in policy implementation by government

One of the major drawbacks during the last three-year period is the delays in execution of policies and programmes. It goes without saying that getting policy implementation right is critically important for ‘governance’ purposes. There have been many instances where the majority of the people were of the opinion that there are serious inconsistencies in the policy implementation by the government and that has contributed to poor economic management by the government. Consequently, the quality of life of the people has deteriorated during the last three years.   

One such instance was that the president had said sometime back that he would not allow the “government economists” to levy higher taxes, thus burdening the masses. He was referring to the value-added tax (VAT) increases recommended by the cabinet. Our constitution has empowered parliament to have full control over public finance under Article 148 and the executive president is responsible for implementation under Article 4(b). The two arms are accountable for their responsibilities separately.   

Public was dissatisfied with conduct of two arms of government machinery  

In the past three-year period, the public was dissatisfied with the conduct of the two arms of the government machinery. The two were playing the famous game: good cop, bad cop, in the eyes of people, as they are under pressure from the opposition led by the former president. 
The then opposition, joint opposition, has queried: “How long can we allow the members of the national government to fool the public?” As for the tax increases imposed, it is the Finance Ministry that has announced the “updates” on the VAT, Nation and Share Transaction Levy. 

The Finance Ministry has informed the public its decision through circulars, obviously after obtaining the cabinet approval, the president was a party to that decision. This is because, in terms of the constitution, the president will be the head of the cabinet. 

The Finance Ministry earlier announced that it is essential that we increase the tax revenue as a percentage of gross domestic product (GDP) under the International Monetary Fund standby arrangement. There were many examples of mismanagement.  

Poor economic performance affecting people

When this so-called national government came into power in January 2015, the outstanding external debt was US $ 43 billion and the Sri Lankan economy was growing at a faster rate above 6 percent and a GDP of US $ 80 billion at the current market price (cmp).

As per the Central Bank report 2016, the economy has been stagnating around US $ 81.6 billion in terms of GDP at cmp and the external debt outstanding as at end-December 2016 has increased to US $ 47 billion. 

A country’s debt is similar to a corporate balance sheet and requires debt to be compared in relation to equity or revenue (GDP) for it to be consistently measured. In 2002, Sri Lanka’s debt to GDP was 102 percent. This ratio was gradually reduced and subsequently reached 70 percent in 2014. 

The overall public debt has now exceeded more than 80 percent (76 percent in 2016) of GDP as of to date. It is expected that GDP for the year 2017 was even lower than 2016 (2017 Central Bank report yet to come). The government has failed in bringing social justice and the much-needed economic welfare to the people.  

Challenging so-called national government and reduce cabinet to 30   

Now that the local government elections are over and official results have been released, there must be some tangible benefits to the people. The immediate task is to challenge the so-called national government, which is already lapsed. 

Pressure must be brought into reduce the cabinet to its original number of 30. Fiscal consolidation can be achieved only through reducing the unnecessary and wasteful government expenditure and not necessarily by increasing taxes. 

Private sector view: Political stability is key

Political stability is the key to raise business confidence. Economic growth and political stability are deeply interconnected. The standard definition of political instability is the propensity of a government collapse either because of conflicts or rampant competition between various political parties. Also, the occurrence of a government change increases the likelihood of subsequent changes. On the one hand, the uncertainty associated with an unstable political environment may reduce investment and the pace of economic development. On the other hand, poor economic performance may lead to government collapse and political unrest. However, political stability can be achieved through having a political party in place that does not have to compete to be re-elected.   

Presidential elections would supersede, unless parliament is dissolved now

The presidential elections will be held in or around December 2019 under the existing provisions in the constitution, whereas unless parliament is dissolved with two-third majority, the earliest date for the general elections would be in March 2020.

In short, the presidential election would essentially supersede parliamentary elections, unless the necessary amendments are brought in to the relevant provisions in the constitution.   

The coming weeks will be very crucial for the people who have exercised their democratic rights at this local government election and for the future of our motherland.   

(Jayampathy Molligoda is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka. He has obtained his MBA from the Postgraduate Institute of Management and has also successfully completed an Executive Strategy Programme at Victoria University Melbourne, Australia. He counts over 37 years of executive experience in the fields of financial management, strategic planning and human resource development. At present, he serves as Executive Deputy Chairman of a leading public quoted company. He can be reached at [email protected])