Were our leaders praying or taking insurance

against lightning strikes?

January 21, 2015
Were the leaders of this State, including those political, official, business,
academic, journalism and civil society leaders, who participated in the
process of compiling, presenting, endorsing and sometimes
misrepresenting and deceiving the public by promoting the National Budget
2015 as well as the leaders who made presidential election promises by
way of published vision statements/manifestos, action programs,
presentations and platform pronouncements, praying to the Aruchchana
Deviyo (the god purported to control thunder strikes) for protection or
taking insurance covers to protect and mitigate risk against possible
lightning strikes or doing both?
Has the Budget 2015 conformed to expected benchmarks?
Despite the leaders of our nation articulating that the Chinthanaya that
guides this nation is now quoted by the IMF, World Bank and ADB let us
review what a budget is and what its objectives

are.
The World Bank states: The word budget is a Middle English word for the
kings bag which contained the money necessary for public expenditure.
Budgets evolved in two directions. At first, Parliaments fought to take
control of the budget and make governments accountable for the use of
resources. In democratic societies, for instance, approval of the budget (the
power of the purse) is the main form of parliamentary control of the
executive. The budget authorises the executive to spend and collect
revenues. In later years, the scope of government activities expanded
considerably and the role of the government budget became more
complex.
Today, government expenditure is aimed at a variety of objectives,
including economic development and social goals or redistribution
objectives. Hence, governments need sound fiscal policies, i.e. policies
concerning government revenues, expenditure and borrowing to achieve
macroeconomic stability and other government objectives. The budget is
the most potent instrument of the Government in carrying out its policies.
In countries with representative governance systems, the budget is the
financial mirror of societys choices. Public money should be spent only
under the law.
The scope of the budget depends on the field of activities of the

Government but must also be in a form to allow Government policies to be

appropriately scrutinised by the legislature and the public. Assessing the
soundness and the realism of tax forecasts should be the preliminary step
in analysing a budget. Since fiscal stabilisation, distribution or allocation

objectives can be achieved

either through tax policy or
through public expenditure policy, common issues need to be reviewed
together, especially those concerning policy goals that can be achieved
through direct spending, tax expenditures or both.
Accordingly, it is necessary during the budget formulation process to
coordinate the preparation of the expenditure and revenue portions of the
budget and consolidate them into a single document at the time of
presentation to Parliament.
Some of the important objectives of government budgets are reallocation of
resources, reducing inequalities in income and wealth, economic stability,
management of public enterprises, economic growth and reducing regional
disparities.
The role of civil society
Civil society must benchmark above expectations and standards with a
review of the process leading to the announcement of the Budget,
substantiate budget numbers and validate the deliverable outcomes. It
must examine whether political, official, business, academic, journalism and
civil society leaders who sang hosannas following the Budget
announcement have assured the validity of assumptions and numbers,
outcomes and especially, acceptable reallocation of resources, reduced

sustainable economic stability and have laid a foundation for effective

management of public enterprises, achieving sustainable economic growth
and reducing regional disparities.
They must also assess whether the revenue and expenditure forecasts are
realistic, achievable in the likely external environment and examine
whether there are any serious risks in the sustainable future. They must
examine whether the Budget is a collective effort of all relevant
stakeholders.
Did these estimates conform to the required framework of accruals
accounting, incorporate provisions for contingent losses, provisions for
expected negative free cash flows of public investments and independent
corporations, consolidation of losses of state enterprises and provisions for
impaired assets and liabilities under guarantees of State and State-owned
corporations?
An effective review of the Budget approval process, benchmarking with
New Zealands legislative process, especially during the working committee
review, requires a collective initiative of the officials and external experts,
professionals and civil society participating actively in such a process.
An impartial and independent review will reflect that the 2015 Budget
violated most expected norms.
Credibility, transparency, accuracy and right to information
With several issues of significance having been raised by independent
professionals, including some yet in government service, the level of
credibility, transparency and validity of published key economic data
remain highly questionable.
Two respected economists cum columnists have regularly in their columns
pointed out many examples that challenge the credibility and accuracy of
published data. The issues of data inconsistencies and methodological
soundness were highlighted in several presentations made by recognised
professionals during the annual sessions of the Sri Lanka Economic
Association.
Central Bank officials however continue to follow the ostrich culture, where
they, with a buried head outlook, claim that these issues are not unique to
Sri Lanka and have been addressed.
The laughable fiasco of senior Central Bank personnel justifying that the

country has done well despite its fall in the World Banks Ease Of Doing
Business index by slipping from last years 85th place to 99th position this
year, lends credence to the public opinion that misrepresentation and
deception in search of window dressing are not only fine arts mastered
under the the- ruling regime but probably an embedded core value of their
governance framework. The new regime must address this serious issue by
arranging early a professional due diligence audit conducted by a
competent panel.
It was clearly evident that, at the last minute, the Budget proposals had
been changed by either two or a few individuals in order to accommodate
Budget handouts targeting an election victory.
In the absence of right to information laws and independent public
institutions headed by persons of independence and integrity, the
budgeting and budgetary control processes will remain within questionable
realms.
Priority and equality of allocation of national resources
The Overseas Development Institutes publication Equity in Development
Why is it important and how to achieve it states: Promoting equity is
valuable in itself, is likely to contribute significantly to positive processes of
social change, has the potential to improve development programming and
may add value by marshalling involvement, enthusiasm and political
support for development efforts. The key question is whether there is the
political will?
A policy agenda for equity would involve focusing on the following:
Redistribution and progressive taxation
Welfare and social protection
Affirmative action policies
Intergenerational concerns
Shifting power imbalances to have a sustained impact
Development agencies should incorporate a more systematic
understanding of equity and inequity into their policy decisions and, more
than this, should implement pro-equity policies and influence developing
country governments to do so themselves.
In Sri Lanka the priority and equality of allocation of national resources is
unfortunately given low priority by all leaders and stakeholders of society.

Election promises must follow rules of transparency and accountability

The pending election law reforms must include provisions requiring greater
transparency and accountability commitments when publishing or
pronouncing any proposals of political parties or contestants of presidential
and parliamentary elections. The financial implications and expected
socioeconomic outcomes must be made to be published.
Presently the Fiscal Responsibilities Act requires the Secretary to the
Ministry of Finance, within three weeks of the publication of a Proclamation
or Order requiring the holding of a general election for the election of
members of Parliament, to release to the public a Pre-election Budgetary
Position Report containing the information on the fiscal position of the
country. A Pre-election Budgetary Position Report should contain the
following information for the current financial year:
(a) Estimates of revenue and expenditure
(b) Estimates of Government borrowings
(c) The economic and other assumptions that have been used in preparing
such estimates
(d) A statement of the risks, quantified where practicable, that may have
material effect on the fiscal position such as: (i) Contingent liabilities
including guarantees and indemnities given by the Government under any
Act
(ii) Publicly-announced proposals for spending by the Government that have
not been included in the estimates referred to in paragraph (a)
(iii) Government negotiations in progress and not finalised
(e) Such other information as may be necessary to reflect fairly the financial
position of the Government as at the date of the said report statements
Mini budgets following elections
Any mini-budget or vote of account announcements made post or prior to a
presidential or parliamentary election should follow a similar commitment
to make transparent financial statements.
Conclusions
Independent professionals believe that the 2015 Budget presentation
lacked clarity, left many questions on the validity and reliability of the

estimates and had inadequate depth of the supporting implementation

framework for policy proposals and in addition failed to detail the basis of
computations of the expected outcomes of proposals e.g. a refinance
facility for payment of tax arrears of Rs. 40 billion, balance sheet
restructuring of Rs. 230 billion, basis of and adequacy including
contingent/associated spends consequent to expenditure proposals.
The Budget debate and committee stage approval also remained
unprofessional and lacked the required validation, independent strategic
reviews with recommendations for better allocation, agreement of
transparent outcome expectations and allocation of tasks of oversight of
the budget management.
Election promises too lacked professional and responsible leadership
expectations led pronouncements supported by transparent information
and outcomes estimates.
It is hoped that the Election Law reforms will bring out a more responsible
leadership culture with greater transparency and accountability in both preand post-election pronouncements, strict assurance that State resources
and State power will not be abused and that officials will be made
accountable if they carry any illegal activities or incur unauthorised
budgetary spends.
There must be inbuilt safeguards to ensure that the Finance Minister and
the Ministry Secretary cannot undermine the procedures laid down or
amend collectively developed budget proposals and estimates.
Civil society remains vigilant to validate whether the promised good
governance commitments will be honoured in presenting the mini-budget
due on 29 January, as a vote of account under the 100-day program. Will
this presentation meet professional expectations and bring out a
transparent statement of the current state of financial affairs of the State
and set out the resultant financial and social outcomes and spell out a key
change in management result objectives? A time-bound action plan must
also be announced with due accountability and be followed up with
transparent disclosures of results on a quarterly basis.
One of the main lessons I have learned during my five years as SecretaryGeneral is that broad partnerships are the key to solving broad challenges.
When governments, the United Nations, businesses, philanthropies and civil
society work hand-in-hand, we can achieve great things Ban Ki-moon.

(The writer is a former Chairman of the Ceylon Chamber of Commerce.)

Posted by Thavam