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by Janaka Ritigahapola Financial Sector Chairman - Ceylon National Chamber of Sri Lanka and Managing Director of Jana - Shri Financial Corporation Co. Ltd

It is of much relevance to deal with economic backwardness of contemporary Sri Lanka before making an analysis of this year's budget proposals. The country besides being faced with a serious unemployment problem is also going through a period of high inflation, which subjects the population at large to make, their ends meet extremely different.

The bulk of the population that lives on agriculture find it difficult to sell their products at an economic price. In addition, terrorism has badly affected the country's development activities. When all these factors are taken into account it is not surprising that Sri Lanka in the last year suffered from a negative growth rate.

It was at a time when the country is going through severe economic crisis of the sort that a new government was put into power by the people. Hence, it is of importance to find out as to whether the first budget introduced by the present government would help remedy the persisting economic ills of our country. Many a budget analyst tries to show that a budget is a statement of income and expenditure of the year under review as well as one that heaps concessions on the people. But as the late Dr. N. M. Perera, an eminent economist, mentioned in an article that was published in the Ceylon Economic Journal of late 1930s it is into the case.

A budget, according to him, is an economic and social policy statement, which would be valid not only in the current year but also in the future. Therefore, one must not be opportunistic by misleading the masses through a wrong interpretation of a budget.

I sincerely believe that a budget should not be one that concentrates on bestowing concessions on the people to meet their daily needs but one that gives priority to solve the burning economic problems of the country in the long run. Because, if the people get a good income, if the children can get a better education, if the unemployed get employment and if what the people produce get an economic price then the need for granting concessions does not arise.

Agricultural country

One should not underestimate the fact that ours is basically an agricultural country. The great majority of the people are engaged in rural agriculture for a living. Therefore, it is no exaggeration to say that the development of rural agriculture should receive pride of place in any development strategy pursued by any government in power. The rural agriculturist should be able to sell their products at a competitive price, which would ensure their economic stability. Hence, this year's budget should be looked at from that point of view.

It is gratifying that the budget has proposed 60% duty on import of essential food stuffs which I strongly believe would usher in a new era for domestic agriculture by guaranteeing a competitive price for the products. Also, 10% on milk imports which will encourage the country's livestock farming which will also go a long way to help develop rural agriculture by minimising the dependence on artificial manure.

A fundamental factor for the growing unemployment in the recent past was the decline in investment in the country by foreign investors. Even the local investors showed a greater reluctance to invest capital because of the wrong policies pursues by the previous government.

There is also evidence that such policies not only discouraged foreign investors coming to Sri Lanka but also of some such investors shifting their industries to countries with a better investment climate. Therefore, it is a fact that any budget in a developing country like Sri Lanka should introduce investment friendly proposals. Fortunately, this budget after some years has introduced certain tax concessions to investors, which will go a long way for the progress of existing industries and also in some way of putting an end to the dormant position in the investment field.

Noteworthy policy

Although the opponents of the budget say that those tax concessions are at the expense of the people it must be borne in mind that it is only through investments that employment can be created which will be for the betterment of the country at large. One must also not forget the fact that it had been the private sector that to a very large extent that created employment opportunities since the introduction of the free economy policy after 1977. Another noteworthy policy initiative of the budget is the raising of the tax limit from Rs. 144,000 to Rs. 240,000 on those engaged in self-employment projects, which too will create the necessary environment which too will to some extent help solve the unemployment problem. As a direct result of these measures there will also be an expanding market for the local products.

It is well known that during the last two decades 1/3 of our country remained outside the arena development due to terrorist activity. Therefore if the ongoing peace negotiations succeed that besides help developing the neglected North East regions will also be a boon to attract foreign investments.

When all these factors are considered it can be said that the 2002 budget will provide a host of indirect benefits to the people. Factors such as employment creation, attraction of foreign and local investment expansion of the domestic market for local product to mention a few would be some such benefits to the population at large.

Finally it should be stated that as a developing country Sri Lanka should lay emphasis on hard work to strengthen the economy. History of Sri Lanka as an agrarian country, which was renownly known as the granary of the East at one time, achieved that fame through hard work or through blood and sweat. 

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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