Mr. Minister:

War and economy: a balancing act

Shirajiv Sirimane

WHEN SRI LANKAN Security Forces can take full control of the Northern Province, as they did in the Eastern Province, Sri Lanka can be made a Singapore, in less than 10 years, Minister of Finance and State Revenue Ranjith Siyambalapitiya is optimistic.

Speaking to the Daily News Business, at the Finance Ministry he said the Government has achieved a 7.4 per cent economic growth despite spending heavily for the war and also continuing with the handouts rolled out to the poor people.

"This is very creditable as it's being achieved while the Government is fighting a war," he said. "You can just imagine what we can do if there is no war and this is why I am saying that Sri Lanka can easily become another Singapore," he said.

The Government has spent Rs. 3.4 billion in the first five months of this year for handouts which included Rs. 575 million for printing of school books, a further 389 million to provide a nutritional meal to school children, Thiposha (Rs. 115m) and many more. In addition a further Rs. 6.6 billion had been reserved to provide the fertilizer subsidy and 3.85 billion for the Samurdhi for about 2 million people.

The Government is committed to spend for free education and health and on top of all these we have to pay salaries for over 200 State institutions running at a loss.

"The Government can easily give these institutions that are running at a loss to the private sector. However the Government is not in for privatisation as it was an election pledge made by President Mahinda Raja- paksa.

The Government also loses revenue by way of taking off taxes imposed on the imports of some essential goods. The Government had to forego around Rs. 5.4 billion in the first six months of the year as a result.

The cost of living is the pet subject of any Opposition party. "However I want to emphasise that meaningful steps have been taken to minimise and caution the ever increasing oil prices and other commodities that are being imported. "This is why it was decided to provide diesel to the Ceylon Electricity Board at a discounted price," he said.

The Deputy Minister recalled that while reading an old magazine which was published in 1920 he noted that a measure of rice was sold for 10 cents, Maldivefish at 17 cents a kilo of sugar at 6 cents.

However the daily wage of a labourer during that time was between 35 to 40 cents and this clearly shows that even 88 years ago the market was driven by the earnings of people. "This has not changed even today and would remain so under any Government," he said.

The highest inflation was recorded in 1980 soon after the introduction of the open economy. This was at 26.1 per cent and later it was brought down to under 20 per cent. "It's noteworthy to mention that inflation was at 1.2 per cent during the 1970 to 77 era where the country was heading towards self sufficiency. "Our aim is to bring the inflation to a single digit by the end of the year," he said.

He said the lowering of the unemployment ratio to 6.3 per cent too would helped to bring down inflation. The attractive bank interest rates have also help towards increasing savings.

The Minister said action has been taken to make the public sector more efficient and they have paid almost Rs. 6 billion as an incentive for employees who had taken 'less leave'. The Government is now in the process of introducing new thinking to increase productivity and technology by way of computerisation.

The Government is far thinking and have gone ahead with many power generation projects such as Norochcholai, Sampur, Kotmale which never got off the ground due to various reasons.

"The country had provided electricity to around 35 per cent of households a few years ago and today this has increased to 78 per cent. When these projects along with other power generation plants are completed the whole country would have electricity within the next five years," he said.

Airing his views on the foreign aid utilisation he said that this too is being used in a more productive manner. "However I must admit there is still some aid that is being unutilised due to red tape," he said.

The Government is working very closely with the World Bank, Asian Development Bank and various other donor countries. They are happy with the rapid development of the country.

Foreign debt as against the GDP was in 2003 was 105.9 per cent and it has narrowed to 93 per cent last year. The target is to lower it to 91 per cent by the end of the year.

In addition the highway development, construction of the harbour in Hambantota, expansion to the Colombo Port and other mega infrastructure development projects would provide the most needed infrastructure to attract more investors.

The investments for the Eastern province too would also open a new window of opportunity for both local and foreign investors.

'The budget to be presented in November would be people friendly', Siyambalapitiya said.