Strengthening institutions and organizational
capacity:
On solving a Cabinet equation
Prof. Rajiva Wijesinha, MP
In his brilliant account of our current economic situation, delivered
at the Liberal Party discussion on Economic Reform, Indrajith
Coomaraswamy spent some time in discussing the budget deficit, and why
it is particularly worrying in the current context.
He noted that the current account of the balance of payments has been
in deficit since 1957, while the current account of the budget has been
in deficit since 1987. He made it clear that it is not a new phenomenon
that government has been borrowing to meet some of its recurrent
expenditure and all of its capital expenditure over the last 25 years.
But he also noted why Sri Lanka needs now to be even more worried than
before about living beyond its means. A budget deficit is a principal
source of instability in the system. High budget deficits lead to
inflation by creating excess demand. The inflation differentials between
Sri Lanka and its competitors and trading partners that result exert
pressure on the exchange rate. But, given the high import component in
our basic consumption bundle, it is politically difficult to maintain a
flexible exchange rate policy.
Supplementary estimates
Indrajith explained how Sri Lanka had been able to live ‘beyond its
means’ for so long, namely that we received a lot of aid, along with
concessional loans. But now that we have graduated to
lower-middle-income country status, we no longer have much access to
Development Assistance. So we now depend much more on foreign commercial
borrowings. As a result the share of commercial debt within our stock of
external debt is increasing, which means external debt servicing is
increasing. We should be concerned then that our total debt stock is 79
per cent of GDP, in contrast with peer counties which have a median
figure of 36 per cent.
All this means we really must cut down on our budget deficit. But
there seems to be no understanding of this at Cabinet level, and so
month after month we get supplementary estimates for even greater
expenditure.
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I suppose that this is understandable though, given that the enormous
size of the Cabinet is one of the chief contributory factors to the
deficit. Sri Lanka is surely the only country in the world in which
Ministries are created in order to keep Parliamentarians happy. The idea
that Ministries are intended to produce beneficial results for the
public is not something anyone in politics now would take seriously.
Rather, the assumption is that they are about perks, about vehicles and
jobs for constituents and self promotion.
Tough decisions
I was astonished to find, for instance, when I was Secretary to a
Ministry, that the Media Unit of the Minister’s private office consisted
of over a dozen individuals, for whom fuel had to be provided so they
could cover all his activities. The coverage occasionally made it to the
newspapers, along with coverage of fifty other Ministers, but
essentially what they produced was of interest only to themselves and
the Minister. I did try suggesting to the Secretary to the President
that Media Units for each Minister were an unnecessary expense, and he
agreed, but of course cutting down on such would be impossible.
How did what is essentially a circus take over what should be serious
executive responsibilities? While obviously all Members of Parliament
want to be Ministers, in Sri Lanka the assumption that they all need to
be arose because of the provisions of the 1978 Constitution. Given the
impact they have to make to ensure re-election, Members need the perks
of Ministerial office. My Minister then had to provide jobs for people
in a whole District, not merely a Constituency, and create an impression
in the whole area, which is why his media Unit chased round the District
behind him at vast expense, while doubtless 50 other media units were
doing the same in other Districts.
All this goes along with establishment costs that add up, given the
rentals and utility and communication bills that have to be paid, in
addition to staff. When I decided to close down the office I had used as
Adviser on Reconciliation, because not enough work was being done to
justify the expense, I was told that the Rs.50,000 rental that had been
charged was a negligible amount compared to other such expenditure.
Saving on the establishment costs then for the at least 20 Ministries
which the country could well do without would make a considerable
contribution to reducing the budget deficit.
It would be argued though that this is politically unrealistic, and
that, unless the President keeps his Parliamentarians happy, his
government would be in danger. This is nonsense in the current context,
given the massive majority he enjoys and the fact that he can dissolve
Parliament if he needs to, a fate that no member of his government would
want. In fact this is the perfect time to take tough decisions, for the
President has over three years of his current term, and is still
undoubtedly the most popular politician in the country.
Electoral reform
But at the same time there is no reason why he cannot keep his
Parliamentarians happy while also cutting down on expense. The need to
multiply the resources available to them would be avoided if the
electoral reform to which government is pledged is carried out swiftly.
Then, instead of perks based on multiplying establishments in the form
of Ministries, the decentralized grant could be increased so as to allow
Members to engage in meaningful developmental projects in the much
smaller area they would need to satisfy in a future election.
This would not only make sense for the country, it would also make
political sense, for economic problems will only increase if reforms are
not put in place quickly. I am sure that, provided individuals did not
feel discriminated against, the majority of those in government would
agree to streamlining, provided the type of compensation I have
mentioned were also made available.
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