A “New Normal” Budget? | Daily News

A “New Normal” Budget?

The first Budget of the Sri Lanka Podujana Peramuna (SLPP) Government that will be presented by Prime Minister cum Minister of Finance Mahinda Rajapaksa today would be unlike all past budgets in post-Independence Sri Lanka in that it will be launched amidst a near cataclysmic situation facing the country in the throes of a deadly pandemic.

The Budget, no doubt, will be tailored this year to conform to the “New Normal” concept that the country has today transformed into with Coronavirus raging in all its intensity, which would essentially mean sacrifices and belt-tightening on the part of the public due certainly to the financial cutbacks that would be inevitable to tide over the monumental crisis.

State Minister Ajith Nivard Cabraal has stated that no burdens will be placed on the public by way of increased taxes in Budget 2021. But the prices of many essential goods have gone up due to no fault of the authorities owing to currency fluctuations, unfavourable global market conditions, climate woes and of course, unscrupulous traders exploiting the situation to make a killing.

No doubt, Premier Rajapaksa would come out with details on how he proposes to bridge the massive budget deficit in the face of the paralysis of almost all vital sectors of the economy such as exports, tourism and expatriate remittances especially at a time foreign assistance is largely confined to fighting the Coronavirus with major world economies too in the same predicament as ours.

The Finance Minister will be obliged to draw up a much more comprehensive picture of what the future position will be, given the forecasts that the pandemic is going to last for another two years, notwithstanding the advent of a viable vaccine which will not be widely available at least until mid next year.

Is the Government going to make provision in the budget to meet similar financial handouts as at present when the country will be placed under lockdowns? If the answer is in the affirmative how will it allocate financial provisions for its development projects that are already in the pipeline? The Premier is likely to answer these questions today, given that development projects cannot also be put on hold for years on end. The Bandaranaike International Airport (BIA) expansion project begins tomorrow, raising hopes that the Government will go ahead with such projects despite the present obstacles.

A budget is not solely about reducing consumer prices or raising salaries and wages. It is the macro-economic picture that any budget should reflect. The large mass of the public have lost their steady incomes. Offices, workplaces and commercial establishments are paying only half salaries to their staff or nothing at all, leaving middle income families in dire straits. The worst affected are the daily wage earner or the itinerant worker who are today driven to the wall having lost their livelihoods.

Thus far there have not been suggestions of any wage increase to the Government servants - and understandably so. In any event the Government will not be in a position to plead with the private sector to follow suit even if a salary hike is granted to the public sector. True, the State sector depends on the Government for its salaries which any way is a recurrent expenditure in the budget. But with the anticipated massive expenditure for combating the Coronavirus, will it be realistic to expect a wage hike to public servants at this juncture? Also how will this accord with the monumental debt obligations?

Unpalatable though it may be, the public will have to settle down to the reality that a sizable portion of the national budget, will, this time around, be earmarked for battling the Coronavirus. It has been reported in the media that the health budget this time around has seen a slight reduction. It will be left to Premier Rajapaksa to put the record straight on this score when he unveils the Government’s maiden full budget today and also reveal the measures on how he proposes to raise revenues to bridge the budget deficit, while also at the same time designing his budget to meet the “New Normal” concept – post Coronavirus.

One should also not forget that many relief measures are being granted by both the State and the private sector, at the insistence of the Government, such as the deferment of loan repayments and leasing instalments etc. that no doubt are tied in with concessions in return in the form of tax exemptions etc. which also is going to affect the Government’s revenue plans. Hence, the Government is facing an unenviable situation. While granting financial relief to the public affected by the Coronavirus, it is also being starved of much needed revenue to keep the State afloat amidst the worst health emergency in living memory which is bound to swallow up all means of State income. It no doubt is going to be an acid test for the Government to wriggle out of the crisis.