29 October, 2020

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Three Cheers; The National Debt Is To Reduce By 2020: Can It Be Achieved?

By Chandra Jayaratne

Chandra Jayaratne

Chandra Jayaratne

Three Cheers to the Government and may its dream come true! The Prime Minister on the occasion of celebrating the 70th Anniversary of the UNP stated that by the year 2020, the national debt will be reduced; and vouched that this challenging burden will not be left to be solved by the next generation. The citizens should clap, if this objective can be achieved? However, the citizens must stand vigilant and hold the government to account to ensure that this target is realized for the sustainable growth and prosperity of this nation and its people.

Economic Policy Statement made by the Prime Minister in the Parliament on November 5, 2015 committed that the final goal of the new regime was to improve and enhance the living standards of the people, and he further stated that;

  • In 2000, the exports stood at 30% of the Gross Domestic Product and by 2014, it had gone down to 15%, and
  • In 2003, 19% of the GDP was raised as state revenue, but by 2014 this had gone down to 10%, and
  • Today, we are in debt to the whole world.
  • and envisioned that through the leadership of the new government his commitment;
  • to reduce the budget deficit to 3.5% of the GDP by 2020.
  • To increase the ratio of direct and indirect income tax generation in the medium term from 80%: 20% to 60%: 40%
  • to encourage investments that generate employment
  • to create a special financial and a business hub in Colombo
  • to provide knowledge competencies needed
  • a lawful economic environment that will set the stage for sustainable development
  • Regrettably this policy announcement had one glaring absence; ie. a specific strategy to meet the looming debt crisis. Now nearly one year later, we hear the Prime Minister commit to reduce the national debt by 2020, but regrettably again, there is silence on how it is to be achieved!

In what ways can the national debt be reduced in the next 4 years? And can it be achieved?

  • By stimulating expanded growth in the economy, leading to higher levels of state revenue via taxes, levies, and state enterprise profits ?, and
  • By adopting effective fiscal discipline, efficient public finance management and prudent, sustainable use of state and national resources?, and
  • By eliminating the presently experienced twin deficits?
  • If these twin deficits are reversed and results in the annual fiscal deficits and the current account deficits being eliminated, certainly the national debt can be reduced, ;
  • However, these objectives are unlikely achieved as the government itself believes it will have a budget deficit of 3.5% at least by 2020; and
  • The current policies support growth options stimulated via unabated imports of consumption and construction goods, along with low productive capital goods and transport vehicles.
  • In addition there are no positive signs that export incomes will substantially increase in the short term nor will income from export of services spring up vertically.

If so, will the government look to other options to reduce the national debt?

  • By significant privatization proceeds being realized, which is also unlikely in the current policy framework;
  • By attracting significant new Foreign Direct investments to our shores ; here again the current political and policy uncertainty, coalition politics and public resistance will pose significant challenges; further delays in the implementation of second generation reforms will be a major stumbling block; Thus this option remains doubtful to succeed, especially when there are more safer, stable, competitive and productive economies for investors to place and hedge their investment bets
  • By a significant share of the current informal economy being captured within formal revenue contributing sectors and the level of illegal fund transfers and money laundering being eliminated.
  • That will be a distant dream within the present societal value system, socio-political-economic risks and patronage politics!
  • By all economic activities of both the state and private sectors, being focused on exploiting value enhancing niche market opportunities, leveraging strategies which are enabled by creativity, innovativeness and the use of best options of science and technology, in order to enhance productivity, intensity and quality of resources and outputs; and this core value becomes embedded as a societal value and results in significant increases in the levels of national savings and investments: this is most unlikely as this nation lacks leaders with power, integrity, vision and commitment to deliver real and sustainable value to this nation
  • By debt swaps arranged converting debt to equity; the reported lack of appetite from the Chinese authorities is anything to go by this also looks a non starter
  • By attracting bi lateral and multi lateral id, grants, transfers and debt forgiveness: these are not options due to our economic classification

In the meantime there does not appear to be any signs that collective and professional budgetary implementation efforts will soon be in place to

  • Optimize by 2020 for state revenues to be at least 20% of GDP, with the targeted increases mainly recovered based on those with ability to contribute, contributing their share proportionate to their wealth, profits and cash flow returns
  • have prudent, equitable and sustainable decision making in scare resource allocations placing due emphasis on inclusiveness and welfare, and needs and aspirations of those at the bottom of the pyramid
  • have fiscal discipline to ensure that public finances are allocated based on well defined transparent national priorities and assuring sustainable positive national economic returns commensurate with such allocation objectives
  • ensure that the fiscal gap (being the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years) keep improving

In the absence the above positive signals in the economy, lack of demonstrated capability in professional treasury and economic management, backed by the cabinet singing from the same hymn sheet, there is much doubt that the national debt can substantially be reduced by 2020.

The pessimism that the promise of delivery of the commitment is further enhanced by

  • failed to effectively implemented last two budgets, where even the basic tax reform proposals had been folded up and remain unimplemented
  • the majority of the visionary commitments in the National Economic Policy pronouncements of the Prime Minister in November 2015 remain yet as words of wisdom not effectively implemented
  • the Election Policy Manifesto of the United National Front for Good Governance unveiled in 2014 titled ‘the Five Points programme’ to create a new country in 60 months are yet to be embedded as firmly implemented actions where successful results can be assured, especially in regard to the core commitments regards
  1. Growing the Economy
  2. Fighting Corruption
  3. Ensuring Freedom For All
  4. Investing in Infrastructure
  5. Improving the Education System

The above analysis is further evidenced by the Ceylon Chamber of Commerce Economic Intelligence Unit Survey findings where “business leaders are optimistic about the government’s ability to deliver economic results in the next four years, but are critical of the progress made so far and have mixed views about Budget 2017”. These findings are further elaborated by comments “showed a lot of pessimism to a question ‘How focused is the government on creating policies that support private sector growth’?”; “expressed strong disappointment in the progress of reform in the first year of the government’s term” ; and “were a bit more optimistic about the future,- but emphasized that “uncertainty prevailed”.

The recent announcement by the President that 2017 be declared as a year ‘the country will be liberated from poverty’ is also highly recognized by the civil society.

It is the fervent wish of the civil society that the forthcoming National Economic Policy Statement of the Prime Minister will elaborate on the strategic action planned by the Government in support

  • of realizing the vision to reduce the National Debt by 2020 and make significant advances in meeting the challenges of the fiscal gap
  • of meeting the likely medium term balance of payments challenges
  • of liberating the country from poverty and delivering the socio economic rights of citizens
  • of realizing the set objectives of
  1. increasing the State Revenue to GDP
  2. assuring equity and inclusiveness in national resource allocations
  3. liberating marginalized families impacted hitherto by war, conflict and natural disasters
  4. ensuring good governance in a corruption and narcotic substances free society
  5. sustainable development in line with the Paris Declaration
  • A National Involuntary Resettlement/ Reparations Policy applicable across the country
  • Developing the capability ( knowledge, skills, attitudes and values) of the human resource pool to meet emerging job opportunities
  • Investing in infrastructure and urban and rural development with equity and inclusiveness
  • Attracting foreign direct investments and promoting public private participation led investments creating niche market new job opportunities

It is also the wish of civil society that the budget to follow the economic policy announcement will spell out the medium term action strategies and fiscal / monetary outcomes of the policy framework announced by the Prime Minister.

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Latest comments

  • 4
    1

    You the kind of men that are on the mode of sabotaging any good moves – will paint the message in your way – as always has been.

    You may know if we need to achieve it- we need to focus on 60:40 law… meaning it is better to go that hard with the issue – if at least to achieve over 50%.
    The manner the last terms of MrAbusive-Mahinda Rajapakshe has behaved, it will not be easy anyone to repair it easily. Given that the current rulers need to do anything and everything to reduce the critical situation.

  • 5
    5

    Our external debt alone was 4 Million Millions LKR in 2014.

    Batalanada Ranil then hired Singapore Mahendran to borrow another LKR 600 Million, in 15 months.

    That makes it 40 600 Billion in LKR total which, we have to pay at present.

    What Batalanada said was not Reduction . But a a total wipe off .

    And he promised the Yahapalana suckers that they will debt free in 2020.

    My guess is Batalanada Ranil is planning Quantitative Easing at the rate of 15,000 Billion LKR a year, every year till 2020.

    Must be the brainchild of Singapore Mahendran….

    • 4
      2

      Why not we will have to confiscate all the billions valued properties of MR, GR, NR and all – sooner than later, you will see it in reality no longer we will allow RW and MS to go for that. You the fomer leela will have to face it too.

  • 6
    1

    OFCOUORSE,
    IT CAN BE ACHIVED!!!!!!!!!!!!!,

    HOW?????.

    First we have to get rid of beggars like HDLM,[ KAS], failed Marxists, with failed self appointed diplomatic columnists and Diyavanna oya asylum lunatic beggars who are /were living on our blood money, ransacking, and wasting public coffers.

    Should stop the pensions and privileges, expenses of Diyavanna oya beggar hoodlums.

    bribe takers, drug dealers, rapists, child molesters, public property robbers and corrupters should be shot at the gall face ground.

    then we will save more money to pay our debts taken by scoundrels, thugs, and sycophants of Jarapassa family gang.

    • 2
      3

      So you are one of those waving little Green Flags to Batalanda Ranil and his new mate Bodhi Sira in Campbell Place..

      Bodhi reckons UNP and his Blue Sira Faction are now two in one..

      How cool .

      Poor Mom will be kicking in the Mausoleum in Horogolla, although Whiskey Madam will drink to it.

      Who sent you?

      Is it digital Harin from Badulla , John Amaratunga,from Jaela or foul Mouth Rajitha from Beruwala?.

      Don’t worry about me mate.. I even pay private Samurdhi out of my own pocket.

      You will never match it…

      • 4
        0

        generally my principle is not to sleep with dogs,
        as I know that when sleep around dogs, you get up with ticks and not only that is what you are suffering as you got jarapassa dog scabies.

        “”””Who sent you?
        Is it digital Harin from Badulla ,
        John Amaratunga,from Jaela or
        foul Mouth Rajitha from Beruwala?.””””

        Party politics are not my play,
        Above named are Scoundrels like your Moda mulana mongol Jarapaassa thieves.
        some of them are running hither thither to get down the erection

        I am not indebted to my mother land, I have paid the debt from my own blood.
        but not as all of you pickpockets. still I have not got my due from the rehab ministry for my lost property in the Your Peelam War.
        But rehab Aarshaf and Regeey got billions for 77 and 83 for false claiming.
        Ask the captain of world cup is it true or false.
        when they have the spoon, beggar thieves serve themselves from public coffers

        Any way Every body knows, thieves are running around Samurdhi bushes and rolling with Sil redi.

        • 0
          0

          Mate, I am disappointed .

          Your Yahapalana Bosses sleep with dogs in the Master Bedroom.

          For example , Senasinghe who won 35 Million instant Car Permit Lottery, has three or four in his house..

          And he reckons he scored the highest next to Ranil, telling his Yahapalana followers yesterday, that he needs a higher Ministry to reflect his standing in the UNP.

          Do they have Balu Mekkas ( Ticks )?

          I like dogs although they don’t share my bedroom.

          They never forget who feeds them , even if you give them only OX Tail bones in the left over soup,

          Unlike some of our Yahapalana bosses who have free feeds of Appam made by gourmet chefs, and then not only bite the hand which fed them ,

          But also **** them in the back.

          Can you see the difference.

          • 0
            0

            Your picky examples will end up with all clarifications, if you study them each. I would never see that Senasighe or new men of UNP to have gone any kind of abuses since they are the masters appointed to go against corruption and abuses.

            May be the car deal or the other in terms of buildings getting allocated for their ministrys, be with former regulations, but there too, they cant change a lot at this level… honestly, none of these men have space to do so , since criticisms work inside too…

          • 0
            0

            It is pity that you do not have a brain to think.
            [ sitting on the Brain disopora gang].
            that all those dogs, ticks,[ Mekkas] leaches, are a products of Jarapassa group of Thieves, Mongol rapists, Sycophants and Scoundrels who had free feeds of Appams made by your gourmet chefs and had Gala whisky parties with Prostitutes from Sri Lankan air at ARALIYA abode on Our [ poor people’s accounts].

            Ex; Kudu duimia, Victim [the Supplier to mongol family of Mahajarano and his mongol sons], And other Jumping frogs of Balu party.
            do not forget abut the Arse licker contract killers from Ranwiruvo getting disgrace to our Security forces because of Defense Sycophant Hothambaya.

            All of them are Leaches of failed and cheating Marxists and suckers of poor peoples blood.
            Sirisena or Rahanil no exception.

  • 1
    2

    Keselwatta Kid, one time Leadership aspirant and Co Leader of the UNP Sinhala Buddhist Faction,, says a couple of Million inhabitants came to the 70 Birth Day Bash in Campbell Place.

    This sound like the UNP Elite, Anglican and Vellala Faction Leader Batalanda Ranil’s promise to pay 40,600 Billion LKR debt by 2020.

  • 1
    0

    Has Ranil W acted with frugality and humility? No His giant size Cabinet, Tax free cars for crooked politicians , his behaviour re Mahendran Saga does not give us any hope.His politics will continue the Rajapakse policy that enslaves the people more and more. The question is will the Sri Lankans have a country to live in or will it be sold with the politicians running away from the country with the illgotten wealth.

  • 1
    1

    Haven’t we heard enough lofty claims from Batalanda and Pach Sira?

  • 0
    0

    Sri lankan govt does not have even money to pay salaries. that is why they laid of some CTB workers with hefty pay outs which will wait until another govt pay it.

    Ranil is just making some people happy.

    Other than that, his ministers are just reading and eacting Mahinda Chintanaya.

    Ranil wickrmasinghe gave minister posts to both husband and wife who spent their fortune earned from Hingurana sugar cane factory – liquor sales to UNP winning.

    Ranil also made a miniter from the party boss who made a fortune to the party by implementaint the bond scandlae which made Arjun Mahendran to leave the job.

  • 0
    0

    Governments always run defecits. We could be debt free, just as a company can be debt free – a company that is in debt to the tune of billions can simply sell of its assets and lay off workers, but that is not the point.

    What will be the state of the ordinary citizen in 2020? What about peace and reconcilliation? What about human rights? all these are more important than debt freedom.

    The present government asked for these debts when they asked to take over power they cannot complain. Apparently these debts were worth the price of risking their lives to go against the “evil previous regime” so thee debts are very important to them.

    One bright opportunity is for :

    “Developing the capability ( knowledge, skills, attitudes and values) of the human resource pool to meet emerging job opportunities”

    What are our future job demands? Our you lack analytical skills and according to worldwide statistics, lack IQ.

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