An analysis of the last budget by Mr. Muttukrishna Sarvananthan, Principal Researcher of the Point Pedro Institute of Development, has concluded that the present government "is on a course of not only stalling but also even reversing the economic liberalization and reforms of the past 27 years."

In a paper on "Budget 2005 : A paradigm shift back to the 1970s," he has said that the priority of the new government which lacked even a simple majority in parliament when it came to power was not the economy or the peace process but securing a parliamentary majority by luring opposition MPs and minority political parties into the government fold.

"More crucially the incumbent Executive President is fighting for political survival as her second and last term of office comes to an end by December 2005 or 2006 (subject to interpretation of the Constitution). Hence, economic management of the new government has been piecemeal with the view of securing parliamentary majority and prolonging the political life of the president rather than for the good of the country," the researcher said.

The paper said that the November budget of the UPFA government was populist and aimed to satisfy most strata of society and was intended to prolong the life of the current parliament and the political life of the president.

Pointing out that since 1948, the Sri Lankan economy had been welfare rather than growth oriented, the paper says that in 1977 there was a paradigm shift towards the growth oriented economic strategy with the country embarking on a strategy of export led industrialization in order to emulate the economic success of Singapore by liberalizing the economy, specially the exports sector.

This new economic policy regime continued for 17 years with the UNP under three government leaders ruling the country from 1977 to 1994.

Although there ware a change of government in 1994, the economic policy regime remained intact. The UNP returned to power in 2001 and pursued open economic policies with renewed vigour. However this was short-lived with the change of government in April 2004.

"This time the new coalition government that came to power is on a course of not only stalling but also even reversing economic liberalization and reforms of the past 27 years, the paper said.

The researcher says that 27 years of economic liberalization and reforms have done much good for the people of Sri Lanka although there had been negative impacts as well of the open economic policies since the late 1970s. However, Sarvananthan argued that the positives of the Sri Lankan economy integrating with the global economy far outweighed negatives.

Among the pluses he has enumerated was the creation of one million jobs for Lankans in overseas labour markets, particularly in West Asia, the export oriented readymade garment industry creating 350,000 direct employment opportunities and another 500,000 indirect employment possibilities and the growth of the tourism sector presently employing 500,000 directly and indirectly.

The researcher admits that labour migration has resulted in some social problems identifying negatives like sexual abuse of women and children, child prostitution, etc. attributable to the success areas.

"Nevertheless, the positive impacts of these sectors, both to the macro economy of Sri Lanka as well as to the household economy of the rural areas, far outweigh the negative impacts," he has said.

Sarvananthan has argued that the growth sectors that he identified are driven by informed choices made by individuals as well as the private sector with government only playing a facilitating role to stimulate these sectors.

"It is true that the government has been steadily losing vast amounts of tax revenue as a result of tax holidays and concessions afforded to attract foreign investors in the readymade garment industry. However, the benefits accruing to the country and individual households would be more than the loss in government revenue," he says.

Sarvananthan said politicians blaming the globalization process and the open economic policies for the economic, political and social woes of the country was to hide their ineptness and incompetence in the management of the economy and the polity of the country.

"Not only has the present Sri Lanka government stalled the strategic economic reform programme, it has even embarked on a course of rolling back the reforms undertaken in the past several years," the paper says identifying several measures as indications of reverting to the failed policies of the 1970s.

"The previous government reduced both public expenditure and public revenue in the annual budgets. The present government has reversed the trend by increasing both public expenditure and public revenue.

"What is of paramount importance to the country is continuity in economic policy and to going back to the tested and failed policy regime of the 1970s," concludes Saravananthan.