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Choksy slams political system, calls for
consensus on war, economy
Calling for an end to political bickering among political parties, former UNP Finance Minister K. N. Choksy yesterday called for major political parties to reach an agreement on the war effort and economy. Addressing Parliament on Thursday (13), the National List MP said, "Looking back over the past 60 years of political independence, it cannot be said objectively that the country’s economy and productivity or the quality of the people’s lives, particularly in the rural areas, has substantially improved. To my mind, the growth of the economy and the end of the ongoing war in the North, are matters that have to be handled on a national basis, by cooperation and coordination between the major political parties. Our present system, we follow in Parliament is not beneficial to our nation. This system, also known as the adversary system, has led to nothing but destructive criticism, in common parlance called "mud-slinging". The establishment of an ‘Economic Council" representative of all parties in Parliament might be worthwhile of consideration.

Mr. Choksy’s statement in full: Having presented 03 Budgets as Minister of Finance, I am conscious of the fact that the preparation of a Budget in a developing nation which is subject to adverse international fiscal trends such as the prices of oil and flour, presents tight-rope walking for its Finance Minister. And yet, we cannot allow ourselves to be swamped - the challenges have to be faced and met as best as we could. Let us therefore examine the main features of the Budget to see whether these are correctly positioned.

Firstly, I observe that the Budget refers to almost every sector of the economy - but it presents no clear over-all plan or strategy of economic development. A "home-grown" policy inter-spersed with basic international requirements is well and good - but it must lay down a clear path along which development could be channelled. This is missing.

Secondly, certain sensitive issues present in our economy and which have got aggravated form year to year have not been addressed. They are:

- Rising inflation, which presently stands at 22%

- Cost of living

- Increase in interest rates

- The sharp decline of the Rupee as against other international currencies; the Rupee presently stands at Rs. 109.50 against the US Dollar.

The above are unfavourable tendencies in any economy, and particularly in a country such as ours, which imports almost 70% of its requirements. Cumulatively, they will drain our national wealth and retard economic progress.

How does the Government intend arresting each of the above? Parliament and the country at large must be told this through the Budget. But the Budget remains silent.

The Fiscal Management Responsibility Act of 2003 sets the parameters for the development of the economy, which a government is called upon to meet. The Act stipulates that the Budget deficit at the end of 2006 should not exceed 55 of GDP. Yet the deficit is still 6.5%.

The Minister of Finance has pointed out, not without justification, that the sudden and sharp increase in world oil prices earlier in the year adversely affected the country’s economic indices. Timely planning and action could have considerably reduced this. The increase in world oil prices also took place during the regime led by the UNP. But with planning, we immediately introduced an automatic price adjustment mechanism, whereby we increased the cost of fuel to the consumer when world prices went up and gave the consumer the benefit of reduced prices when costs decreased. This formula reduced the burden both on the State and the consumer. President Kumaratunga abandoned this beneficial scheme when the People’s Alliance formed the government in 2004. It has since not been replaced, resulting in the adverse result son the revenue referred to by the Minister.

The Budget also refers to the Feriliser subsidy costs and Samurdhi payments. None can grudge governmental assistance to the needy, but is this alone adequate in the long run? Should not parallel steps be taken to systematically reduce poverty and make the people more self dependant? Take for example our rural youth. Schemes should be put in place to train them to be more self reliant and self productive. The demand for services such as of motor mechanics, electricians, repairs to and maintenance of agricultural and electronic equipment, have considerably increased in the rural areas. Why not commence training schemes to enable rural youth to qualify in these capacities. At the end of the period training, they could be provide with the capital to purchase the basic tools of their trade. In this manner, they enter the stream of productivity and self reliance. The continuous granting of the subsidies and doles will not end or reduce poverty. On the other hand, training people to earn a livelihood of their own will progressively reduce poverty and their dependence on the State.

Mr. Speaker, we must introduce innovative measures to expand the economy and the revenue it generates. The current position is that of an economy that is contracting.

The Fiscal Management (Responsibility) Act fixes the ceiling of government borrowings. It stipulates that at the end of the financial year commencing on 1st January 2006, the total liabilities of the government, including its external debts at the current exchange rates, should not exceed eighty five per centum of the estimated gross domestic product for that financial year.

The government has commenced external borrowings in US Dollars. The danger with which this is best is that the rupee has depreciated considerably as against the US Dollar. When the United National Front relinquished office in April 2004, it stood at Rs. 94/-. Today, it has spiralled to Rs. 109.50. If this trend of the reducing value of our currency continues, the government’s debt will increase to an unaffordable level when it comes to repayment of such borrowings.

This is another reason why, as I said earlier, the government will have to introduce measures to increase revenue by providing incentives for growth of private sector productivity. But the Budget provides none. The country is faced with a situation where government’s outgoings far exceed the revenue generated, leading to greater reduction of the national wealth.

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