Country’s downfall due to public finance management blunders –Dr. Bandula Gunawardena | Sunday Observer

Country’s downfall due to public finance management blunders –Dr. Bandula Gunawardena

7 August, 2022

Parliament is responsible for the economic crisis. According to the constitution, Parliament is responsible for the finances of the country. Therefore, Parliament is responsible for government revenue expenditure, budget gap and borrowing and debt settlement.

The Parliament prepares related ordinances and authorises the establishment of relevant institutions for this purpose. If parliamentarians do not accept any proposals presented by these higher institutions, if there is no space to present their views through parliament, the current and former officials of the Treasury and the Central Bank should also take responsibility for the issue of the country going bankrupt said Public Vehicles Highways and Mass Media Cabinet Minister Dr. Bandula Gunawardena said in an interview with the Sunday Observer last week.

Excerpts of the interview.

Q: Many people are trying to find solutions to the national crisis by staging demonstrations and changing governments. But you have proposed a four-pronged proposal beyond that. Could elaborate?

A: People see only a certain aspect of the economic crisis by taking into account the fuel and gas scarcity and the restrictions on electricity supply. The crisis is seen only on the surface. It has to be looked from a deeper and different perspective to grasp the real situation.

Q: As per your knowledge, what is the real economic crisis?

A: What we see today is the worst economic crisis since independence. The economic growth rate dropped from 1.7 percent to -3.5 percent in 2001. It is estimated that in 2022 it will be -6 percent. Statistics prove that 2022 will be a year with the highest negative economic growth rate. This means that there is an adverse effect on all macroeconomic variables such as total output income, employment, price level, balance of payments and investment in the country. Therefore, the output will decrease this year with an adverse impact on people’s income. There will be a lot of pressure on the balance of payments.

Q: Activists say that the former President is responsible for the crisis and that’s why they tried to remove the people who were agitating. What are your views on this?

A: This is the view of a group of young people who have no knowledge of the economy and realities. If you ask a Professor of Economics he would say this is not due to the Gotabhaya Rajapaksa’s regime but rather a series of blunders in public financial management. After independence and 1977 there was no proper precedent for the economy of our country.

Q: Are you also a part of this accusation?

A: Yes. As a Member of Parliament who has represented the parliament for 33 years, we also have a part of this responsibility. But less responsibility is assigned to me.

I printed and published a large number of books about this, about the impending destruction. Wrote documents.

No matter how many facts are presented through debates inside and outside the parliament, the only response received is laughter, insults and ridicule.

Q: Some political parties say that if they are given power they will solve the problems within six months. Do you agree?

A: The former and the current President declared that they are ready to hand over reigns to anyone who is capable.

It was after Ranil Wickremesinghe saying that he would like to take over the premiership that Sajith Premadasa said that he would like to take over the post.

Former President Gotabaya Rajapaksa did not want to give orders to the Army to shoot civilians due to the violence unleashed on May 9. Therefore, he gave into the protesters and stepped down.

Q: The Opposition leader said that he does not accept this government that has a mandate. What is your take on this?

A: Politically, it is an unfavourable statement for him. He says that if Dullas Alahapperuma who was nominated by him, was elected with the majority of votes, it would be a government with a proper mandate. But after losing, they say that there is no mandate. It is not possible for the country to move forward in this way. In developed countries parliamentarians do not behave in this manner.

Q: Why do you say that our parliamentarians do not behave in that way?

A: As a country with parliamentary republicanism, the answers to all the economic questions facing Sri Lanka today should be sought from the enlightened parliament. Like many countries, and the neighbouring countries such as India and Pakistan search for answers through the parliamentary system.

Q: Does it mean that Parliament should take responsibility for these issues?

A: Of course, yes. Sections 148, 149, 150, 151 and 152 of the Constitution state that all the powers of the state finances have been assigned to Parliament. Therefore, the lack of rupees and dollars in the country means that money has been moulded and that means that the country is bankrupt. Public finance is the collection of revenue by taxation or other means for the government. The second is to pay salaries to government employees and incur daily, progress and recurring expenses. Taking local and foreign loans to cover the gap between income and expenses. After independence this task was assigned to the Parliament.

Q: How does Parliament control public finance?

A: Parliament passes laws related to financial management to provide services to the public. Institutions have been set up to carry out these tasks. Eg- The Central Bank was established in 1950 by the Monetary Act of 1949. Only the Central Bank has the monopoly of printing money with the permission of the Parliament. Therefore, the credit related responsibility rests with the State Credit Department of the Central Bank.

This department recruits officers after receiving a first pass in economics from the university, passing local and foreign exams and receiving international training. They are paid huge salaries. Most people do not understand this subject. Therefore, the public loan department of the Central Bank should take the loan and bear its responsibility. But today politicians are involved in this. These officials should explain the reasons for the bankruptcy of the country.

The second institution is the Ministry of Finance. It is the Treasury that spends for the public. They prepare the budget. There is a large group of trained officers. The truth should be presented to Parliament in the budget document. The Treasury has misled Parliament and made huge mistakes. These people are innocent. The majority of MPs who represent Sri Lanka’s political parties have little understanding of public finance management. Whether in the ruling party or the opposition, every MP in the last three to four decades is responsible for this.

Q: Does that mean you are also responsible for this?

A: I have not prepared any budget documents. Budgets were prepared in the past by former President JR Jayewardene and then Dr. N.M. Perera. Others only read what was prepared.

They are arguing about this in the parliament. We suggested that if they have dollars, they should open an LC and bring an electric vehicle and pay the foreign exchange first. Even if we propose it, it cannot be done if the Central Bank officials do not approve it. They have a separate power. Those who have dollars in Sri Lanka should be given a market to trade in dollars. During the time of Warnasena Rasaputra  the then Governor of the Central Bank, Bearer Bond was proposed.

They said no as it would be subjected to money laundering. Therefore the Central Bank and Prime Ministerial officials proposed a way to do this. Therefore, how can politicians be held accountable for the decisions made by these officials?

Q: If what the parliament or relevant personnel say does not work, who will provide solutions to this problem?

A: There should be an all-party consensus. Secondly, the general public should be made to understand that there are four solutions for this. Raising government revenue, increasing revenue to 27% of gross domestic product by 2027. Reduce government expenditure. Maintain 22% of GDP by 2027. Doing so would bring the budget gap to 5% in 2027 and continue to maintain the budget gap below 5% thereafter. The third is to increase export earnings. Increasing annual export earnings of goods and services to US$ 22 billion and reducing import expenditure to US$ 20 billion by 2027. Then there is a surplus of about 2 billion US dollars in the balance of payments current account.

Q: Why don’t you, as an experienced Minister suggest this to the government?

A: Solutions to the current crisis were presented to Parliament when I had the constitutional power to do so. It is the Public Financial Management Accountability Act of 2003. Among its primary objectives is to reduce the budget gap to 5% of gross domestic product by 2006 and maintain it continuously.

Reduce outstanding public debt to 60% of GDP and maintain it. Guarantee for public debt, not exceeding 4.5% of gross domestic product. I gave the most correct answer to this crisis as the Cabinet and Finance Deputy Minister for Civil Affairs. But unfortunately the officials arbitrarily concealed the truth and reversed this Act in 2004. The result is the bankruptcy of the country today. Even if the Financial Management Act of 2003 passed by the Parliament was implemented in the same manner by 2013, the country will not be bankrupt today.

Q: When the Act was amended why were the subject experts silent?

A: The views of intellectuals are not taken seriously by politicians. On the other hand only a few of the intellectuals contribute to public and financial management. In order to overcome the economic crisis intellectuals and businessmen who are not in favor of political parties should contribute.