Budget deficits and holiday perks

By FS

(February 28, Colombo, Sri Lanka Guardian) Among the plethora of political, social and economic developments this week, some public announcements grabbed our attention. As politicians grappled for the ‘manape’, the UNP introduced aJRJ-styled ‘resignation-in-the-pockets’ plan to bar crossovers and Colombo continued its stormy relationship with the West; to the business community what would be more important was a delay in the IMF’s third tranche of a $2.6 billion loan and special holiday packages to motivate public servants.

An IMF mission visiting Colombo to discuss the third tranche – which should have been due in December – told reporters that it was delaying this disbursement until the 2010 budget is presented and the ‘new’ government’s economic policies are known. This is a reasonable move given that economic policies are likely to change (even if cosmetic) when a new cabinet is sworn in. Furthermore the 2010 budget is only likely to be presented around May or June (as our report two weeks ago indicated).

This could mean that at least three tranches could be postponed (until around May/June) after getting the first two tranches following the approval of the IMF facility in July 2009. The loan is available in a total of eight installments over a 20-month period which means that Sri Lanka will get $322 million equally till March 2011. So far, two tranches have been received with a third, due in December, now delayed till around May. Two other tranches due in the first half of 2010 will be similarly delayed or the IMF may choose to give it in first go (in May) together with the delayed December disbursement.

The IMF has complimented Sri Lankan on some economic fronts but said spending particularly on infrastructure and a revenue shortage has exceeded budget deficit targets, resulting in a suspension of the third tranche.

Spending has hit dizzy limits with various offers and handouts by the government just before the Presidential election. Some of it included wage hikes and tax breaks (which means lower revenue to the state). The parliamentary poll on April 8 will bring its own share of ‘give-aways’ to the people as the governing party attempts to capture a difficult 2/3rds majority of parliament, as they have stated.

These handouts and sops give a false sense of relief to the people since most economists and planners believe that once the election is over, the government will strictly revert back to the budget deficit targets leading to increased taxes, a hike in pries, and pressure on especially middle-class incomes. “All those taxes that were reduced or removed will be brought back. There is no other way tax revenue could be maintained,” one analyst said.

This week, SriLankan Holidays, an arm of SriLankan Airlines, said it was offering public servants and their families a special overseas holiday package rate for the good work done and in recognition of services to the state. This is to motivate public servants (do they really serve the people or their political masters?) to do better. But do they need to be motivated?

Aren’t they expected to serve the Sri Lankan public as ‘servants of the public’ for which the public pays for their upkeep through taxes? Does the public get the required service or do people have to spend hours on end at government departments pleading, begging and bribing bureaucrats to get a job done for which they have been adequately paid for by the customer (public)? Everyone knows how the public sector works with the exception of the Immigration and Emmigration Department which is an excellent model of efficiency and public courtesy.

Public servants don’t pay taxes – an issue that has gathered momentum in recent years as public calls increase to remove this privilege --; some or many of them are not in their seats when the public comes calling; many are rude and brusque when dealing with people as if the public is under obligation to them (as some or all of them arrogantly assume) and finally resorting to bribes and corruption to get some work done.

For public servants at a professional level there are other perks like doctors being allowed private practice like some other state professionals in addition to duty-free cars. So is there any need to motivate them? However berating about the public service is like pouring water on a duck’s back (it never gets wet!). Maybe motivation, encouragement or special holiday perks should be based on a merit basis and a report card system.

Yet if one is to draw a connection to the parliamentary elections and what turns on the voter, particularly those out of Colombo, these issues (budget deficits and a better public service) don’t matter to the common man. These were also issues at the presidential election but didn’t turn against the government. We are looking at a similar trend in April.