|Thursday, 22 August 2002|
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Better financial management
It is a well-known fact in Sri Lanka that governments over the years have misused state funds. Most governments have been guilty of this but in the past six years this ugly practise seems to have reached dizzying heights.
In the past few months we have been regaled with tales of the past government's profligate use of the people's money. The resources of numerous state-run boards and corporations have been used freely for political purposes and massive amounts frittered away.
The Auditor General, whose department itself has been starved of funds, has come up with damning evidence of untrammelled spending that has shocked the right-thinking people of this country. Tens of billions of Rupees have been borrowed from the State run banks by Corporations and these funds siphoned off by the government. This has put the survival of even the People's Bank itself in some doubt according to the Finance Minister.
The Criminal Investigation Department is investigating allegations that hundreds of millions of Rupees have disappeared and many millions more over-paid to contractors who have not done any work at various statutory bodies. The worst practices have allegedly being at the Rubber Manufacturing and Export Corporation and quite rightly the officials in charge at the time are now facing judicial inquiry.
There is no such thing as a free meal. If funds are misused, robbed or wasted by one party, be it the government or a private person, then someone else has to pay. When the State itself is profligate and uncaring, then the country at large loses.
That is what has happened to us. Our banks have to maintain high margins to offset the losses they suffer from the un-serviced loans given out to political favourites or inefficient corporations. The high cost of finance translates into costlier services. For instance the finance costs impinge on bus fares because bus owners have to pay more to service their vehicle leasing.
The most extreme case in this regard was the loan-service charge added on to the price of fuel by the Ceylon Petroleum Corporation. The government has asked the CPC to remove this charge and thereby end the servicing of some 39 billion Rupees loaned by the State Banks. But this decision itself has a risk as it threatens the health of the entire financial system. In the end all of us ordinary citizens end up paying more for our daily living because the government has not been prudent and not made full and productive use of every Rupee.
As a donor-dependent country we also have to ensure that the funds that are given to us by friendly and richer countries are not wasted in this manner. If we do not take care these countries and institutions will lose their trust in us and the easy cash line will dry up.
This realisation is what appears to have prompted the government to come up with the new ideas on fiscal discipline for the state. In the next few weeks the government will bring in tough new legislation, we are told, to make the state more accountable.
These laws will compel the government to regularly report the state of its finances and keep domestic borrowing low. The proposal mandates the Finance Minister to present to Parliament a Financial Position Report each year, which will set out the estimates of Gross Domestic Product, prices of goods, the unemployment figures and the economic priorities for the coming year. The proposed legislation even specifies that the budget deficit - the gap between the government's revenues and its expenditure - be brought below the 5% mark within the next four years.
This level of accountability is highly commendable and when mandated by the Law will certainly compel government administrators to keep a keen eye on the coffers and reveal as to where the cash is going to frequent public scrutiny. It will also reassure the public as well as the donors and international lending agencies of the probity of our governance.
Much lip-service has been paid before to making government more accountable. Some governments in the past have tried in some measure to control expenditure, but in most cases these attempts have failed. Now when we are faced with a real crisis, it appears that the present government has decided to legislate to compel it's own appointees and all future governments to adhere to higher standards of financial integrity. Perhaps there has also been pressure from international lenders for these measures to be introduced.
Whatever the reason, we welcome these moves. By electing the government the people have placed their sacred trust in the administration to handle the finances of the state, which is the people's money. it is only right that the government act in matters financial maintaining the highest standards of integrity and transparency. Legislation to compel administrations to do so is certainly the right direction to take.
Produced by Lake House