Humane capitalism needed to generate national wealth

(Text of Opposition Leader Sajith Premadasa’s speech in Parliament during the ongoing debate on Budget 2025)

When analysing the solutions that the 2025 Budget should provide for the country, it is crucial to examine the mandate given to implement such a budget and how that mandate has been executed.

The policy framework presented to secure the mandate was “A Thriving Nation – A Beautiful Life” and “Country to Anura”. We must assess how much of these policy features are reflected in the 2025 Budget.

Looking at the budget framework, its presentation, and its unveiling, it is clear that this budget does not align with the promises made or the mandate received. I would like to substantiate this argument with evidence, data, and facts.

On page 105 of the ” A Thriving Nation – A Beautiful Life” policy document, there is a commitment to conduct an alternative debt sustainability analysis when the current government came into power. What has happened to that promise? Instead, what we see today is an unbearable burden and hardship imposed on the people, with the benefits they deserve being severely restricted.

Under the 2024 Fiscal Management (Responsibility) Act, primary expenditure is capped at 13% of GDP, and the primary balance is limited to 2.3% of GDP. Such limits are imposed in only about 10 countries worldwide, including Guatemala, Ethiopia, SriLanka, Venezuela, Nigeria, Yemen, Bangladesh, Lebanon, and Haiti.

Capping primary expenditure at 13% of GDP and maintaining a primary balance at 2.3% of GDP were not election promises of this government. This is not the execution of a mandate; it is a surrender of the mandate. It is a destruction of the mandate, forgetting what was promised, and entering into harsh and oppressive agreements with the International Monetary Fund (IMF) and sovereign bondholders.

This does not mean we advocate for withdrawing from the IMF program. Instead, we believe in entering a new, more people-centric and humane path that prioritizes the welfare of people.

These fiscal limits make it impossible to correct for externalities or address social costs. The responsibility of a government is to provide public goods, and these limits hinder that. They also restrict social redistribution. International studies show that capping primary expenditure and primary balances is counterproductive to a country’s development. Yet, the government has ignored all this, renegotiated agreements, and entered into new ones.

In essence, the government, which came to power with the people’s mandate, has completely surrendered that mandate.

I remember a statement made by President John F. Kennedy: “The great enemy of the truth is very often not the lie, deliberate, contrived, and dishonest, but the myth, persistent, persuasive, and unrealistic.” This statement holds great relevance today.

Many people are lamenting that they do not understand the increase in salaries. There is confusion about what will happen to allowances and how they will be structured. We must understand this confusion. This budget has been prepared within the constraints of 13% primary expenditure and a 2.3% primary balance of GDP. In reality, the amount of funds available to rebuild the country and empower the people is very limited.

We have met with the International Monetary Fund (IMF) on several occasions. I, along with Minister Harsha de Silva, Minister Kabir Hashim, Minister Eran Wickramaratne, and others, have clearly stated that we are working with the IMF and that we are moving forward with their program. However, we do not dance to their tune. We acknowledge that the IMF program creates hardship and burdens, and there are costs involved. But we must minimize these hardships and burdens as much as possible.

Yet, the President comes to Parliament and says that we must forget all the promises made on election platforms, forget the people’s burdens, tears, and pain, and ignore all these difficulties. He claimed then that by November 2024, the country’s economy would face significant shocks. The President is taking over the agreements negotiated by the previous Ranil Wickremesinghe government wholesale.

We see this as a betrayal of the people’s mandate. On one hand, it is a betrayal of the people, and on the other, he speaks of the lost decades. Will we lose another decade due to this decision? We could have made a better, more beneficial decision for the country—one that reduces burdens instead of increasing them, provides relief instead of hardship, and offers some solution to the people’s cries.

The President has firmly stated in this House that they will be ready to repay our debt by 2028. That is a good thing. Our hope is that we can achieve this. However, we do not endorse the tribal political culture that creates crises within the country and transfers power. To repay the debt by 2028, it is essential to boost economic growth and increase state revenue. There is a fact that no one talks about, and many are hiding it.

Since 1975, 75 countries have implemented IMF agreements. Of these 75 countries, 59% have inevitably had to enter second, third, and fourth debt restructuring programs. No one talks about this or informs the public. Only 41% of countries have successfully managed their affairs with a single agreement and debt restructuring. Honestly, I hope we are among that 41%. I pray that we do not have to undergo another debt restructuring. If that happens, it will lead to a severe economic collapse.

Our country should have stayed on the path of debt sustainability, but it has deviated from that line. Our country needs a higher economic growth rate and a faster rate of increasing state revenue. Otherwise, we will have to undergo another debt restructuring.

This revelation came to light during discussions I participated in with a team that advised the previous government until the last moment on formulating the current IMF agreement and sovereign bond agreements.

Even if we cannot stay on the debt sustainability line, we may have to undergo a second or third debt restructuring. If that happens, Sri Lanka will face a global crisis. To prevent this, the country’s economy must grow, and state revenue must increase.

The President stated in his budget speech that they would achieve a 5% economic growth rate in 2025. That would be good if it can be achieved. However, the President’s speech mentions that according to the World Bank, our country’s poverty rate is 25.9%. These are the statistics presented by the President in the budget speech. But while the President accepts the World Bank’s poverty statistics, the World Bank states that the economic growth rate in January 2025 will be 3.5. The President has accepted the poverty rate of 25.9% while citing World Bank statistics.

According to the President, the economic growth rate is 5%. The World Bank states that the economic growth rate in January 2025 will be 3.5%. There is a deficit in the economic growth rate. If this deficit is not bridged, we will fall into difficulty. As a country, we must definitely move towards rapid economic growth. However, this budget does not clearly indicate how this will be achieved.

Similarly, we need to increase our Gross Domestic Product. This budget has not provided any clarification regarding expenditure methodology, revenue methodology, and production methodology. There is no clarity in this budget about how to maintain a high economic growth rate to begin debt repayment in 2028. We must be realistic in presentation.

The whole country is complaining today because of the wrong agreement reached on the primary balance and primary expenditure. There is confusion about salary increases and no clarity. There is no clarity about how salaries will be received by grades. There is no clarity about how much will be received this year and next year. There is confusion everywhere. There is no explanation about salary increases.

There should be a clear explanation of how the economy will grow rapidly. There should be a clear explanation of how to increase state revenue. The agreement with the International Monetary Fund and the International Sovereign Bond agreement have been entered into based on several scenarios. The scenario used as the basis for this is completely wrong. That’s why we stated that an agreement should be reached. This process created based on the agreement has created an unrealistic target that cannot achieve the economic growth rate. They have agreed to an unrealistic target regarding state revenue. The main reason for this is that the current government also agreed to a weak agreement. The current government is following in the footsteps of the former President.

During the period of electing 159 MPs, they should have discussed with the International Monetary Fund and international sovereign bondholders to change the signed agreements and move to a new agreement that would put less pressure on the people, provide more relief, less distress, and more strength. I request that they consider this even now.

I request immediate discussions with the International Monetary Fund. The economic growth targets are not realistic. State revenue targets are not realistic. Primary balance and primary targets are not realistic. The country will have to go for a second debt restructuring before debt repayment in 2028. This is a serious situation. The government is heading towards a very difficult destination. The government is heading in the wrong direction.

I was shocked to hear what the team that advised on creating the International Monetary Fund agreement and International Sovereign Bond agreement said. It hasn’t even been three months since discussing the end of the agreement. They say we need to go for debt restructuring again. These are not jokes. It’s our country’s people who face distress and pressure from these. Through domestic debt restructuring, they tapped into the Employees’ Provident Fund. Why can’t the current government bring a proposal to Parliament to do justice to the Employees’ Provident Fund and Employees’ Trust Fund?

Similarly, Aswesuma is not a solution for eliminating poverty. There should be a production program, consumption program, savings program, export program, and investment program to eliminate poverty, but none of these exist. The selection for and exclusion from the Aswesuma program are done without identifying the poverty line and without conducting a household income-expenditure survey. It has been done without knowing information about poverty as well as food and non-food expenses. How can a poverty elimination program be implemented that way?

There are several serious problems with the limitations the government has created. There is serious confusion in every service including teachers, doctors, nurses, workers, and office employee (KKS) staff. The government has been unable to provide the promised Rs. 20,000 salary increase. The limited primary expenditure limit is thirteen percent. The primary balance is limited to 2.3. Within this limit, the government cannot implement the promised “A Thriving Nation-A Beautiful Life” policy statement. Within these limited resources, you have placed the necessary limitations yourself to not implement this, and you have become a prisoner yourself.

The elderly retired community used to receive 15% interest on their Rs. 1.5 million savings. That saving has now been reduced to one million. The savings interest rate is only about 10%. This is a serious problem for the elderly community. Various benefits have been provided for women. That’s a good thing. But the most serious problem has become labor force participation. It’s thirty-four percent. We should work to bring that to 45%. Verite Research has prepared data-centric proposals to implement maternity allowances with state patronage. It costs about six to seven billion rupees. If such an amount is spent, women’s labor force participation can be brought to a higher level.

Tax money from alcohol and cigarette manufacturing companies is not being properly collected. A wrong tax formula is being implemented. The government should look into this and work to increase state revenue.

There are several proposals to help the pre-school system. It has been proposed to increase pre-school teachers’ allowances. But there are very few pre-schools in the public service. Don’t implement it selectively. It should be implemented as a comprehensive program. We are happy about the increase in Mahapola scholarships. The Mahapola scholarship hasn’t even been paid for the past few months. The government has announced increasing an allowance that hasn’t been paid. I believe the government will work to pay both the increased Mahapola allowance and the unpaid Mahapola allowance.

Farmers are currently under severe pressure. Not just the paddy purchasing process, but the purchasing process of other crops has not been properly implemented. I’m not making this accusation against the government. No previous government had a proper cultivation formula with a clear cycle. This should be legislated. It should be legislated through a Parliamentary act.

The fishing community is waiting for the fuel subsidy. Many fishermen have become destitute. We talked about the wages of the Malayaha community. We believe we need to go beyond that. That Malayaha community has no land ownership, no house ownership. They should be empowered by giving them ownership of cultivation and lands, and the right to live in their own house. This community should be transformed into small tea estate owners who contribute 60% of production by utilizing 40% of the country’s land within the national production, with their own small tea estate in this country.

A sustainable solution should be provided to the unemployed youth community too by distributing some portion of uncultivated land. More than increasing salaries, such a process adds something to national production.

Many people are waiting for appointments after training as nurses. The family health sector is the same. There are about thirty-five thousand graduates. The President has promised to prepare a proper program for 35,000 graduates. Please don’t forget the promise given to unemployed graduates. Work to implement that too.

The current government hasn’t made any systemic changes. The Gotabaya-Mahinda Rajapaksa system hasn’t changed. Projects are implemented according to the government’s wishes. Political victimization is happening severely. Mahinda Weerasuriya was the Chief Secretary of Sabaragamuwa Province. Now he has retired. Mrs. Deepika, the Chief Secretary of the North Western Province, and Mrs. Damayanthi Paranagama, the Secretary of Uva Province, have been removed from their Chief Secretary positions. Nandana Galagoda, the Nuwara Eliya District Secretary, has also been removed. Mr. Wasantha Gunaratne has been removed from the position of Ratnapura District Secretary. Ganesh Amarasinghe has been removed from the position of Matara District Secretary. Why are they doing this? People didn’t vote for you to carry out such political victimization. This is wrong. Stop the victimization immediately.

I hope this budget will be successful. We will also support implementing the positive, people-friendly provisions in it. We will be a strength to add value to the country. Please let’s work with a mindset of providing decentralized funding. Let’s work under a new program. This budget shows no understanding of the external environment.

We need to diversify our export market. We depend on just a few exports. There is potential to create diversification in export destinations in other power regions of the world. There are no details about this in the budget. Foreign direct investment must necessarily be brought to our country to rebuild it. A special program should be implemented for this. We are ready to support this. We must compete with other countries in the world. I don’t see a clear program for this within this budget speech.

Within our political policy, in the ten-fold methodology we follow, we follow a social democratic program. Through this, humane capitalism is needed to generate wealth in the country. Limited state intervention is needed to correct the imbalances that occur within humane capitalism. While protecting the welfare state and increasing its efficiency, more action should be taken to provide resources to it. A results-oriented and time-bound poverty eradication program is needed. A balanced economic growth rate should occur at the Divisional Secretary level across all nine provinces of the country. An agriculture sector, fisheries sector, and industrial sector enriched with new technology should be created. All people should be empowered as Sri Lankans without discrimination. Democracy should be strengthened. Sustainable development should be strengthened. Foreign relations that add value to the country should be implemented. This ten-fold program is the program we follow. Standing within that framework, we will provide our strength to build this country.