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Budget is the next big thing!

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One major event is over now. People have elected a new government having high hopes. The next major event is not the abolition or change of the 19th constitutional amendment. The next big event is the submission of the new government’s first budget. Will it dash the people’s expectations? The writing is on the wall for those who want to read it.

Leaders of the government might be thinking of a big budget deficit. A big budget deficit means a big government. And a big government means lower productivity, lower sellable output, lower capital formation and lower allocation for consumption money to households.

However, I have my doubts as to whether the IMF would support such manoeuvres. For the previous government the IMF insisted to have at least a primary surplus in the government’s budget. Primary surplus means that government revenue must be sufficient to meet its expenditure excluding the payment of interest. For the first time, after many decades, the previous government achieved primary surplus in 2018, but again the target “was missed by a sizable margin in 2019 with a recorded deficit of 0.3 percent of GDP, due to weak revenue performance and expenditure overruns” (IMF staff conclusion, Feb. 7, 2020). The IMF did this observation nearly after two and a half months of Gotabaya’s presidency. Therefore, there is no reason to believe that the IMF would not have insisted on the same condition on this new government. Perhaps, Covid-19 might help to get a temporary excuse. Such excuses would be for the mitigation of economic fallout from COVID-19 but not to run a big government with high budget deficits to finance ambitious projects. This intimates that the government has to slash its ambitious infrastructure projects to be implemented by local expertise and financial resources.

However, if the government wants to have a big budget deficit then it should focus to provide support to enterprising sector enabling entrepreneurs to increase total national proceeds (which is the sum of sales) with profits. For this, the IMF would support as this approach helps recovery of economic fallout, capital formation, take control of current account deficit, and increase the tax revenue eventually. The message from the IMF is clear. In the same report, it observes that, “given risks to debt sustainability and large refinancing needs over the medium term, renewed efforts to advance fiscal consolidation will be essential for macroeconomic stability.”

Fiscal consolidation is a deadly concept for the new government. It seems the government wants to think “out of the box” solution as Nivard Cabraal suggests in recent times. This has already been in government’s official thinking. I quote, “The issuance of an international bond by the government is not anticipated in the near term, thereby rendering the current yields observed in the international bond market irrelevant” (Central Bank of Sri Lanka). Read this again carefully. What is the problem with the current yields in the international bond market? In fact, yield rates are low and positive for the government. But certain governments cannot benefit from low rates if that government’s credit rating is not good. In such an eventuality, the government cannot risk damaging the country’s image trying to access international bond market.

But, as observed by IMF, the government has large refinancing needs in the medium term. It means the government needs money in US dollars. The “out of the box thinking” has kicked in. “The government has taken proactive measures in mobilising funds from multiple sources of market based and official sources of financing to effectively improve the terms and conditions of financing” (CBSL website). Here, what do they mean by “market based … sources?” As far as we know, international bond market is the best “market-based source.” The government has decided not to go for international bond market for whatever reason. Then, does this mean that the government plans to mobilize funds from private financial consortiums? Leave this question open.

CBSL further says “The focus of financing will be to further explore bilateral and multilateral sources to benefit both risk and cost considerations of debt management, and these discussions are well underway. Further, the country is in the process of exploring SWAP facilities with regional central banks, while arrangements are being made for syndicate financing with identified foreign sources.” Borrowing from foreign private sources can break a country than make a country. That was what happened to Greece; in desperation at one point 17 years of future ground-handling income of airports were sold to a foreign consortium. If Sri Lanka issues international bonds, then it limits to 10 per cent of the total bonds and Treasury bills issued separately and borrowing limit also must be approved by the parliament. All these measures are to ensure debt sustainability.

With the Covid-19 pandemic the whole world is in a mess economically. The IMF and other international financial organisations do not have clear policies as to how the crisis should be mitigated. As such, the IMF is going to hold a conference in November 2020 under the theme, “Living in the Extreme: Economics of Pandemics, Climate Change and Tail Risks.” As such, the best source of funds must come from the IMF in times of pandemic getting the US participation in developing such programme invoking its “Exchange Rate Stabilization Act” as many countries use the US dollar as their main reserve currency. This would be a more appropriate “out-of-the box thinking” solution than approaching private foreign funds. In times of difficulty, the government must cling more on to the traditional international financial institutions and donors than newly found friends.

Hema Senanayake

 



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Opinion

Effort by All Ceylon Buddhist Congress to help govt. of Sri Lanka escape from dollar trap

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By DR L M K Tillekeratne

Chairman of the National Development Committee of the ACBC

It is a well-known fact that one the problems faced by Sri Lanka today is caused mainly by shortage of electricity for domestic purposes and industries. Three decades ago, only 20 % of houses had electricity for lighting. But, today over 95 % of houses in the whole country have electricity. Total electric power the country needs is about 2,750 MW a day. In order to generate 65% of it by using diesel and coal, the cost involved now is tremendous and that is the main reason for the creation of dollar shortage in the country. Besides, when Russia’s invasion in Ukraine six months ago equally attributed to the fuel shortage in the whole world thus creating enormous social and economic impacts, and petroleum prices in the Sri Lankan market increased by over 300%, which is bound to increase further at an alarming pace.However, while having enough bright sunlight all over Sri Lanka throughout the year to generate solar power and enough wind power particularly in areas like Mannar and Puttlam districts, only 40% of our electricity requirements are supplied by non-conventional renewable energy, while 65% of the balance need is produced by burning imported fuel oil and coal at a cost of Rs 80 to 100 per unit, thereby subjecting the environment of the country to a great threat by increasing the level of Green House gases to our atmosphere. Further, this conversion of generating electricity by burning oil and coal thereby lowering the liberation of Green House gases to the atmosphere will enable Sri Lanka to earn huge amount of Dollars by trading Carbon.

According to energy experts, it is expected to reduce this 65% of the energy requirement by burning fuel oil and coal down to 40% thus using more renewable energy by year 2030, thereby lowering the cost of producing a unit of electricity to about Rs 35.00.

Surprisingly, according to hydro power generating experts, there are over 400 streams and small waterfalls distributed all over the country without exploiting yet for setting up of mini hydro power generators. If these over 400 water sources are converted to hydro power generators producing not less than 1000 mega Watts of power are started, and by converting the wind power and solar power available in unlimited quantities, Sri Lankans can earn more foreign exchange by selling the extra electric power available to neighboring countries.

Hence, at present most of the dollars available are spent for importing diesel and coal to the tune of USD 6,000 million per annum. It should be mentioned here that out of this USD 6000 million, about 4,500 million is used for transport leaving a balance of USD 1,500 million to import fuel oil for power generation. According to energy experts, USD 1,500 million could easily be saved here for the other priority areas of the country, if mini hydro power generators are set up in those streams which are idling now. However, sadly no payments have been made for the power generated and supplied to the national grid by the few existing mini hydro power plants; they have supplied power to the tune of over Rs 20 billion for several months and hence some of them have been compelled to close their power plants.

Based on this objective, the ACBC, the premier Buddhist and Social organization in the country realized the need to create awareness of the options available and organized an exhibition of inventions last week on generating power utilizing those three natural sources and to display the public as to how they could conserve scarcely available electricity thereby saving extra money spent for generating power wasted due to lack of knowledge.

This event was not merely organized as an exhibition but to showcase the new inventions to the public, but as a workshop for the interested water source owners to select the appropriate invention suit to them best according to the conditions available in his source of water/ solar power/ or wind. Once the prospective investor identifies the suitable invention ideally needed to his needs, the power expert committee of the ACBC is planning to provide them with every technical support they need to do the feasibility study and even to the level of selecting machines etc. up to the level of setting up the complete power station. Further, the Bank of Ceylon has already agreed to provide them with a soft loan of Rs 3 million at 16% interest rate for setting up of the power unit.

It should be mentioned here with appreciation that the Ministry of Power and Energy has already decided to pay Rs 35 per unit of renewable energy produced from the 17.39 paid previously and also to pay all the back accumulated payments due to power generators. ACBC takes an innocent pride to place on record that the power generation project designed and launched by the expert panel members of the ACBC consists of renowned scientists and engineers who have earned distinctive reputation in their respective disciplines. This particular project perhaps is one of the key projects engineered by the ACBC in its proudest history of over 100 years with a view to finding solutions to the macro-economic issues whilst enhancing income generation at the peripheral level so that it would provide a helping hand to reduce the poverty level of the country.

With these important decisions taken by the government to encourage renewable energy production in all unexploited natural energy sources, it is not a difficult task to generate nearly 1000 MW of power within the next two to three years. Minimizing energy wastes by households and industries through the educational campaign initiate by the ACBC recently, another sizable saving of electrical energy saving could be achieved. Hence, the Development committee of the ACBC is optimistic in saving substantial portion of the dollars spent on Oil and Coal imports thereby making savings available in the country to help Sri Lanka to be the Wonder of Asia by year 2050.

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Opinion

Are Murunga and Katurumuringa leaves toxic?

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Dr Parakrama Waidyanatha

In an article titled ‘Throw more light on green foods’ that appeared in the Island of the 20th instant, Mr Gamini Peiris reports about an eminent doctor’s warning to his friend, who told the doctor that he regularly ate Katurumuringa or Sesbania grandiflora (Sg) leaves thrice a week, to stop eating it as it is toxic and so are Murunga(Drumstick) leaves! My family also eat Sg leaves once or twice a week, and hence sought information on the ‘toxicities’ of both species.

Both leaves and flowers of Sg are very commonly eaten. It is a common leguminous tree that grows to a height of about 6-8 meters, fixes nitrogen and native to South East Asia and Northern Australia. The leaves are commonly eaten in all growing countries and are reported to contain 25 to 30% crude protein. For this reason it is also widely used as a fodder for both cattle and goats, especially in India. Goat milk yield is reported to have increased by 25% with Sg leaf feeding. There is no evidence of leaf or flower material being toxic to humans and animals.

Muringa indica or Drumstick is native to parts of Africa and Asia. It is also cultivated in Central and South America, the Caribbean and South East Asia. India is reported to produce 1.2 million tons of pods per year from an area of 380 square kilometers. There are no reports of pods or leaves being toxic. Toxicity to humans being limited to certain compounds ( extracts) from the bark and roots, which are used in Aurvedic and other native medicines in addition to leaves and flowers. Both the pods and foliage are widely consumed in all countries where the crop is grown. For long term storage, dried leaves are powdered for preservation and are commonly added to sups sauces and smoothies. The leaves are rich in Vitamins A, B1, B2, B3, B5 , B6 and C. In Sri Lanka, the crop thrives in the dry and semi-arid areas, and Jaffna Peninsula is the largest producer of the crop.

The good specialist doctor should do well to know that in general there are toxic compounds in most fruits and vegetables we eat! For example, all solanacious plants such as tomatoes, brinjals and potatoes contain natural toxins, solanines and chaconines which are glycol-alkaloids but in low concentrations. These toxins are usually produced in response to stresses such as bruising, UV light, insect and other pest attacks. Wild mushrooms which are widely eaten especially by inhabitants in the growing regions, contain several toxins such as muscimol and muscarine which are reported to cause vomiting diarrhea, visual disturbances and hallucinations. Kernels within the pits of some stone fruits such as apricots, cherries, peaches, pears, plums and cherries contain cynogenic glucoside which can be converted to hydrogen cyanide, when consumed, which is highly poisonous. This toxin is also found in cassava(manioc) root and fresh bamboo shoots, necessitating that they are cooked before consumption.

The good specialist doctor should do well to remember the wise words of Bombastus Paracelsus(1591 – 1643), the father of the science of pharmacology, that ‘all substances are poisonous, there is none which is not and it is the dosage that differentiates poison and remedy’. Even water can be potentially fatal if too much is drunk (hyperhydration). So eat or drink anything in moderation!

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Opinion

PERFECTION…their keyword

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Apple Green-DYNASTY: Active in Southern California

The name Apple Green would certainly ring a bell to those music lovers who were very much active in the local music scene, in the eighties.

Their music was appreciated and they were true professionals in whatever they did…always looking for perfection.

Apple Green, led by Rohan Mendis, was there in a big way, at The Island Music Awards 1987, held at the Bougainvillea ballroom, of the Le Galadari Meriden Hotel, in Colombo, and they won the prestigious award for ‘Outstanding Music Group.’

I remember how the members of Apple Green leapt up from their chairs, that particular night, when the band’s name was announced!

Yes, those were the days, but the good news is that two of the band members, Rohan Mendis and his brother, Jehan, are still very much into music and are performing, on a regular basis, in the States – Southern California – where they now reside.

They operate as a four-piece band, along with Shehan Jayah and Mithuru Cabral, under the banner Apple Green-DYNASTY – keeping the name Apple Green alive in that part of the world, as well.

Says Rohan: “In 2019, an elite quartet of musicians, bringing experience and raw talent, came together, in Southern California, to bring a perfect blend of music, covering all genres.

“This was, initially, to fill the void that was missing in our circles of music loving fans, and partygoers, and, since then, our popularity has soared at a rate that exceeded our expectations!

“Our music loving fans, with a penchant for finer points in quality music, and repertoire, have made us our own critics, pushing us to perfection, leaving nothing for chance. Our goal is to go above and beyond for ourselves and our fans.”

And the lineup is as follows:

Rohan Mendis: Was at the helm of Apple Green

Rohan Mendis (Roh)-

A pro-musician for over 30 years, Rohan was the leader of the famed band Apple Green, before migrating to Los Angeles. A bass player, composer, solo performer and vocalist, and plays all instruments, he is also an accomplished recording tech, with the ability to perfectly balance the “old and the new,” through all music ages and genres.

Jehan Mendis (Rob)

– Another pro-musician, who, along with his brother Rohan, was a founder member of Apple Green. A versatile drummer/singer, he also handles the audio/sound responsibilities for the band.

Shehan (Shay) Jayah

– A very talented guitar player, with an amazing singing ability, his range is seemingly endless, says Rohan, adding that Shehan has loads of energy and the ability to keep all “laughing” – a fun guy to be around. He is the son of Sherwin Jayah, who was a frontline singer in Sri Lanka, and in the USA, as well.

Mithuru (Mitt) Cabral

– Super, cool as a cucumber guy, says Rohan, describing him as an excellent keyboard player, gifted in every sense. Reliable and “oozing” with talent, he is another multi-instrumentalist, blessed with perfect pitch! He is, by the way, the son of popular musician Mano Cabral.

Apple Green-DYNASTY will be performing at the prestigious St. Peter’s College Centinnial Ball, in New Jersey, on December 3rd, 2022.

“We are looking forward to this event and would love to see all our East Coast fans and Peterites in attendance,’ says Rohan Mendis, adding that he would keep music lovers posted “on our developments and projects on the new VLOG that I will launch soon.”

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