Sri Lanka Cannot Afford an Auction of Non-Existent Resources

The government has called for submissions from all stakeholders as part of the preparatory process for its Budget. This has elicited responses from a variety of quarters, including political parties, trade unions, businesses and other interest groups. Some of the wish-lists which have emerged in the media bring to mind a comment made by Lee Kuan Yew some years back. He said that Sri Lankan democracy was a periodic auction of non-existent resources. This comment has even greater resonance today now that Sri Lanka is a lower-middle-income country exposed to the discipline imposed by rating agencies and international capital markets in a manner it was not when Mr. Lee made this remark. It is important to explore why this is so. There are fundamental problems at three levels which need to be considered: revenue, expenditure and debt dynamics. Failure to take these into account will undermine the commendable progress that has been made towards a more stable macroeconomic framework largely as a result of the fiscal consolidation achieved during the 2009 – 13 period.