Twitter was a good place to follow the budget speech, but this Reuters report is a gooder space to digest it. I suppose the full text of the budget speech is better. In short, we’re depreciating the Rupee to encourage exports and trying to encourage tourism. Spending is going towards the military, roads, and infrastructure.
Oh, and the budget report itself is out as well.
The Rupee is now trading at about 113 to 1 dollar. So, say an American importing Sri Lankan apparel worth Rs. 100,000 is now paying $885 instead of $910 (at an exchange rate of Rs. 110). Once you start importing millions, that makes a difference, making Sri Lankan exports more attractive.
Let’s say you’re a consumer buying tinned fish, however, which we import. Well, let’s say you’re a whole saler. I think tinned fish cost about Rs. 225 for a big one. So let’s say they’re selling it for about $2.05. That same can of tinned fish should now cost me about Rs. 231. Sri Lanka imports more than it exports, so it’s unclear whether this depreciation helps or what. It may be necessary, I have a wiki level of knowledge on monetary policy. According to this mises.org report, currency devaluation doesn’t deliver economic growth in itself.
Me personally, I always guesstimate the exchange rate at Rs. 100 to a dollar, which it hasn’t been for a year. So this will make me even more wrong.
The government is both encouraging investment (reducing taxes) and discouraging tourists (imposing taxes). How much revenue will they make with the new visa fee ($20 for world, $10 for South Asia). Well, in July about 25% of tourists were from South Asia. So, out of 2010’s 650,000 tourists, 162,500 would have paid $10 and 487,500 would have paid $20. This is an envelope calculation, but that would bring in $11.375 million dollars. Which is not much money for a whole lot of fuss.
They’re reducing the duty of tourism vehicles (eh? Airport taxis and safari jeeps? buses? could be anything) and talking about making Sri Lanka a regional sports hub.
In addition to the defacto tax of devaluation, they’re going to further tax green grams, peanuts, ginger, and corn to achieve ‘self-sufficiency’. I think self-sufficiency is a foolish goal to force, you just drive prices up, like in Indonesia, and create entrenched political lobbies dependent on handouts. You can engender or support it, but let people have access to affordable food with politicizing it. That said, I don’t really like any of those things, except for corn, which I eat only rarely.
They’re also increasing the tax on ‘luxury’ vehicles (a wide category). People have been inhaling vehicles since the tariffs dropped dramatically last year. I just hope they keep the tax on hybrids down and perhaps introduce some electric vehicles (tho that is largely pointless in a country that burns diesel for its main power supply).
They’re talking about investing Rs 30 billion ($270 million) in provincial roads, Rs. 27 billion in rail and about Rs. 4.5 billion on bus stuff (engines, buses, routes). While this is good, public transport in Colombo still completely sucks and we need a metro of some sort. It is good that they’re expanding the rail network to Jaffna (with Indian help) and expanding the coastal line.
Mahinda is also proposing building 19 new domestic airports: “Parallel with the expansion of the Bandaranaike International Airport and the development of the Mattala International Airport, Palali and Ratmalana domestic airports, I propose to construct domestic air ports in Kandy, Nuwara Eliya, Batticaloa, Trincomalee, Hingurakgoda, Sigiriya, Anuradhapura and Iranamadu, to facilitate domestic air travel. Rs. 750 million will be allocated in the next year to commence the construction of 19 airports in Iranamadu, Nuwara Eliya and Kandy.”
He’s also proposing making Sri Lanka a hub for sports and international legal arbitration, despite his government abject failure in the administration of both. Just look at the money and game losing cricket board and the corrupted court that convicted Sarath Fonseka for, essentially, running for President.
A lot of spending (Rs. 230 billion) goes to the military, though Mahinda says Rs. 200 billion goes to basic upkeep, making that sort of a social program as well. What the country most needs for sustained, equitable (I consider them synonyms) growth is drastic improvement to the education system. He cites a problem and a solution, but I really don’t think it’s enough.
Hon. Speaker, about 350,000 children enter schools each year. But only about 25,000 of those get eligible to enter universities. About 175,000 children enter into vocational education provided by both the private and public sectors. This shows that around 140,000 children do not get an opportunity to improve their skills. It is also shocking to note that around 165,000 children fail the GCE Ordinary Level examination.
Hence, I propose to introduce a system through which children will be selected from GCE Advance Level either to enter university or to pursue skills development, so as to ensure that all children will get an opportunity to develop their skills. As a sum of Rs. 8,617 million has been allocated for vocational education. I expect that relevant institutions will give priority to introduce standards and skills development program through required reforms, in order to respond to emerging skills demands. I also propose to allocate Rs. 500 million to undertake special accelerated vocational education programs on a priority basis in the fields of tourism, IT, construction, beauty care etc. in districts in which unemployment is in excess of 8 percent, to meet the emerging demands for local and overseas jobs.
I don’t think this is very well thought out, or funded. Serendipity seems to write the same. The budget allocates Rs. 95 billion for primary and secondary schools and I don’t think it’s enough or well allocated. He’s talking about setting up model schools everywhere, but there are already strong economic forces at play where parents are lying and begging to get into performing schools. Rather than bucking that just go with it, enable performing school, shut down non-performing ones and spend on transport to move kids around. Either the government helps, or sticks its head in the sand while parents do it anyways. Again, Serendipity has more on this.
Some good, some bad. It’s not an especially intelligent budget, but it’s not a dumb one. It still continues with the emphasis on agriculture at a time when services are growing, and on the military at a time when the youth are neglected. Sri Lanka is still, however, a growing country with natural awesomeness and I think we’ll do OK.
I must say, it’s a bloody embarrassment that Parliamentarians physically fought during the budget. I think what the UNP did was dumb, trying to interrupt the speech by shouting and holding placards. They’re not a revolutionary youth force, they’re an aging, bleeding party that simply can’t do its job in Parliament and has to resort to shouting or walking out. However, it’s a travesty that they were assaulted. It just reminds you that Mervyn Silva is there and that this government really is a den of thieving lords that only coincidentally benefit the country.