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Business


Does the Appropriation Bill mislead parliament and public?

Accountability to the public and right of the public to evaluate vide - Fiscal Responsibility Act No. 3 of 2003

By Nihal Sri Ameresekere FCA, FCMA
Appropriation Act No. 39 of 2005 approved by Parliament stipulated a total expenditure of Rs. 609 billion for 2006. However, as per the Financial Statements of government audited and published on September 9, 2007, the actual expenditure for 2006 has been reported to be Rs. 1073 billion. Therefore, there had been an expenditure increase of Rs. 464 billion for 2006, over the original amount approved by the Appropriation Act No. 39 of 2005. This is an increase of 76%. No doubt, costs escalated during 2006, due to factors, such as, defence expenditure, fuel prices and exchange rates. Nevertheless, the reality is that Rs. 1073 billion is reported to have been expended for 2006.

As per Appropriation Act No. 47 of 2006 approved by Parliament, Rs. 809 billion has been approved as expenditure for 2007. As per Central Bank Report released in March 2007, the estimated expenditure for 2007 has been given as Rs. 1273 billion, which is an excess over the amount provided by the Appropriation Act by also Rs. 464 billion, which is a 57% anticipated excess over the originally budgeted expenditure, as per Appropriation Act No. 47 of 2006 ! Here again, justifiable factors, for such significant increase, are prevalent, such as, defence expenditure, fuel prices and the exchange rates. Of course there is, in addition, a very large Cabinet, that too, necessitated by political realities and the aspirations of politicians, transcending the expectations of the poor masses!

Therefore, the ground reality is that the government’s expenditure for 2006 was Rs. 1072 billion, whilst the estimated expenditure for 2007 is Rs. 1273 billion, as per the Central Bank Report. Given such factual ground realities, how could it ever be stated that the expenditure for 2008 is to be Rs. 925 billion? Is it a realistic estimate and can it be justified by some miraculous cost cutting? On the other hand, if that is not the case, given the levels of expenditure for 2006 of Rs. 1072 billion, and the estimated expenditure for 2007 of Rs. 1273 billion, is it not likely that the expenditure for 2008 is to be in the region of Rs. 1400 billion? That is nearly Rs. 500 billion, above the Rs. 925 billion provided in the Appropriation Bill now before Parliament!

Already, the Appropriation Bill had provided for borrowings of Rs. 740 billion during 2008. Hence, would not any excess expenditure in the region of Rs. 500 billion have to be raised by way of further loans and/or by way of further taxes imposed on the people? In fact, approved borrowings for 2006 as per Appropriation Act No. 39 of 2005 had been Rs. 548 billion, whilst as per Appropriation Act No. 47 of 2006 the approved borrowing for 2007 has been Rs. 655 billion.

In the foregoing context, ought it not be taken into reckoning that the government revenue for 2006 had been Rs. 477 billion, and as per the Mid-Year Fiscal Position Report 2007, the government revenue for the first 4 months of 2007 has been reported to be Rs. 170 billion, giving a 12 month proportionate projection for 2007 of a revenue level of Rs. 510 billion, whilst expectancy may be to reach a level of Rs. 550 billion. These levels would indicate the likely revenue level for 2008, to be reckoned with the foregoing levels of expenditure and loans for 2008 !

In terms of Article 149(1) of the Constitution, funds of the government not allocated by law to specific purposes, in aggregate form the Consolidated Fund. Articles 150(1) & (2) enable the Minister of Finance to withdraw from the ‘Consolidated Fund’, only where Parliament has approved such funds for specified public services. Therefore, would not Parliament be prohibited from approving funds for unspecified public services, whilst in terms of Article 149 funds not allocated for specific purposes, in fact, form the ‘Consolidated Fund’ ? Would not the only exception be in terms of Article 151, which stipulates that, notwithstanding the provisions of Article 149 i.e. the prohibition, Parliament could however create a ‘Contingencies Fund’ for unspecified expenditure and/or unspecific public services, where after expending funds for such purposes, the Minister of Finance is required to obtain the approval of Parliament, through a Supplementary Estimate to the Appropriation Act?
Fiscal Management (Responsibility) Act No. 3 of 2003

Fiscal Management (Responsibility) Act No. 3 of 2003 passed by Parliament and certified on January 9, 2003, and which came into operation on June 3, 2003, as per Gazette Extra-ordinary No. 1291/15 of June 3, 2003 states in its head note thus - “An act to ensure that the financial strategy of the government is based on principles of responsible fiscal management; to facilitate public scrutiny of fiscal policy and performance ; and to provide for matters connected therewith or incidental thereto”.

Section 2 of Act No. 3 of 2003 stipulates – “The fiscal strategy of the government shall be based on the principles of responsible fiscal management hereinafter referred to. Section 3 of Act No. 2003 stipulates – “The objectives underlying responsible fiscal management which need to be adhered to, by the government in outlining the fiscal strategy of the government” - as given in Box 1, and particular attention is drawn to ‘the statutory obligation cast upon the government to ensure that the policy decisions of the government have regard to the financial impact of such decision on future generations’.

As per Sections 4, 5 and 6 of Act No. 3 of 2003, the government has to release to the public and table in Parliament on the day fixed for the second reading of the Appropriation Bill, a Fiscal Strategy Statement to increase public awareness of the government fiscal policy and to establish standards for evaluating the government’s conduct of its fiscal strategy. The contents of the Fiscal Strategy Statement are given in Box 2.

Also, for the purpose of providing information for the evaluation of government’s fiscal performance as against its fiscal strategy set out in the Fiscal Strategy Statement, as per Section 7, 8 and 9 of Act No. 3 of 2003, the government has to also on the day fixed for the second reading of the Appropriation Bill table in Parliament a Budget Economic Fiscal Position Report, the contents of which are given in Box 3.

Thereafter, 10, 11 and 12 of Act No. 3 of 2003 by the last day of June of each year, the government has to release and table in Parliament a Mid-Year Fiscal Position Report the contents of which are given in Box 4, to enable the public to evaluate the government’s fiscal performance, as against the fiscal strategy.

Not later than 5 months from the end of each Financial Year as per Sections 13, 14 and 15 of Act No. 3 of 2003 the government has to release to the public and table in Parliament a Final Budget Position Report to enable the public to evaluate the government’s fiscal performance as against its fiscal strategy the contents of which are given in Box 5.
The foregoing amply demonstrates that the government’s budgetary formulations and financial reporting must necessarily be in such simplified manner, devoid of meaningless economic jargon, where the public could scrutinise and evaluate easily the government’s financial performance and financial position which in fact affects and has a bearing on every citizen of the country, and more importantly on the future generations. Both the Mid-Year Fiscal Position Report and the Final Budget Position Report, in terms of Sections 12 (2) and 15 (2) of Act No. 3 of 2003 have to give a comparison between the estimated and actual expenditure, revenue, cash-flow and borrowings, giving the reasons for ‘excesses’ and ‘shortfalls’.

Nevertheless, the colourful and voluminous Report for 2006, has questionably failed to perform such statutory obligation by the public, except in page 70 thereof, in respect of a few selected items, namely, salaries & wages, pensions, interest payments, fertiliser and fuel subsidies, Samurdhi, other subsidies, transfers to public corporations / institutions, other goods & services and total public investments, that too, in comparison to a ‘revised budget’!

Is not what is required be a comparison of the original estimate, as per the Appropriation Act for 2006 and the actual expenditure incurred, classified under the different Heads, as per the Appropriation Act? Would not the statutory requirement be to give the reasons for the increases in expenditure under the different Heads from the original total estimate of Rs. 609 billion to the total actual expenditure of Rs. 1073 billion? Interested and affected parties have puerilely endeavoured to mislead in this regard, denying the statutory right to information of the public and the accountability to the public, as provided for in Act No. 3 of 2003!
For instance in terms of Act No. 3 of 2003 would not the reasons be statutorily warranted to be disclosed for the difference between the approved amount of Rs 77.9 billion under ‘Head’ ‘Department of National Budget’ and the actual expenditure reported in the financial statements audited of only Rs. 4.5 billion ? Does not Act No. 3 of 2003 mandate the disclosure, as to what expenditure the balance funds had been diverted to?

In terms of provisions in Act No. 3 of 2003 disclosure of any information, in the written opinion of the Minister of Finance, which would be prejudicial to national security, or which would compromise the country in a material way, in negotiation, litigation or commercial activity need not be made in terms of the said Act. Furthermore, Section 26 provides for the government, in exceptional circumstances, to depart from the requirements under the said Act, with the approval of Parliament, disclosing the reasons for such departure, steps to be taken to overcome causes necessitating such departure, and the period within which such departure would come to an end.

In addition, Sections 16, 17, 18 and 19 of Act No. 3 of 2003, cast a statutory obligation on the Minister of Finance to disclose all material, fiscal or economic implications within his knowledge and the Secretary, Ministry of Finance together with him to issue signed statements of responsibility, and to provide information in a Pre-election Budgetary Position Report, contents of which are given in Box 6, within 3 weeks of proclamation of a General Election. This would enable the public to be aware of the financial performance and position of the government prior to voting at a General Election, and which would also facilitate a new government being elected, to be aware of the financial performance and position of the country, before assuming office after elections, and also throwing open for public debate, the reality of the ‘empty promises’, hitherto made on political platforms!

Hence, would not the Financial Statutory Statement and the Budget Economic and Fiscal Report, as per Act No. 3 of 2003, be ancillary, supplementary, related to and dependant upon the Appropriation Bill ? Therefore, ought not the Appropriation Bill be formulated to support such position, unlike the years prior to 2004, when Act No. 3 of 2003 had not been enacted. Similarly, ought not the Appropriation Bill facilitate, the simple and meaningful preparation of the Mid-Year Fiscal Position Report and the Final Budget Position Report, in terms of Act No. 3 of 2003, in a manner that ordinary members of the public would be able to comprehend and evaluate?

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CCC Trade Fair Unit sets sight on Qatar, Turkey and UAE for business promotion

The Ceylon Chamber of Commerce Trade Fair Unit, with several successful trade promotion and fact finding missions to its credit, has announced its next step forward: a proposed business promotion mission to Qatar (Doha), Turkey (Istanbul) and UAE (Dubai and Abu Dhabi) from December 1-11, 2007.

The CCC having identified these countries as potential markets for Sri Lankan products has initiated this mission, in a bid to strengthen trade ties, establish business links and source suitable business partners in the areas of trade, investment, joint ventures, technology transfer and services.

Meetings with business communities in Qatar, Turkey, Dubai and Abu Dhabi are among the highlights of the mission.
Among the high ranking Sri Lankan export products are live fish, live plants & foliage, fruits & vegetables, tea, food stuff, pneumatic tyres, textiles/garments, gems & jewellery, spices, coconut /coconut products for Qatar, natural rubber, garments, fresh coconuts/coconut products, porcelain ware, tea, spices, tubes & tyres for Turkey, and tea, spices, coconut/coconut products, rubber/rubber products, gems & jewellery, ceramic products, coconut milk powder, fruits & vegetables, live plants & foliage, food stuff, essential oils and garments for UAE.
According to the Confederation of Business and Industrialists of Turkey (TUSKON), Turkey is reported to be among the top 20 economies of the world.

His Excellencies Atugoda, Ambassador for Sri Lanka in Qatar, Junaid, Ambassador for Abu Dhabi, Senevirathna, Ambassador for Israel, accredited to Turkey, along with their Hon. Consuls Esref Cerrahoglu, and Wasantha Senanayake in Istanbul and Dubai respectively have given their assurance to support the mission. The Ministry of Foreign Affairs and the Department of Commerce too have agreed to extend their co-operation to the CCC towards the success of this mission.

The One-on-One Business Meetings with the relevant business communities will be coordinated by the Sri Lankan Embassies and the Consulates in association with the Qatar, Istanbul, Dubai and Abu Dhabi Chambers. The CCC entered into a Memorandum of Understanding with the Dubai Chamber of Commerce & Industry in 2002 and to further strengthen their ties, is also exploring possibilities of making use of this opportunity to enter into co-operation agreements with the Qatar, Istanbul and Abu Dhabi Chambers. The CCC is positive that this mission will assist the delegates in entering into new agreements and establishing useful trade links.

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FCCISL establishes consultancy, research division

Memebers of the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) will be able to receive consultancy services and advice on routine labour related issues, and be provided with research based business development initiatives under a newly formed division.

The new division will also be responsible for study programmes offered to school-leavers, job seekers, and executive level candidates who wish to advance their knowledge in the field of human resources.
Secretary General, Samantha Abeywickrama, stated the new division would help develop skills of the workforce in line with the changing and challenging demands of the business community today.

Commenting on the importance of developing the skills of young people, in particular, Abeywickrama noted, “the Federation will take these skill development training programmes out to the provinces for the benefit of the rural youth to sharpen their business knowledge.”
For a monthly fee of Rs 3000, clients of the FCCISL will be able to obtain advice on a number of labour related issues either over the phone or by fax or email. Clients can meet with consultants for an additional fee of Rs. 2000
Customised training programmes will also be available to organizations under this division.

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