UNP front liner Milinda Moragoda said yesterday the UPFA government’s 2006 Budget proposals were inconsistent with Prime Minister Mahinda Rajapakse’s manifesto -- Mahinda Chinthana.

'Much attention is being focused as to whether the 2006 Budget proposals presented in Parliament on Tuesday contained the promises included in the Prime Minister’s election manifesto. In short the answer to that question of course is 'no”, Mr. Moragoda told the Daily Mirror.

'The Prime Minister’s manifesto is based on a large number of subsidies that are impossible to deliver. The Budget proposals reflect the government’s admission that the country does not have the necessary resources to deliver on those promises. The manifesto does not address the fundamental economic issues we face today, especially the high cost of living and the urgent need for more and better jobs for our youth”, he said.

'Based on our initial assessment, it appears that a few of the proposals in the Mahinda Chintana are included in the Budget. But funds have not been provided for many of the expensive programmes, such as daily meals for all the children and increased fertilizer subsidies for farmers”, Mr. Moragoda said.

'Public sector salaries have been increased to some extent, though not to the extent promised. However, a Rs 1,000 monthly cost of living allowance has been provided to help public sector workers to cope with the high rate of inflation during the past 18 months” he said.

Mr. Moragoda said he was happy the government recognized that continued expansion of the public sector workforce was not the answer to the employment problem.

He said there were no major public job programmes in the budget, in contrast to the Prime Minister’s plans as mentioned in his manifesto. Instead the government believed that a healthy private sector was the means for more and better jobs able to compete effectively in foreign markets.

'Whether or not the 2006 budget is consistent with Mahinda Chintana is not of any great national interest. It is being discussed only in relation to the immediate political environment of a keenly contested presidential election. Like many of the promises made in the Prime Minister’s manifesto, it is likely this too will be quickly forgotten in the next week”, he said.

Mr. Moragoda said what was of greater national importance was what the 2006 Budget would mean for the growth and development of the economy.

The Finance Minister in his Budget speech, referring to the broad goals of the two main presidential candidates said '… the common objective of all of these visions was to accelerate economic growth, create employment and reduce poverty”.

Mr. Moragoda said this has certainly been the foundation of the economic strategy of past UNP governments and also the main focus in Ranil Wickremesinghe’s manifesto --People’s Agenda”.

'The budget estimates are based on reaching a 6.9 percent growth rate in the coming year. Whether this can be achieved or even surpassed depends on whether a most of the difficult economic challenges facing this country are adequately addressed. During elections and at budget time we usually sweep these difficult issues under the carpet but they will not go away”, he said.

'For example, the Finance Minister was widely quoted when he referred to the large money-losing state enterprises like the CEB and CPC as 'monsters”. It is not going to be possible to reach high growth rates if we do not have the political courage to tackle these problems that continue to waste our country’s limited financial resources”, Mr. Moragoda said.

He said one important step in this direction was proposed in the Budget; a major reduction in fuel price subsides. The government these subsidies, now estimated at Rs. 20 billion a year, will be reduced to Rs 3 billion, or by 85 percent. Mr. Moragoda said the government proposed reverting to the automatic pricing formula for adjusting local fuel prices in keeping with world prices.

He said this would mean sharp fuel price increases in the coming months that would be politically unpopular but economically necessary.

'There is, however, still far too much waste and inefficiency in the ways that government makes use of our national resources. The public sector continues to be engaged in many areas which no longer make sense, if they ever did. We continue to maintain a government organizational structure that reflects inward looking policies and global conditions that existed decades ago. So it is not surprising there is substantial waste and inefficiency. But unless we do something about it, we will never see the high growth rates and more rapid development that both presidential candidates and much of the country aspires to. Unfortunately, the Budget proposals reflect little inclination to come to grips with these challenges.

'We must not forget the fact that while we continue to debate mainly trivial changes and minor adjustments, the rest of the world is moving on. We remain in danger of being left behind. As Indian Prime Minister Manmohan Singh said when asked about making India more attractive to foreign investors: 'Most sectors of the economy are open for private direct investment. Recently we opened up the real estate sector. One sector that is not open at this stage – and there is demand for it – is retailing. We have not made that decision yet – there are still some hesitations. But over a period of time this will open up. We are also getting ready to introduce an element of privatization into the defense industry”.

Mr. Moragada said to maintain higher rates of economic growth it was essential to do a much better job of mobilizing national and international resources. The UNP had a proven ability to do this. Under President JR Jayewardene he was able to mobilize resources to complete Mahaweli far more quickly than anyone imagined possible. Under President Premadasa the UNP was able to mobilize resources to bring garment factories to rural areas to generate rural employment. Today under Prime Minister Ranil Wickremesinghe an unprecedented $4.5 billion was pledged to Sri Lanka in support of rehabilitation and economic reforms. Ranil Wickremesinghe had expressed his willingness to work together with the opposition to build a national political consensus to overcome the major challenges facing Sri Lanka today.

The fact that the Budget presented this week had avoided some of the worst excesses of 'election budgets” appears to be based upon a relatively moderate approach to economic management. This should be encouraging to those who support the idea of closer cooperation between the parties. A more economically disciplined, focused approach to managing the economy would be needed if the country was to do more than continue to muddle through, he said.