The Minister of Finance of a country has a unique role to perform set apart from other Ministers and that responsibility is very important for the betterment of the country. That has come to the fore today more than ever. Among his objectives, achieving the overall budget objectives takes prominence.
The way that the existence of a government is determined can be identified through the implementation of the role of the Finance Minister based on the organization of the budget process, monitoring and enforcement.
That is why, the Finance Minister should have a broad vision and a good understanding of how to handle the economy is imperative to cope with the pressure of expenditure from other Cabinet Members successfully.
When discussing about the Finance Ministers of Sri Lanka, two prominent Ministers come to mind. They are Dr. N.M Perera who was the Minister of Finance from 1970-1975 and Ronnie De Mel who was the Finance Minister from 1977-1988.
It is visible that Dr. N.M. Perera, who politically represented the socialist camp, sought to move the economy forward by implementing an import substitution policy focusing on domesticating the economy.
It can also be noted that Ronnie De Mel, who was the Minister of Finance from 1977-1988, focused on a free and open economic policy and while directing the Sri Lankan economy forward via externalized economic policies. It is no secret that although the two had different political orientations, their efficient decisions have made a positive impact on the country's economy.
The international reports point out that when pay attention over the greatest Finance Ministers of the South Asian region, Finance Minister of Bangladesh Mustafa Kamal, former Finance Minister of neighboring India, Manmohan Singh and Indonesia's Finance Minister Sri Mulyani Indrawati have been successful in discharging their duties as Finance Ministers.
The Finance Ministry portfolio had been held by several Ministers in independent Sri Lanka beginning with J.R Jayawardena and two Ministers held this position in Good Governess. Ravi Karunanayake was the Minister of Finance from 12 January 2015 to 22 May 2017 and Mangala Samaraweera was the Minister of Finance from 22 May 2017 to 17 November 2019 until the new government came into power.
"The Banker" magazine can be described as one of the leading international magazines which has won the trust of the banking and financial sector. It is visible at present that all banks that are registered in Sri Lanka are using the grades granted by the magazine in their propaganda. Due to this reason the trust that banks and financial institutes, placed on the “The Banker" magazine is very clear.
“The Banker” magazine also annually selects the most efficient financial system operators in the Asia Pacific, and they accredited the officers who hold the Finance Manager portfolio in Sri Lanka, India, Indonesia and Bangladesh in 2017, 2018, 2019 and 2020. Ravi Karunanayake has been selected as the Best Finance Minister in the Asian Region by “The Banker” magazine in 2017 and the purpose of this discussion is to consider the reasons to make that decision.
The most important fact in this discussion is, the reasons cited by “ The Banker “ magazine after selecting Ravi Karunanayake as the Best Finance Minister of the Asia-Pacific region in 2017.
The reason text up on which this decision was based can be quoted as ” the ability to prevent the financial crisis caused by a balance of payments crisis, restoring the country's currency reserves and thereby rebuilding confidence in foreign investors. "
This reason text clearly stressed that the county was in a foreign exchange crisis as today by the time Mahinda Rajapakshe regime handed over the administration of the country in 2015 which could be overcome due to the efficient decisions of a competent Finance Manager.
The role of a successful Finance Minister is to raise the necessary funds to meet the expenses. Instead of relying on the advice of officials, Ravi Karunanayake has fulfilled his responsibilities in a creative manner and it is particularly recognizable that he understood pragmatism better and focused on these decisions.
For example, in 2015, the highest salary increase in the history of the Sri Lankan public sector was granted. Accordingly the monthly salary of public servants was increased by Ten Thousand Rupees which is an annual increase of 120,000 rupees.
As a result of this increase, the salary bill increased from 455 billion Rupees in 2014 to 580 billion rupees in 2015. Some members of the Good Governance Government later said that the increase in salaries was a problem and that the situation had a severe impact on public expenditure.
But when the facts are properly analyzed it is clear that this argument is not correct and this decision was well-planned. About 36 billion could be earned to settle the increased salary bill by excise tax imposed on production tax.
It is mentioned in Table No. 01 that the excise levy under production tax was Rs. 105 billion in 2015 which was Rs. 69 billion in 2014. The levy on cigarettes was Rs. 57 billion in 2014 which was Rs. 80 billion in 2015. In this way Rs. 23 billion could be earned additionally. Rs. 60 billion could be additionally earned altogether which settled half of the salary bill.
Table No. (01) Government Financial Operations from 2010 to 2019.
Central Bank of Sri Lanka – Miscellaneous Annual Reports
It is clear from the above table that it was able to increase the government tax revenue by 30% by increasing the revenue by Rs. 305 billion which was 1050 in 2015 and Rs. 1355 in 2015. The government was able to increase the taxes related to production by 241 which was 256 billion in 2014 and 497 billion in 2015. Financial experts are of the opinion that the best example of Minister Ravi Karunanayake's efficient decisions is to increase the salaries of public servants in a way that is not taxable to the general public like the present government.
Chart Note No. (01)
-Government revenue in proportion to GDP-
https://www.statista.com/statistics/797372and Central Bank of Sri Lanka, (Miscellaneous) Annual Reports
The behavior of the ratio between the Gross Domestic Product and the revenue of the government is given in Chart No. (01).The ratio between government revenue and GDP has been a low figure for decades, and its continued depreciation has led to many state fiscal problems in Sri Lanka. The reason for this continuous decline was the decline in government revenue. The rate which was 17.2% in 2000 dropped to 11.6% in 2014. It is noteworthy that in 2015 it came up to 13.3% and in 2016 it increased to 14.1%. Subsequently, with the appointment of a new Finance Minister, the rate began to fall again. In 2020, that figure dropped to 9.6% again.
Despite the increase in the salaries of public servants between 2015- 2016, the government was capable to increase government revenue. Thus, it was also possible to meet the government's expenditure from the government revenue. When focused on the primary account, it was also possible to bring the balance of that account to a positive value for the period 2015-2016.
The pre-2014 government was unable to sustain the post-war economic growth rate at a higher level. This is clearly mentioned in Chart No. (02).The government was able to maintain the average economic growth rate at 5 % despite the ongoing global crisis and destabilization of the country. After that reportedly the average growth rate remained at below 4%. It is impractical to compare the economic growth in 2019 because of the impact of the Easter Sunday terror attack. The growth rate in 2020 had the impact of the global economy among the COVID-19 pandemic.
Table No (02)
-Economic growth rates from 2010 to 2020-
CBSL, Annual Reports and IMF Forecasting for 2020
At present, the government revenue is not sufficient to meet the recurrent expenditure of the government. Domestically earned income is not even enough to maintain the public service. However, as the then Minister of Finance in 2015-2016, Ravi Karunanayake was able to expand the "Tax Net" or tax base while making it easy for those who can pay taxes and effectively collect those taxes through the Inland Revenue Department.by
Under this circumstance the argument that can be raised is as stated by "The Banker" magazine, Ravi Karunanayake as the Minister of Finance in 2015-2016 was able to avoid the possible financial crisis in the country and to cover the government expenditure by increasing the country's revenue. The most important thing here is his ability to keep the most inefficient Treasury Secretary in recent history and to focus on such active and efficient decisions
It can be clearly stated that it is his experience and knowledge, gained by working in the private sector that made him take these effective decisions. It can be highlighted, as the results of his tiresome involvement in making decisions while having discussions spending day and night in the General Treasury.
Using data on the personal characteristics of Finance Ministers in Europe (1980-2010) Mark-Daniel Moisinger (2012) also pointed out that the personal characteristics of a Finance Minister affect his or her overall performance.
In fact, we have no assessment left of Ravi Karunanayake's role as Minister of Finance and his political-economic status. But sadly we have to say that the present government is dragging ordinary people to hell for not being able to manage public finances as well as foreign exchange.
While the international has made a huge appreciation on Mr. Ravi Karunanayake and specially in a scenario where the “The Banker” magazine belonging to the "Financial Times" a leading monthly magazine from 1926 on global economics, had awarded him “ The best Finance Minister of the Asia-Pacific region” in 2017, he has been leveled various charges inside the country. Due to this tendency of not giving the right place to the right person, we as a nation are currently suffering severe consequences.
As students of the University of Sri Jayewardenepura, who are studying economics, the best budget proposal we have seen in recent political history is the budget presented by Ravi Karunanayake in 2015 as the Minister of Finance.
If Mr. Ravi Karunanayake was given the opportunity to implement the budget proposal properly without being dragged down by his leg, the country would not have been plunged into such a crisis and the Good Governess regime would have still remained in power.
It’s our opinion as University student community, if Ravi Karunanayake continued as the Finance Minister, when the country is in an economic abyss in the face of the COVID-19 pandemic, the government would not have to print money as in the present.
Ravi Karunanayake has the ability to generate funds nationally and internationally and manage those funds until the crisis is over without printing money in such a serious and emergency situation and pushing the country's economy further into crisis. Ravi Karunanayake is a permanent member of the Institute of Chartered Management of Sri Lanka and a professional with extensive experience and skills in financial management.
There are very few professionals with such experience and skills in national politics. In order to build the country, practical Politicians like Ravi Karunanayake should be absorbed into national politics. Also, the political future of the UNP can only be trusted with Ravi Karunanayake and he should definitely come forward in the party. In the future, the UNP needs to be widely reorganized and it is our hope as young people to see Ravi Karunanayake at the forefront.
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