By Mandana Ismail Abeywickrema

Weak economic policies based on heavy state expenditure including the distribution of indiscriminate subsidies have pushed the country's economy into peril with Sri Lanka now having the highest inflation and interest rates in the region.

Heavy state expenditure has been identified as the bane of the country's economy. However, analysts say that the cash strapped government is now left with not many avenues of finding money for its coffers.

The high inflation rate has made it impossible for the government to even consider money printing as an option while the credit downgrading has had an adverse impact on the government's plan to borrow money in the overseas market.

The loose fiscal policies followed by the government with regard to money printing has been identified as the cause for the increase in inflation, which now stands at 28.2%. The present rate of 28.2% is according to the new index that replaced the old index, which recorded a near 30% inflation rate in April this year.

Waste of public funds

Unfortunately, amidst the serious economic issues the government has not shown any interest in minimising unnecessary state expenditure and continues to waste public funds at great cost to the country's economy.

Apart from the high fund allocation for defence, the excessive expenditure on maintaining the world's largest cabinet as well as on other wasteful endeavours, especially when the government has turned down a request by the working masses for a wage increase citing lack of funds smacks of weak financial management.

It has been reported that a cabinet minister, non-cabinet minister and a deputy minister are each entitled to two official vehicles and two back-up security vehicles. However it is an open secret that every minister uses a minimum 10-15 vehicles apart from the back-up vehicles.

Leader of the House, Health Minister Nimal Siripala de Silva responding to a question raised by JVP Parliamentarian Ranaweera Pathirana, told parliament recently that the six Nation Building Ministers were using 43 vehicles, incurring a staggering monthly fuel bill of Rs.752, 500.

Astronomical cost

According to de Silva, the ministers using these vehicles were Jagath Pushpakumara, Susantha Punchinilame, Saliya Dissanayake, Rohitha Abeygunawardene, S.M. Chandrasena and Gunaratne Weerakoon.

All cabinet ministers receive a basic salary of Rs.65, 000 while a non-cabinet minister and a deputy minister receive Rs.63, 500. A parliamentarian receives a basic salary of Rs.54, 285. All of them receive a host of additional allowances.

Apart from the basic salary an allowance of Rs.500 is paid for each parliamentary sitting and Rs.200 for attending a select committee meeting. Depending on how many days they attend parliament sessions and select committee meetings the allowances vary and the final package that a parliamentarian receives is more than Rs.100, 000 per month. Ministers and deputies receive over Rs.130,000.

Unlimited facilities

Further, every cabinet and non-cabinet minister is entitled to a monthly fuel allowance of Rs.75,000, a deputy minister is entitled to Rs.50,000 and  parliamentarians are entitled to Rs.29,000 depending on the distance to his/her constituency, before the recent price hike.

According to the Public Administration and Home Affairs Ministry, Rs.20,000 is paid for a private land phone and Rs.10,000 for a mobile phone in addition to unlimited local and IDD facilities for official telephones every month.

Ministers are entitled to two drivers but these rules change depending on the number of vehicles. Most of the ministers employ their kith and kin as their private secretaries, coordinating secretaries and public relations officers.

In addition every cabinet, non-cabinet and deputy minister is entitled to four secretaries. They are all entitled to official vehicles, fuel and telephone allowances and a limited entertainment allowance.

The government also spends Rs.100, 000 on an official residence for a minister.

Legislators who occupy the Summit Flats pay Rs.6,000 while occupants at the Madiwela Housing Complex and in Colombo 7 pay Rs. 2,900 and Rs. 8,000 respectively, as rent.

The electricity and water bills too are borne by the state. Ministers who occupy official residences in Colombo pay only Rs.2000 for maintenance and their water, electricity and all other maintenance bills are met by the state.

The government responding to the charge of spending colossal sums of money on maintaining the large number of ministers, has said that it is a negligible amount compared to the total state expenditure.

Small component

Consumer Affairs Minister Bandula Gunawardena told The Sunday Leader that the money spent on ministers was a small component when compared with what is spent on paying the public sector salary and pension bill.

"The public sector salary bill, at Rs. 233 billion, is the largest bill," he said.

Meanwhile, speaking at a political talk show, Minister Rajitha Senaratne said that the money spent on maintaining the ministers was 1.8% of GDP.

According to former JVP parliamentarian and the party's trade union wing leader Wasantha Samarasinghe, although the exact amount spent has not been calculated fully and if as told by Senaratne the amount was 1.8% of the GDP, it was equivalent to the total government spending on one of the key sectors in the country - the education sector.

It is in this backdrop that it was revealed in parliament last week that the government has imported 31 bulletproof vehicles for the use of parliamentarians at a cost of US$ 8.6 million.

Chief Government Whip Dinesh Gunawardena made the disclosure to parliament responding to a question by UNP Parliamentarian Ravi Karunanayake.

Massive spending on vehicles

According to the official response, 15 of these vehicles had been bought for 3.7 million Euros inclusive of duty, 12 for 1.8 million US dollars, and four for 1.3 million US dollars.

The government also informed parliament last week of the massive supplementary estimate for over Rs. 2,800 million to finance the upcoming SAARC Summit scheduled to be held from July 27 to August 3 in Colombo.

The amount, according to the breakdown is Rs. 401,881,272 for recurrent expenditure and Rs. 2,478,299,069 for capital expenditure and totals to Rs. 2,880,180,332.

Interestingly, Sri Lanka decided to host the event even though it is the turn of the Maldives to host it, which in turn has raised the question as to why the government has opted to fork out such a large amount of money at a time the state coffers are begging for money and borrowing at astronomical rates from commercial banks.

Also, the government's decision to hold two provincial council polls before the stipulated time for the elections is to cost the government an additional Rs. 400 million. It has been reported that the preliminary election work would cost the government up to Rs. 110 million while spending a sum of Rs. 90 million on the police, postal facilities and printing.

Public servants' wages and pension bill

According to Gunawardena, all these expenses put together would still form only a small part of the total government expenditure.

He reiterated that the real drain on the state coffers was the high wage and pension bill.

It has been reported that of each tax rupee earned by the government, 55 cents is spent on paying public sector salaries. A sector that contributes very little to national productivity.

Gunawardena also said that if the government were to heed the workers' demand and grant a salary hike of Rs. 5,000, the salary bill would see a further increase of Rs. 72 billion.

"The only option then would be for the government to print money, as it does not have such a lot of money to grant a salary hike. Heeding the demands would mean printing money and allow inflation to go out of control," he said.

Economists while not recommending a salary hike at the present time, given the unhealthy economic conditions faced by the country say that the government needs to cut down on wasteful expenditure in order to maintain a balance and tighten monetary policy.

According to economist Dr. Harsha de Silva, granting a salary hike would push the country in to spiral inflation. However, he said that given the high cost of living the demands of the workers could not be considered unfair.

"The salary increase has in fact  been demanded due to the expectation of inflation rising still further in the future," he said.

The only solutions before the government as pointed out by Dr. de Silva is to minimise wasteful expenditure, further tighten fiscal policies and show a slow down in inflation in order to build confidence in the people's mind that the economy can be saved from the disaster it is heading for.