In any democratic country, the Annual Budget of the Government is, by and large, a political economic document rather than purely economic, as most economists would like it to be. Hence, economic rationality and economic prudence gives way to political opportunism and manoeuvring. The Government of Sri Lanka's Budget for 2009 presented to the Parliament on 06th November 2008 is no exception to this.
Basking on the relentless successes in the battlefields of the North and electoral successes in three Provinces for which elections were held during this year (2008), politically astute Chief Executive Officer (President) cum Chief Financial Officer (Minister of Finance) of the Government unveiled a populist budget aimed at further wooing the masses keeping in mind the upcoming five Provincial Council elections early next year (2009), which could perhaps lead to a snap Parliamentary election. Although the budgetary allocation of just LKR 1,100 million (or 1.1 billion) for the Department of Elections in 2009 is not adequate for a snap Parliamentary election (on top of the five provincial council elections already in the pipeline), the government could always allocate more money to the Department of Elections through a supplementary budget.
The government budget has two sides, namely government expenditure and government revenue. This is a critical analysis of the government budget for 2008 presented in the Parliament on 07th November 2007. There appear to be shortcomings both on the expenditure as well as the revenue sides of the public finances of the country. The public expenditure programme of the government seems to be welfare oriented than workfare oriented. On the revenue side of the budget, government’s tax policy appears to be regressive because of its over dependence on indirect taxes. Nevertheless, there are some positive proposals made in the budget to stimulate the economies of the periphery, particularly the Eastern Province.
A change of government in April 2004 and the onset of economic downturn coincided in Sri Lanka. The Sri Lankan economy has been experiencing turbulence during the 2nd and 3rd quarters of this year due to a variety of factors, viz. prolonged drought, world oil price hike, lack of tangible economic policy framework by the new government, and even more remote chance of the resumption of peace talks between the new government and the LTTE that has been stalled since April 2003.