On 23 March, the Secretary to the Treasury released the Pre-Election Budgetary Position report as required by law. On 30 March, further to preliminary comments, I released a detailed statement on the report.
The statement advised the President that this report – signed by the Treasury Secretary and Finance Minister – justified the presentation of an illegal and unconstitutional so-called ‘vote-on-account’ without a vote in Parliament. I warned that without increasing the borrowing limit, and putting public finance on a legal footing, “a cash crunch will occur”.
Tragically, the President did not heed this counsel. Now the President’s Secretary appeals to public servants to bear the burden of the Government’s illegal actions. This is at a time when, in violation of election law, individuals purporting to be State Ministers are drawing allowances whose value would provide Rs. 5000 to 4,900 families.
The difficulties the Government is facing in spending, in borrowing monies and in providing economic relief – which is paltry as a percentage of GDP compared to almost any other country – stem from this disregard for law, the spurning of the largest grant in Sri Lanka’s history and from the myopic and irresponsible tax-cuts everyone warned against earlier this year.
An economic crisis is upon us. Hundreds of thousands of citizens are at risk of losing their jobs over the coming months. Day-earners are beginning to go hungry. The entire country is anxious and worried about their survival over the next few months. We need to do all that we can to ease their minds and ensure their economic security.
The following arguments may appear technical. But they point to a more fundamental and simply intuited truth. Sri Lanka is a democracy. And democracies cannot function without Parliaments. We cannot manage an economic crisis without Parliament.
The statesman and lawyers framing our Constitution have been very careful to ensure that “Parliament shall have full control of Public Finance”. This safeguard against dictatorship has played a central role in democracy since the Magna Carta, French Revolution and American Revolutions. It has been our tradition too. The spirit emanating from these historic events runs through the solemn clauses and weighty pages of the Donomourgh, Soulbury, First Republican and Second Republican Constitutions.
As a result, we can be proud to be Asia’s oldest democracy. We have an unbroken history of facing coups, insurgencies, terrorism and tsunamis because of our democratic strength. Similarly, at this time of peril, we need our Parliament more than ever. Other democracies, like New Zealand, have shown just how valuable Parliaments can be in ensuring effective, accountable responses to the coronavirus and its aftermath. From 10 March, onwards the Government has shown utter disregard for the Constitution, the law and democratic checks-and-balances in relation to public finance.
On 10 March, the Secretary to the Treasury issued National Budget Circular No.1. This circular, available on the Treasury website, was sent to all Ministries and heads of departments authorising expenditure under Article 150 (3) of the Constitution from 6 March onward. This Circular is unconstitutional and has no validity in law.
Article 150 (3) of the Constitution states: “Where the President dissolves Parliament before the Appropriation Bill for the financial year has passed into law, he may, unless Parliament shall have already made provision, authorise the issue from the Consolidated Fund and the expenditure of such sums as he may consider necessary for the public services until the expiry of a period of three months from the date on which the new Parliament is summoned to meet.”
Parliament had already made detailed provision under the Vote-on-Account for the period 1 January to 30 April. Therefore, the question of invoking Article 150 (3) does not even arise until 30 April. Despite this, the Secretary to the Treasury had the gall to crow about this illegal action in the Pre-Election Budgetary Position Report. It is one thing to be an untrustworthy steward of the public’s purse, it is another matter to lie in an official Government report.
The Government has also exceeded the borrowing limit of Rs. 721 billion for the period 1 January to 30 April. According to Verité Research, the Government exceeded the borrowing limit by Rs. 120 billion. The legality of that debt is now in question, deeply affecting the credibility of the Government when it attempts to raise debt on local and international markets. We will all have to pay the price of higher borrowing costs.
With the exception of a billion rupees worth of Treasury bills raised in January, all the debt raised between 1 January and 30 April matures after 30 April. Therefore, that debt remains an outstanding liability on 30 April. And thus counts towards the sum of “proceeds as loans to be raised in terms of the relevant laws”, the language used to define the borrowing limit in the Vote-on-Account.
Returning to the question of invoking Article 150 (3) after 30 April; this too is not possible. In addition to the inability to activate Article 150 (3) when Parliament has already made financial provisions, Article 150 (3) can only be invoked for a limited time period. That time period must be defined and cannot be indefinite.
However, in the absence of a “date on which the new Parliament is summoned to meet” that is precisely what exists at the moment. Read with Article 148, which gives Parliament exclusive power of purse, and the constitutionally mandated requirement for the legislative power of our sovereign people to be wielded by Parliament, it is abundantly clear that the Government has no authority to draw from the Consolidated Fund.
Legal provisions aside, Sri Lanka is facing an unprecedented pandemic. Our focus must be laser-sharp on containing the virus and limiting its economic fallout. This is no time for politics. Or for a constitutional crisis. All arms of the Government must activate, stretching every sinew and mustering every measure at our disposal to carry us the country through this calamity.
We need Parliament to increase the borrowing limit, authorise expenditure and pass new laws. In fact, the only way to secure the money needed for a large fiscal stimulus in the short-run, may be to credibly commit to a debt-brake enshrined in law in the medium-to-long term. Without such a stimulus, there will be no money for the relief measures required and called for by all sections of society. The plans for such a debt-brake have already been prepared in the Fiscal Rules legislation we were drafting.
Also, we need to free public servants’ minds and energy to focus on their jobs (not spend sleepless nights worrying about the legality of their actions or whether they will be paid), we need the confidence of the international community, donor agencies and financial markets. Delays in relief cannot be afforded in this desperate situation.
Please, Mr. President and Mr. Prime Minister, enough with the politics. Do not fear democracy or the people’s representatives. Avoid a crisis, summon Parliament under Article 70 (7), develop a plan in consultation with all stakeholders and let’s get through this, together.