The recent budget speech represented a mixed bag of promising proposals and concerning gaps. While highlighting the key takes of Budget 2024 in a recent LMDtv interview, Founding and Senior Partner of Gajma & Co N. R. Gajendran underscored the importance of keeping in mind that Sri Lanka is a bankrupt country.

Speaking to Ruwandi Perera, he noted several positives: “The budget has clearly given us the message that the government and country will stay on course with the IMF programme. There is no question of wavering or moving away from it like in the past.”

“The government has also been smart enough to offer some relief to the people by recognising the importance of land, housing and share ownership rights,” he added.

As for the negative side, Gajendran also mentioned that Sri Lanka doesn’t have a history of achieving budget targets – and the budget deficit can widen further by the end of the year.

“This can push interest rates up because under the new Central Bank of Sri Lanka Act, there is no question of printing money at the whims and fancies of the government,” he noted.

Gajendran elaborated: “The budget indicates that there are no banking borrowings. When the government is short of money, it will have to go to the people, and issue bills and bonds.

“In that case, demand and supply will come into play, interest rates can go up, and now that we are running large budget deficits and have a current account deficit on the external front, there is a possibility that the exchange rate can also be vulnerable,” he asserted.

And Gajendran stressed the importance of driving investments explaining that “investments are the way forward,” and pointing out that “this has to come from within and outside the country.”

He explained that “if you invest, it will boost GDP; and with GDP growth, there’ll be income and employment growth, and then more income in the hands of the people.”

“When you earn, you must invest first, then save; and if there is a balance, you spend. In Sri Lanka, most of our expenditure is recurrent – that means consumption – and there is nothing [left] for saving or investment,” Gajendran lamented.

He mused: “What can Sri Lanka offer local and foreign investors? It has been recognised as having structural, institutional and legal deficiencies, which have to be corrected. Another reason foreign investors may be sceptical… is the high rates of taxes – so you have to offer some fiscal incentives.”

“If we want to be a competitive nation, we have to see how we can develop and enhance our products, and develop and improve our businesses and processes,” he emphasised.

Gajendran believes that there is hope for Sri Lanka but it banks on action – particularly regarding the elimination of corruption: “In his budget speech, [the president] recognised the need to eliminate governance weaknesses and corruption vulnerability. If we don’t do this, we can try to do everything else but nothing will happen.”

“Corruption is the bane of Sri Lanka,” he stressed, noting that “if Sri Lanka wants to do one thing to come out of this mess, it must be dealing with corruption” while commending LMD on its Refresh Sri Lanka campaign.

He noted: “The fish always stinks from the head. We’re trying to put the Inland Revenue Department (IRD), Sri Lanka Customs and the Excise Department of Sri Lanka in order, and get go­vernment servants to work; but it’s not going to work – you have to stop the misfeasance, nonfeasance, malfeasance and palm greasing at the top.”

Gajendran lamented the sad state of Sri Lanka’s decision makers: “Whether decisions are made for the benefit of the multitude or country is questionable because first, decisions have to be self-serving and self-enhancing, and only then do other things come. This menta­lity has to change; it has to be eliminated altogether.”

“If there’s one thing to do, it is stopping this [corruption] and then Sri Lanka will be back in its place,” he concluded.