Harsha touches raw nerve as NPP gets into stride

Budget 2025:

by Vishvanath

There has been a mixed reaction to the NPP government’s maiden budget President Anura Kumara Dissanayake, who is also the Minister of Finance, presented to the parliament on Monday (17). The government claims that it has been able to fulfil many of its election promises through the budget and live up to people’s expectations, but the Opposition is convinced otherwise.

Trade unions have declared that pay hikes for the state employees are woefully insufficient, given the ever-increasing cost of living. The Ceylon Teachers’ Union, which is considered pro-NPP, is also on the warpath, claiming that the government has not fulfilled its promise of a substantial pay hike for the state sector teachers. Farmers are complaining that they have not got any relief from the budget. Private sector workers and self-employed workers are also resentful.

The 2025 budget is not fundamentally different from the previous ones prepared under the ongoing IMF programme. It aligns with the parameters set by the IMF and the Economic Transformation Act (ETA). The fiscal and monetary targets set by the ETA are, among other things, maintaining a 2% primary account surplus, keeping government revenue at 15% of GDP, capping the current account deficit at less than 1% of GDP, limiting the debt-to-GDP ratio under 95%, maintaining an annual GDP growth rate of at least 5% and increasing the female labour force participation to 50%.

The NPP had to present the 2025 budget with only about two months to go before the local government polls. It has done its best to grant relief to the public, rekindle their hope and thereby retain popular support.  As for increasing its revenue to meet its expenditure commitments, the government is depending heavily on taxes to be levied on imported vehicles, and an 18% VAT on digital services, and increases in taxes on capital gains, cigarettes, liquor and casino. The budget is currently under the microscope; it is being examined from all possible angles in and outside the parliament, and the Opposition will do its utmost to pick as many holes as possible in it.

Presenting the budget on Monday, President Dissanayake took a swipe at the Opposition, which, he said, had predicted economic doom and gloom in case of the NPP’s victory in last year’s presidential and parliamentary elections. He said the NPP’s political rivals had claimed that an NPP government would nationalize all private ventures, leave the IMF programme, ruin the economy and cause Sri Lanka to be isolated internationally. He said the NPP had proved its critics wrong by continuing with the IMF programme, managing the economy properly, and winning over the international community. He apparently did not realize that his rebuke would prove counterproductive; it prompted SJB MP Dr. Harsha de Silva, a senior economist, to point out that the President had made an about-turn as the leader of the JVP, where the economy was concerned.

Harsha, during the budget debate on Tuesday (18), pointed out that the economic policies of the JVP and the NPP were chalk and cheese; the JVP advocated socialism and the NPP had embraced economic liberalism, which former had rejected lock, stock and barrel. Claiming that he could not find the right term for the economic model the JVP-led NPP had adopted, Harsha asked the government to describe it if possible. Minister of Labour and Deputy Minister of Economic Development Prof. Anil Jayantha Fernando lost no time in responding; he said the NPP was keeping abreast of the changing world and its economic policy was evolving. He asked the Opposition to wait for a few years and see what the NPP’s economic model was really like and suggest a name for it.

Despite the government’s rhetoric, Harsha has put his finger on a serious ideological issue that has the potential to have an adverse impact on the group dynamics of the JVP-led NPP coalition. The JVP ideology has undergone some changes over the years, and the outfit has come to terms with liberal economic policies although it displays pictures of Karl Marx, Lenin and others at its political events. It no longer cries slogans such as ‘Death to Capitalism and Victory to Socialism’. However, the JVP and the NPP do not see eye to eye on neoliberal economic policies, which are antithetical to the founding principles of the JVP, which emerged as an alternative to the traditional left in the mid-1960s. In fact, the JVP’s main attraction to the youth has been its socialist ideology and revolutionary zeal.

Today, the JVP in the NPP coalition has nothing radical to offer to the youth and the public at large. Hence, having compromised on its policies in the name of political power, the JVP has doubled down on its anti-corruption drive in a bid to retain its popular appeal, with the Opposition showing signs of recovering lost ground as evident from its ability to beat the NPP in elections to a considerable number of cooperative society elections during the past several weeks.

The JVP used the NPP as a vehicle to increase its appeal to the people who did not subscribe to its socialist policies and to garner votes. Its strategy worked, with millions of floating voters fed up with the main political parties and their offshoots, backing it in the last two elections and enabling it to capture state power. The JVP is the main constituent of the NPP, and other coalition partners are described as mere nameboards. The NPP however seems to have had a mellowing effect on the JVP’s core ideology.

The JVP offshoot, the Frontline Socialist Party (FSP) has lambasted the 2025 budget as the outcome of a neoliberal project, and condemned the JVP for having abandoned its socialist policies. FSP Spokesman Pubudu Jayagoda told reporters yesterday: “In 1978, when the UNP introduced its neoliberal economic agenda, its bitterest critic was the JVP. Now, the IMF programme is being carried out by the JVP’s leader!”

The FSP is apparently trying to drive a wedge between the JVP and the NPP in a bid to cause a split in the government.