Sumanthiran says FT report incorrect

With reference to yesterday’s Daily FT article titled ‘Budget bungled?’ TNA MP and Committee on Public Finance Chairman M.A. Sumanthiran held the view that the opening paragraph was misleading.

Following is Sumanthiran’s observation made in Parliament yesterday:

“I presented a Report yesterday of the Committee on Public Finance. I found this morning that the Daily FT newspaper has led with the story ‘Budget bungled?’ and the first paragraph is misleading. It is actually the opposite of what has been said in this Report. 

“It states, I quote: ‘Committee on Public Finance Chairman and Opposition lawmaker, M.A.Sumanthiran yesterday charged in Parliament that 2017 Budget presented by Finance Minister Ravi Karunanayake didn’t tally with the actual figures by which the Finance Ministry was working on.’

“That is totally false because I have explained in the introduction itself that the Minister relied on actual figures but those figures are not the figures that have been distributed in those three volumes; the redbooks and we have recommended that the actual figures be distributed at least during the Committee Stage Debate. So, this news item is totally misleading and mischievous and I urge the Hon. Speaker to take action on this.”

Editor’s Note: The Daily FT reproduces below the full text of the introduction of the COPF’s report which we based our opening paragraph. 

Report of the Committee on Public Finance

Introduction

The Committee on Public Finance (COPF) is mandated with the task of providing an assessment of the fiscal, financial and economic assumptions used as bases in arriving at the budget estimates within 4 days of the Budget being presented to Parliament. This report is written in fulfillment of that mandate, after the 2017 Budget was presented to Parliament on 10 November, 2016.

Sumanthiran...

At the outset the Committee makes note of some of the constraints and concerns encountered in the process of making this assessment. 

It was expected that the assessment would be based on the assumptions and explanations provided by the Ministry of Finance to the Committee on November 2, 2016, numbers provided in the 2017 Budget Speech and the 2017 Draft Budget Estimates provided to Parliament on November 10, 2016. 

However, when COPF was not able to rationalise some of the line breakdowns presented in the Draft Budget Estimates 2017 provided to Parliament with the Budget Speech or the prior assumptions and explanations provided to the Committee, it asked for clarification from the Ministry of Finance. On November 12 the Ministry of Finance then presented COPF with two A4 sheets that had another set of figures where the breakdown of the numbers was more accurately aligned with what was presented to Parliament in the budget speech, and significantly different from the Draft Budget Estimates 2017 that were presented to Parliament and the previous assumptions and explanations presented to COPF. These latest numbers will now be referred to as the “Estimates of 12.11.2016”.

Table 2 sets out the differences between the Estimates received by Parliament and the Estimates of 12.11.2016. As there are significant variations in the numbers received at different points the Committee has always tried to use the latest set of figures Estimates of 12.11.2016) and where these don’t provide information, it has fallen back first on the Budget Speech, and the Draft Budget Estimates 2017, in that order. The Committee has since November 12th re-worked assessment to use the best available data in this way.

This report is prepared under a challenging time-constraint of 4 days after the submission of the budget to Parliament; and has been further challenged by the underlying data being subject to change through the late submission to this Committee, by the Ministry of Finance, of its Estimates of 12.11.2016 that are the basis for numbers presented in the budget. Any errors and omissions that may arise consequently are regretted. This report should be used mainly to inform Parliament and improve access to relevant information and improve the Draft Budget Estimates. It cannot be expected to serve as a final and definitive analysis.

The Committee recommends that these Estimates of 12.11.2016 be tabled in Parliament prior to the commencement of the Committee Stage debate.

It is hoped that in the future the assumptions of the Ministry of Finance will be more realistic and be made transparent to Parliament.

The committee’s work has been assisted by independent experts who volunteered to give of their time expertise without remuneration for same. The committee wishes to thank Dr. (Mrs.) Anila Dias Bandaranaike, Mrs. Rose Cooray, Messrs Themiya Hurulle, Sarath Mayadunne and the team of economists working through Verité Research led by Dr. Nishan De Mel for their invaluable input and assistance.

Assessment

The assessment provided in this report is set out in two sections. Section I is an assessment on the revenue estimates in the budget. Section II is an assessment on the expenditure estimates of the budget.

The committee wishes to note these overall points with regard to the methodology and approach of its analysis and assessment.

All numbers in the assessment are discussed in current value terms (there is no inflation adjustment for different years).

When evaluating the projections from 2016 to 2017 the analysis has accepted, in the first instance, the Government’s view on inflation (normal growth in total output) as being 4% and growth in GDP (real growth in total output) as being 6.3% for 2017, as presented in the budget. The Committee has not attempted a sensitivity analysis with respect to possible variances in projected GDP growth.

When comparing the 2017 annual growth for various revenue estimates, the reference point used is the average growth during the period 2009 – 2014 (both years inclusive). 2015 figures were excluded.