Says an independent Finance Minister can lead the way for better management of public finances
Independent policy think tank Advocata has welcomed the appointment of a full-time Finance Minister, saying an independent incumbent can lead the way for better management of public finances.
It noted that for 23 of the last 30 years the Head of Government in Sri Lanka had simultaneously held the title of Minister of Finance, but that “experience shows that combining the two roles is usually a big mistake as the job of the Head of Government is already very demanding”.
“It is almost impossible for any one person to combine that with being an effective Minister of Finance,” Advocata said. “The tasks associated with being the Head of Government almost always gain priority. Secondly, an effective Minister of Finance needs to maintain fiscal discipline by resisting pressures from the political office. The Head of Government, who is also the head of a party or coalition, cannot simultaneously meet this requirement due to such conflicting priorities.”
According to Advocata, analysis of Sri Lanka’s public finances further provides convincing evidence that the absence of a dedicated Minister of Finance has undermined revenue collection.
It said, from post-independence to around 1990, Sri Lanka’s tax revenue averaged over 20%. At present, Sri Lanka has one of the lowest income tax rates compared to peer countries, as well as a tax threshold which is several times its GDP (Gross Domestic Product) per capita.
(FT)