“Treasury Secretary should be above politics”

Former Treasury Secretary says “We are a ship to mouth economy;” wants revisiting of accountability rules to involve politicians

Q: You were handpicked for the post of Treasury Secretary during the UNP regime. Can you recall the main challenges you faced and how you overcame them?

A: I had worked in government from 1977 to 1994, when I reverted to the private sector, in assignments ranging from director general of Youth Services, commissioner general for Essential Services, managing director of the Janasaviya Trust Fund (now operating under the name National Development Trust Fund ) and secretary to four different ministries. So I was not new to government service.

The main challenge was that the country, for the first time in its recorded history, was on negative growth, had a huge deficit, high inflation, had six-hour power cuts, the exchange rate was out of control, had a bloated government and was at war. All these issues were systematically addressed.

Q: What were the key initiatives you would recall as being most significant during your tenure and why?

A: The government being able to get a peace process started, bringing down inflation and the interest rate, holding the exchange rate steady, cutting the deficit, controlling the numbers on the government payroll and restoring power supply.

Q: How would you describe the job – does it come under severe political pressure or is it a fulfilling experience?

A: It is possibly the most stressful job in government. Ever since the 1972 Constitution brought the Public Service under the control of the cabinet of ministers, political interference has been given a new status. It was fulfilling to watch how the economy responded to the economic fundamentals being corrected and growth bouncing back.

Q: How did you balance political interest versus accountability in the backdrop of being answerable to Parliament on prudential fiscal management?

A: Secretaries to ministries are the chief accounting officers to the Public Accounts Committee and to Parliament. The Auditor General does an ex post facto compliance audit, for which public officers are accountable.

In today’s political context it would be sensible to revisit this Anglo Saxon concept of accountability for tax payers’ money, and involve the accountability of politicians for orders, instructions and decisions given by them.

Also, a comprehensive management and value for money audit would be much more useful. Other institutions for financial management, such as internal audits, tender boards and technical evaluation committees should be allowed to work at optimum.

Where public expenditure exceeds tax revenue by such a large amount as in this country, and the expansion of government seems unstoppable, it is not practical to talk about ‘prudential fiscal management’ within today’s financial governance structures.

Q: People always feel that because the Treasury Secretary is held accountable, even politicians’ faults are landed on the Treasury Secretary, including trade union problems. Is being Treasury Secretary a terrible job? Do you think the Minister should be held responsible instead?

A: As I have said – it is probably the most stressful job in government. The relationship with the minister depends on the people you have to work with, and I was very fortunate in having a gentleman of the calibre of K.N. Choksy as the Minister.

As I have said before, there is a strong case for revisiting the accountability rules to involve politicians, when they may have clearly directed the decisions which are subject to review.

Q: Is being Treasury Secretary a balancing act? In your opinion, how should a Treasury Secretary conduct himself?

A: It is a position of trust; you are responsible for tax payers’ money, loans/grants given by tax payers of other countries and borrowing, which have to be repaid by tax payers. You have to be above politics.

Q: Of late, the Treasury has come under severe attack for mismanaging the economy, especially the fiscal issues, and not improving the macro economic fundamentals. This government appears to be focusing on high spending. Is it a fair criticism?

A: Where the difference between government revenue and government expenditure is so high, it is not practical to talk about fiscal responsibility – especially when we have a huge welfare bill, heavy cost of government, are financing a war and have high debt service.

Q: It was during your tenure that the Fiscal Responsibility Act was introduced. Ever since, successive governments have failed to achieve the annual targets. Can you explain why?

A: In retrospect, with hindsight, the Act should have had more teeth, for example, a balanced budget provision which needed a two-thirds majority to override.

Q: As former Treasury Secretary, in your opinion what are the most pressing issues the economy is facing at present?

A: Bring inflation, which is a tax on the poor, down; bring the deficit, which is a tax on unborn generations, down; bring down interest rates to enable entrepreneurs to borrow at reasonable rates and create employment. Since we are a ship to mouth economy, hold the exchange rate at a reasonable amount.

Q: Could you list the core challenges that the Treasury is facing at present, as well as in the medium term?

A: Curtailing wasteful expenditure at all levels of government, holding down the size and cost of government, increasing revenue, and targeting welfare expenditure better.

Q: What are your views on the independence of the Treasury Secretary?

A: The Treasury Secretary should be above politics, appointed by the Public Service Commission, duly appointed by the Constitutional Council, in compliance with the 17th Amendment to the Constitution. Indeed, this should apply to all senior posts in the public sector.

Ideally, the only task of the Treasury Secretary should be fiscal management; all ancillary tasks such as supervising state banks, etc., are a distraction. The Treasury Secretary should not serve on the Monetary Board, to allow the Central Bank to carry out its statutory duties unhindered.

Q: There is speculation that the government may bring in someone from out of the public sector as Treasury Secretary. Should the job of Treasury Secretary be reserved for senior and capable public servants? What are your views on bringing someone from the private sector?

A: This is fundamentally a governance issue; you need someone in that post who will do the right thing, the right way, at the right time. It does not matter whether his/her experience is within government or business. It must be a person who is willing to listen to all points of view and take a timely decision, for which he or she alone is finally accountable. There is no magic wand.