Time for finance professionals to step up – by Aubrey Joachim
Now is an opportunity for finance professionals and finance bodies to redeem themselves and proactively do what is required of them to bring Sri Lanka back on track, emerge from the economic doldrums and maybe realise those lofty visions of economic grandiose
Source:FT
The long awaited IMF bailout package has finally materialised – although just! Only the first tranche of the $ 2.9 billion loan has been released with some $ 333 million reaching the Central Bank coffers a few weeks ago. The balance will drip feed over the next four years – subject to regular six monthly IMF audits to check if the country is adhering to the strict conditions attached to granting of the loan. This is the 17th time that an IMF bailout has been granted to Sri Lanka with a number of them being aborted in the past.
While the total sum – $ 2.9 billion, is only a small fraction of the country’s huge debt burden it is seen as the key to unlocking other external lines of credit that will go a long way into reviving the shattered economy of the country. However, further unrestricted borrowings alone will not solve the country’s woes. It will only make things worse. An important point to be realised is that the way to get out the economic mess and bring back a semblance of normalcy before the grandiose visions of reaching the heights of economic success – as other countries have – is to fundamentally transform some of the inherent mindsets and behaviours, undo bad policies, re-examine monetary and fiscal policies, thoroughly examine the role of government in business ventures and significantly improve the productivity of the nation across public and private enterprises.
The IMF in its in-depth analysis of Sri Lanka’s position has made some key recommendations – in fact set these as non-negotiable requirements. A total overhaul of the tax system to not only increase the tax rates but also to widen the tax net and introduce new forms of taxation which have hitherto been unheard of in the country. This is fundamentally to balance – to some extent – the fiscal budget. Other requirements in this context are to do away with subsidies on a number of basic necessities such as electricity, petroleum products, etc.
Another area that the Government will need to consider is the burgeoning public sector wage bill and therefore seriously look at staffing of the public sector. A huge drain on the public purse has been the major loss-making State Owned Enterprises (SOEs). Efforts to turn around these organisations in the past have been a dismal failure and therefore the only alternative is to privatise these ventures. The most challenging of all the IMF requirements is to do with eliminating corruption. This aspect most certainly refers to the entire spectrum from top to bottom of governance, public administration and across the population. In simple terms a ‘system change’.
It is widely recognised that the IMF in one sweep has done – or is trying to do – what successive governments over decades have failed to achieve. Only time will tell if the 17th is another failed IMF bailout attempt. It is in this context that the country’s finance professionals – aka accountants, have a major role to play. While the economists, financial wizards and consultants theorise and strategise, it is the role of the accountants as keepers of the public trust to ensure that they are the eyes and ears observing what is happening and hold those who need to deliver to account.
Finance professionals have traditionally been the stewards and controllers supporting good governance. As keepers of organisational data they have the opportunity to observe first-hand what is happening in organisations, where the funds are flowing, are costs in line with accepted benchmarks, budgets being achieved, strategy being executed, performance managed and results achieved. In their reporting role and performance management roles they must provide decision support to organisational leaders and influence correct decisions and choices. Today’s modern finance professionals have enhanced skills and competencies in the use of data and analytics to dynamically observe and manage situations to bring to light any anomalies in governance, cost management, risk management and even fraud detection.
An important and topical area that the finance function and finance bodies are required to get into is the area of sustainability and ESG. A major requirement of global funding agencies such as the IMF, World Bank and Asian Development Bank will be green and eco-friendly initiatives and the investment in areas such as renewables. Finance professionals will not only have a reporting role in such pursuits but can also contribute in areas such as carbon costing and contributing to business case development.
Public financial management is an area that accountants have long played an important role. It would be absolutely essential for finance professionals in the public sector to totally change their mindsets from merely being passive observers to contributing to improving the efficiency of these organisations be they public service organisations or SOEs. They must take on strategic and leadership roles in these organisations, demonstrate their finance business partnering skills and challenge inappropriate decisions. They must develop and exercise the confidence that their qualifications provide them with.
Important traits of good finance professionals are ethical behaviour and professional scepticism. These characteristics will be of paramount importance if the IMF’s requirement in respect of corruption is to be monitored and achieved. The ‘G’ in ESG refers to corruption and the International Federation of Accountants (IFAC) suggests that accountants must play a key role in supporting public financial management and fighting corruption. Specific areas that finance professionals can monitor are money laundering, inappropriate transfer pricing arrangements, etc. As is well known such practices have played a major part in how and where Sri Lanka has got to today. It is widely recognised that Sri Lanka has the highest concentration of accountants in the world with such finance professionals qualified with both local accounting bodies as well as the major global accounting bodies. Sadly, many qualified Sri Lankan accountants have chosen to leave their motherland not only for personal economic reasons but also out of frustration at not being allowed to exercise their independence and integrity in contributing to delivering the right outcomes. In the current climate however, many are leaving due to the sad plight of the country.
During the country’s slippery slope down the economic decline over the past decades, the accountants could be seen as having aided and abetted by their silence and passive demeanour. Now is an opportunity for finance professionals and finance bodies to redeem themselves and proactively do what is required of them to bring Sri Lanka back on track, emerge from the economic doldrums and maybe realise those lofty visions of economic grandiose.
(The writer is a Sri Lankan expat who is an Australian citizen and is a past Global President of the Chartered Institute of Management Accountants (CIMA) UK.)
