Sri Lanka: Why is no one talking about an ‘insolvent’ economy?

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N Sathiya Moorthy  3 September 2019 

The irony of Sri Lanka in the second decade of the second millennium is that everyone can blame everyone else without having to acknowledge his own contribution or owning up his share of the blame. It extends from corruption, to lawlessness to democracy-threats and the elimination of ethnic Tamil innocent in the course of the LTTE war – real and/or perceived, all under the previous Rajapaksa regime.

The more recent one is JHU Minister Patalai Champika Ranawaka (PCR), who has said that the Government would go insolvent by September if it did not pay up commercial borrowings from the past. Thankfully for the common man, he explained in the case of borrowings from nations like Japan or China, repayment could be re-negotiated, meaning an extension should be sought and obtained, but not in the case of commercial borrowings.

Such a scenario, on the face of it, could rock the Sri Lankan rupee even more than already. The economy could face a worse collapse than already before the D-date arrived. The stock market and the forex figures may begin telling their own stories from now on, as a Minister who is otherwise seen also as serious and non-frivolous may have spoken the truth, after all.

Now the job before the Government is multi-fold. First and foremost, tell the people, the true situation and prepare them for the worst, if Minister Ranawaka’s public statement is true. Then, prepare the economy to face the reality, and do what Greece and the rest may have done to save the situation (though not face). Minister Ranawaka did mention the name of Greece and others, but only to say that Sri Lanka may go down the barrel the same way, before you say, ‘Cheese’.

Greater irony

The greater irony is that Prime Minister Ranil Wickremesinghe is not talking about it. Finance Minister Mangala Samaraweera is talking more and more about Sajith Premadasa’s presidential nomination, not about the state of the economy. He could well use all his designer skills at least to make a soft-landing of the rude shock on the people, from investors and industrialists, to job-seekers and housewives.

If Ranawaka is telling the truth, the whole truth and nothing but the truth, then no one is going to be spared of fall-out, and no one can hope to recover from the shock in the near-future. It could be Sri Lanka’s ‘great depression’ and ‘economic melt-down’ rolled into one. Unless the US and the rest of the West, smaller economies like Sri Lanka’s do not have inherent resilience and/or institutional mechanisms to bounce back, even if through the medium-term only.

The irony is that constitutionally-mandated authorities like the Central Bank and the Auditor-General are also not talking about it. Parliament is busy with fixing political responsibility (it would seem) for the Easter Day blasts, and shouting at each other, dating it all back to the days of Adam and Eve. Even if there is an iota of truth in Minister Ranaswaka’s statement, would it be right and proper for the Judiciary to take suo motu cognisance of the same, as the wider ramifications are a threat to the nation’s constitutional scheme and sovereignty

True, the courts may not have the solutions. Better still, the courts better not come up with solutions. The economy is as complex as jurisprudence and it is better to leave it to the experts to sort out. Yet, if required, the Judiciary should act as the voice of the people, if only to make the Government to share the truth with the nation. Accountability and the rest can wait – anyway, who in the nation cares anymore for ‘accountability’, whether it is of the ‘war crimes’ kind or the ‘Central Bank bonds scam’ type!

As is his wont, President Sirisena, if Minister Ranawaka’s statement is brought to his notice and the seriousness underlined, could be expected to appoint yet another commission to probe the mishandling of the economy.  No one should be surprised if it had already happened, before this column gets to be read. If so, as is its wont, the commission, in turn, won’t be prescribing solutions, but stop with selecting political mud-slinging, for discomforting leaks at convenient or not-so-convenient times.

‘Collective irresponsibility’

As always, Ranawaka has behaved as if he were not a senior member of the Rajapaksa team, and that he had nothing to do with the mess created by the Mahinda Government. There is of course Minister Rajitha Senaratne, who outsmarts and out-beats Ranawaka, in this selective blame-game, convinced as he were that he was possibly not even born when Rajapaksas ran amuck all round, 2005-15.

In comparison, Sirisena said a few things in the run-up to his election and afterwards, but only for a while. It may or may not owe to his own sense of ‘collective irresponsibility’, as a senior ministerial and political aide of President Rajapaksa. As President chairing Cabinet meetings, he did not seem to have shared the same sense of collective responsibility while passing all those papers and resolutions that facilitated the ‘bonds scam’. If the Presidential Commission Report on the scam had ever made any such reference, the nation is not made aware of the same.

Among the major political players, the UNP is seen as better managers of the economy than the SLFP, and also the SLPP, now. PM Wickremesinghe is seen as being streets ahead of Sirisena and Rajapaksas and everyone else put together in that one department – though facts should put them only on part. Maybe, Wickremesinghe and the UNP are more sophisticated in packaging their failings that the rest, whose constituency anyway is perceived as not bothered about larger aspects of economics and economy.

In the present circumstances, it is not only Finance Minister Mangala S is not talking about the economy, but even an economist-turned politician like Harsh de Silva and those others like Eran Wickremaratne and Malik Smarawickrama too are talking only of Sajith Premadasa’s nomination. The question is if they have kept themselves abreast of what is happening to the nation’s economy or have already given up on it all, already?

Not my cuppa

It looks s if everyone in the UNP-led Government seems to be thinking that economy is not only not their cup of tea but also not their responsibility – possibly even of the collective responsibility of the Cabinet.  The worse thing about it all is, PM Wickremesinghe seems to have come to that conclusion. At the turn of September, when Ranawaka’s fears are supposed to come true, the PM will be beginning the month with an official visit to neighbouring Maldives – otherwise known for its ‘holiday resorts’….

It is also equally likely that Minister Ranawaka was not telling the whole truth about repayment possibilities, or did not know about them. Either way, if he was not telling the truth or even the whole truth, it is incumbent upon PM Wickremesinghe to take him to task If nothing else, Ranawaka was exploding the nation’s ‘greatest secret’.  If nothing else, he should be asked to apologise to the nation – if his information was wrong, and the Government should reassure the nation in the reverse.

In context, it would be necessary to go back in time and ask what kind of Belgian contract that the current Government stuck or came unstuck in its bid for ‘commercial borrowings’ not long after coming to power. How much of it Minister Ranawaka knew, or sought to know? How much of it President Sirisena knew, or sought to know – also as the Head of State, Head of Cabinet, etc, etc?

Consensus agenda

The Sri Lankan tragedy is that after the interim socialist agenda of the SLFP since the mid-fifties, UNP’s market capitalism found a greater foothold than in the first innings, from the seventies on. It destroyed the nation’s traditional sectors, including agriculture and animal husbandry, encouraging what was wantonly tom-tomed as ‘cheaper imports’. Local milk production suffered and a whole new generation has grown, especially in urban areas, with the belief that milk power made by some machine in Australia or New Zealand, possibly using air as the only raw material.

Sri Lanka’s is not an industrial economy. Had it suffered in the Second World War as Japan did at Hirshima and Nagasaki, a guilty West led by a guiltier US might have ushered in development. Instead, what the nation got was development from borrowed monies, first from iMF-World Bank and later China. Had IMF and World Bank accepted ‘debt-for-equity transfer’, may be there would not have been any Sri Lanka left for pledging and transferring to China.

Independent of the political mess that leaderships created for the economy, the basis issues remain unattended. For a time, maybe economic theorists well-versed in local conditions and needs may have to come up with a ‘Sri Lankan solution’ to Sri Lanka’s problem. The problem here is you only have a failed ‘Soviet model’ and an ever-failing-never-falling capitalist model.

As may be recalled from the 2005 presidential poll campaign, rival candidates in Rajapaksa and Wickremesinghe were competing with each other in not making the domestic economy resilient and self-sustaining. Instead, they were talking about who would help send a higher number of Sri Lankan women overseas as ‘house-maids’ during their tenure as president, if elected. The figure ran into hundreds of thousands

If Rajapaksa’s ‘Mahinda Chintanaya’ proposed five hubs for development in specific areas, the UNP rival also seems to be following it without branding it. To the extent, there seems to be a ‘consensus agenda’, well thought-out or not, yet when it came to implementation, they both have tweaked it this way and that way to present the other as a failure. The fact is both parties have failed the nation, almost systematically and as if wantonly.

This current irony of systems adopting a common agenda, as under western democratic models, and still failing them is at the crux of Sri Lanka’s economic failures since Independence. If anything, it is this that requires an independent commission to probe and report and come up with recommendations for the future. But then, is there a non-partisan economist in the country, who can be tasked to do that probing, and report back to the nation?

The article appeared in the Ceylon Today on 3 September 2019 

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