Cash-strapped SLPP can’t afford Rs 229 bn package, says SJB

Top Samagi Jana Balavegaya (SJB) spokesperson and economic guru Dr. Harsha de Silva said yesterday the cash-strapped government couldn’t afford to provide a Rs 229 bn relief package at the moment. In response to The Island queries, Dr. de Silva has sent us the following statement: “The government is losing control of the economy. At this rate we will be a free fall fairly soon. Looks like they are hallucinating. The solution offered has absolutely no relevance to the problem we are facing. We are in a Balance of Payments crisis. We have no dollars. That’s the problem. Fixing it with a swap here and a credit line there is nothing but plaster solutions. We need real reform. I doubt anyone but ourselves can help us now. It’s too late.

 But instead of addressing that, other than to say in the Cabinet Paper that the country can absorb an adjustment of the LKR to market rates (which they estimate at Rs 230 to the USD) on a completely flawed logic and therefore it must be artificially held at 200 and VAT cannot be adjusted (to what it was), they have introduced this relief package.

 Well, the people are feeling the high cost of living. Official Inflation is double digit after 13 years and food inflation is 22%. Unofficially it’s almost double that. So, yes people need help. Mind you this was created by this government. Two major wrong deductions. One, unprecedented and unnecessary tax cuts in Dec 2019. Two, a totally destructive ban of fertilizer. These had nothing to do with the pandemic. Yea the pandemic has an impact but these two decisions are what brought us to this almost bankrupt situation.

 Anyway, since no supplementary estimates can now be brought to Parliament (passed by 2/3 this budget) and he says no taxes will be increased the question is where is the LKR 229b going to come from? Unless they cut capital expenditure, where will they find the money? But it is almost guaranteed they will not do so, including the LKR 100b to be dished out to local government members to prepare for LG elections. So ultimately the Central Bank will end up printing all this money.

 We now are the lucky recipients of the fabulous outcomes of two years of money printing Modern Monetary Theory experiment. This round of printing will only exacerbate the problem by starting a wage-price inflation spiral. Almost text book style, if anyone in their government wishes to consult a basic Economics text.

We are heading for disaster.”