Dire Predictions, Karmic Quirks, Solheim’s Return and Ranilnomics

by Rajan Philips

The Sri Lankan political class has a ‘measurement problem’ with the economic crisis in the country. Political leaders and organizations, specifically the current parliament, seem to be lacking in competence to come to terms with the magnitude of the current economic problem. This failure manifests itself in the same-old-same-old ways in which parliament is conducting itself, and in the President’s facile optimism that although the crisis is grave, the country has in him the man who is capable of overcoming it. The assumption, or even the fact, that Ranil Wickremesinghe is the only one in parliament who has a measure of the problem does not by itself reduce the magnitude of the problem or renders its solution any easier.

The inability to grasp the magnitude of the problem invariably leads to superficial responses, both internally and externally. The optimism on the external front involves the assumption that all the external support mechanisms to overcome the economic crisis will eventually and somehow fall into place. It is only a matter of time. So, give some time and slack to the President. If only the realities were so simple! Cabinet ministers and a good majority of MPs seem to be taking it for granted that the IMF agreement, China’s concessions, the overall restructuring of debt payments, and the reopening of channels for new FDI inflows – all these will somehow start happening.

Dire Predictions

This level of optimism is contrary to the global reality which in every sense involves a highly divided, dog-eat-dog world in which it is already a struggle for Sri Lanka to get the attention and priority it desperately needs. That desperation is not sinking into the heads of cabinet ministers and MPs who are waiting to become ministers. Again, the assumption, or even the fact, that in President Wickremesinghe Sri Lanka has a leader who can reach out and get help from any country in the world does not necessarily mean that help is on the way, in double quick time, and in amounts that help is needed at any given time.

Add to this the dire predictions about a global economic downturn for 2023, and the specific warning in the IMF’s biannual World Economic Outlook released last Tuesday. that “the worst is yet to come, and for many people 2023 will feel like a recession.” Sri Lanka’s situation, by any measurement, is worse than a recession. And releasing the Outlook report, the IMF’s director of research, Pierre-Olivier Gourinchas offered this admonition about low-income countries: “Too many low-income countries are in or close to debt distress. Progress towards orderly debt restructurings through the Group of Twenty’s Common Framework for the most affected is urgently needed to avert a wave of sovereign debt crisis. Time may be soon running out.”

Sri Lanka is well past the point of aversion. Its debt restructuring talks are virtually stalled over the impasse involving the debt owed to China. This week Washington is hosting the annual meetings of the IMF and the World Bank attended by finance officials and central bankers from around the world. How is Sri Lanka going to be prioritized in this climate? State Minister of Finance Shehan Semasinghe is providing ministerial representation for Sri Lanka at the Washington meetings. This is the pathetic level at which Sri Lanka’s economic literacy is being exhibited at world gatherings of finance ministers and experts. Not to be outdone at home, the full Cabinet of Ministers reportedly decided to have Sri Lanka formally downgraded from middle-income status to low-income status. It was left to the much learned Minister Bandula Gunawardana to make the announcement on behalf of the cabinet, only to have it shot down almost immediately by the President’s Media Division. Perhaps one might feel sorry for the President in all this, but then again all of this including the cabinet is his own making.

Karmic Quirks

For his part, the President addressed parliament again on October. When I read the Sunday Island’s editorial last week on the President’s statement to parliament and its banner-coverage by the Daily News, I could not help chuckling how the wheels of political karma have turned over the last fifty years. That is a long time in politics by any measure, but here we have the Lake House papers that were nationalized by an SLFP-led government in 1973 to rebuke the Wijewardenas and the Wickremesinghes, now feting the grandson of DR Wijewardena and the son of Esmond Wickremesinghe, who is also Sri Lanka’s most fortuitous, but not quite fortunate, Head of State and Head of Government.

There was another karmic quirk that occurred recently, figuring Tiran Alles, who was the alleged mastermind behind the equally alleged arrangement between the LTTE and Mahinda Rajapaksa in the 2005 presidential election that led to the infamous fatwa that stopped Tamils in the North and East from voting and precipitated the defeat of Ranil Wickremesinghe by the narrowest of margins. That was then, and now Tiran Alles as Minister of Public Security is said to have misled President Wickremesinghe into signing the abominably extraordinary gazette on High Security Zones. The gazette has been withdrawn and the President’s supporters have blamed the Minister and the over-zealous Defense Secretary for the gazette misadventure. But that does not wholly absolve the President, for he should have known better without asking for the Attorney General’s opinion and he should be held responsible for appointing and/or retaining the current crop of Ministers and Ministry Secretaries.

All these nuggets would have been great for polemic grinding in ordinary times. But we are not in ordinary times, but extraordinary times. Politics itself is extraordinarily different, and the underlying living experiences of the people are extraordinarily difficult. But the government and the SLPP Ministers and MPs in parliament are not at sensitized to the people’s difficulties and the country’s challenges. They have abdicated their responsibilities to the President in return for the President protecting their interests.

In his statement to parliament, the President confessed to being repetitive and said, “I would like to draw your attention to some of the challenges we face today in reviving the collapsed economy” … and insisted that “we have got to consider it over and over again since it would enable us to comprehend the real picture of the situation we are in today.” However, the President did not present in any great detail – what he called “the real picture” of the country’s economy. And to the point of this article, the President’s address was full of words but there were no numbers – either about the severity of Sri Lanka’s debt problems, or about the timelines for their restructuring and repayments. Instead, he papered over the economic crimes of the Rajapaksas, and berated unnamed “groups” for apparently wanting to destroy the economy in order to capture political power.

The return of Solheim

Obviously, the President was having in mind the JVP whom he could not publicly scold after being with the JVP in the yahapalanaya government. His target group of course is the Frontline Socialist Party, which too the President chose not to name, perhaps out of deference to the JVP. Once again, the President reminded the country that he “embarked on this journey taking a huge risk … at a time when no other political party or leader of the opposition would accept this risk” … and requested all parliamentarians “to join a common program to build the country through the National Assembly of Parliament, “Jana Sabhava” which is to be established soon, and Parliamentary Sectoral Committees.”

The President has got himself into a habit of calling, at one moment, all MPs to join him, and then flying off the handle quite immediately and threatening to call a referendum unless parliament acts soon enough according to his timetable, which nobody knows. His latest referendum threat involves the Local Government elections. Few weeks earlier it was all about parliament coming to a consensus about enacting new election laws after sitting on them for nearly ten years. Now out of the blues comes the extraordinary announcement that the President has appointed former Norwegian Minister Erik Solheim as his “International Climate Adviser.”

It is not quite out of the blues when you hear from Mr. Solheim himself, how this appointment came about. According to his email exchange with the Daily Mirror, “My old friend Ranil Wickremesinghe invited me to visit Sri Lanka and asked me to be his International Climate Adviser. I am looking forward to working closely with the President and his great team on how to assist Sri Lanka to find a green pathway out of the economic crisis. Renewable energy, electric mobility, tree planting, green agriculture and ecotourism all offer huge opportunities for jobs and prosperity while taking good care of Mother Earth at the same time.” Is this another turn of the wheel of karma?

Not surprisingly, Mr. Solheim has called “the proposal for a university on climate science in Sri Lanka a brilliant idea,” and noted that “Sri Lanka has a very rich intellectual tradition and can establish a hub for climate science – working closely with other Indian Ocean nations and the rest of the world.” What can you say, except ask, what are friends for? Even when your country is struggling to feed its children. Why did not the President think of appointing Mr. Solheim as his international adviser to prevent malnutrition among Sri Lanka’s children? That would have been a little less indefensible.

Ranilnomics

Through all these distractions, Mr. Wickremesinghe’s ultimate reason for being President is his assumed ability to lead Sri Lanka’s economic recovery. In his many statements since “embarking on this journey taking a huge risk,” first as crisis Prime Minister and now as redeemer President, Ranil Wickremesinghe has been outlining his approach to overcoming Sri Lanka’s economic problems. Dr. W.A Wijewardena, a former Deputy Governor of the Central Bank and a frequent writer of expert articles on practical economics, has described Mr. Wickremesinghe’s approach in summary as “Ranilnomics.”

Ranilnomics is the Wickremesinghe version of “social market economy policy” that was first tried in postwar Germany. As described by Dr. Wijewardena, it was “an attempt at finding a middle path between pure capitalism and extreme socialism.” Mr. Wickremesinghe has been elaborating on this for some time – first as half-powerful Prime Minister in the yahapalana government and now as all-powerful president in a post-Rajapaksa government. Given Mr. Wickremesinghe’s somewhat long association with ‘social market economy’ (SME) and predating the current economic crisis, the SME approach is not an automatic toolbox with all or most of the tools that might be appropriate for use in the current situation.

In fact, there is no such ready made toolbox, but there are enough economists in Sri Lanka who would be able to provide consistent advice to the government. The President has occasionally referred to experts offering voluntary advice and support to him and to the government. If so, why is it that their involvement is not made public or channeled through formal institutional arrangements? Ever since public protests broke out against the Rajapaksa regime, expectations arose that outside experts would be brought into parliament and cabinet through the National List avenue. The JVP and some of the opposition parties were prepared to sacrifice their MPs to create openings for outside experts to enter parliament and then the cabinet. Of course, that would be anathema to SLPP MPs.

But why has not the President done anything to bring in outside experts as MPs and make them ministers? Instead, there is Shehan Semasinghe, State of Minister of Finance, doing the honours for Sri Lanka at the IMF and the World Bank in Washington. There is Bandula Gunawardene always talking out of turn in Colombo, and the whole cabinet seriously deciding to formally downgrade Sri Lanka from middle-income status to low income status. In all the reporting of interventions by other countries and international agencies, there seems to be an emerging focus on helping vulnerable sections meeting their basic needs and helping children avoid malnutrition.

There might be financial and material support to prevent severe food shortages and malnutrition, but no easy way out for the government to get an IMF agreement on track and to reach agreement on a debt restructuring package. That would be just rewards for a government that in spite of having a new President has learnt nothing and forgotten everything from the exit passage of the Rajapaksa family. Unfortunately, the people will have to suffer collateral damages but they will have their turn, hopefully sooner than later, to vote the present rascals out and elect a new parliament that will have credibility both within and outside the country.