Give And Take

Sri Lanka heads into the Sinhala and Tamil New Year at a time of difficulty and hardship unprecedented in our contemporary history. Covid 19 has cost us much, as it has cost nearly all countries in the planet. There have been claims that the worst is over and we continue to hope that this is correct. But that is not something that can be said with certainty. However a semblance of normalcy has returned although sections of the community, such as those dependent on tourism, continue to suffer hardship. Nobody can claim that the economy is in good shape with the rupee plunging to a historic low of Rs. 200 to the U.S. dollar. This must reflect both on the import bill and on external debt servicing and repayment. But tea prices remain good and the weather has been fair. While we can take comfort that we have not yet defaulted on our massive debt servicing and repayment obligations, the situation is far from rosy with our ability to raise new loans at interest rates that are not exorbitant declining by the day.

Although the ever-rising cost of living continues to impose hardship on both the poor and the middle class, this has been something that has been always with us for a very long time. Although incomes have grown, prices have grown much faster and we know too well that the value of money is now a fraction of what it was. This has particularly hurt savings and the prevailing low interest rates have dealt a kidney punch to large numbers of retired people dependent on interest income for their livelihood. While grumbling continues, people have learned to cope as best as they can. Despite all the negatives, the rulers continue to project a bold front. But there is no escaping the reality that the government has rapidly lost popularity since the last elections, both presidential and parliamentary.

No ban on New Year travel has been imposed although there are inherent risks, in the covid context, of large numbers of people going home to their villages from crowded urban centers they work in. This has been a long-held tradition and it would be a brave government that would interfere however much prudence dictates otherwise. While most people wear masks while moving around in public places, enforcing social distancing in crowded public transport will be next to impossible. Thus the powers that be have resorted to the easier way of leaving the choice to the good sense of the people rather than enforcing strict rules controlling movement. Although other countries have seen spikes of infection by being lenient on holiday travel, Sri Lanka will hopefully have better luck post avuruddhu.

We run on this page today a contribution from the Pathfinder Foundation of Mr. Milinda Moragoda, our High Commissioner-designate to New Delhi cautioning the government against taking too strong a stance on import substitution – a direction in which it is clearly moving. Given Moragoda’s political orientation, Pathfinder may be seen to be sticking its neck out by advocating a hemin hemin policy. Nobody would reasonably object to government imposing certain import bans to encourage local production as in the recent case of turmeric. There is no debate that we must grow crops that we can rather than import them. But governments must always strike the right balance between the interests of producers and consumers. When Prime Minister Dudley Senanayake pushed a massive food production drive during his 1965-70 government, he used to say at public meetings in agricultural areas that enormous foreign exchange expenditure was being incurred for the import of potatoes that some foreign experts had once-upon-a-time said cannot be economically grown here.

But Welimada farmers disproved them. Thereafter potatoes have been successfully grown even in Jaffna although we have not achieved self-sufficiency. “Why should we pay farmers in potato growing countries for their produce when we can pay that money to our own farmers?,” the prime minister used to ask. “But when we enforce a policy to ensure that our cultivators got the money flowing abroad, our opponents accuse the government of kicking the poor man’s ala hodda.” This was also true of chillies and onions where import substitution policies worked to benefit local farmers although at a cost to consumers. Jaffna farmers garlanding one-time Agriculture Minister Hector Kobbekaduwa with onions and chillies when he ran for president against J.R. Jayewardene was testimony to this policy. But it has not worked as successfully as it might have where local sugar production was concerned. Despite this country being endowed by conditions enabling sugar cane growing, we are nowhere near self-sufficiency although different governments have used tariff barriers to ensure better prices to domestic cane growers. Unfortunately we have a local sugar industry which makes more money out of its potable alcohol byproduct than from its sugar.

We have to be always conscious of the trade balance and cannot forget that Europe and the USA are the biggest markets for our garment industry. The ongoing restrictions on motor vehicle imports has no doubt saved us much foreign exchange but we cannot butter our bread on both sides by adopting one sided trade policies. That there must be give and take is a fact of life and it would be useful for the concerned authorities to take note of the Pathfinder perception that “openness to trade improves the tgrowth, employment and income trajectories of economies.”