The debate against seeking IMF assistance was always flawed

by Sanjeewa Jayaweera

Despite the country being amid an economic Armageddon, a few individuals from the “old left” are still talking and writing nonsense. Prof. Tissa Vitarana (TV) and Vasudeva Nanayakkara (VN), both MPs, have expressed their vehement opposition to seeking a financial arrangement with the International Monetary Fund (IMF). It is a fact that neither gentleman represents the voice of the people. One is in parliament through the national list because he was otherwise un-electable and the other also needed accomodation from the SLPP to get returned. They should have gracefully retired from parliament long ago and allowed younger politicians to take their positions. I suppose wielding even limited political power is an aphrodisiac for even the most committed socialist!

A few other armchair writers have also expressed their opposition to seeking IMF assistance and critiquing neo-liberal economic theory. However, I am confident that many of them have never owned or managed an enterprise and been responsible for generating employment, managing cash flow, ensuring the sustainability of the business and other challenges that an entrepreneur has to overcome. What is theorized when not in a position of authority versus the realities when in power are poles apart.

Punish the Gang of Four for their mistakes

It is now widely accepted that the former Governors of the Central Bank, Professor W D Lakshman and Nivard Cabraal, and the Treasury Secretary S.R. Attygalle and P B Jayasundara, the Secretary to the President (Gang of Four), are responsible for the economic catastrophe that we are currently enduring. The so-called “homegrown” solution they spoke about never materialized.

Their policy decisions to reduce taxes, print money, and maintain low-interest rates and a forced exchange rate that was unrealistic are now acknowledged by many as the cause of the destruction of the country’s economy and the immense suffering we are undergoing. They steadfastly refused to seek the assistance of the IMF and restructure the foreign currency debt. Those who argued against such policies were ignored and labeled as “doomsday advocates.” The international rating agencies were criticized for downgrading the country’s credit rating. It is unfortunate that Ali Sabry, the current Finance Minister, is only now acknowledging the many mistakes made by the government. A case of closing the stable door after the horse has bolted.

In my view, the Gang of Four must be charged and prosecuted in a court of law for crimes against humanity. Undoubtedly, they failed as public servants in discharging their fiduciary duties. Unlike our uneducated politicians, they had a formal university/professional education, and as such, their guilt for the mistakes made and for the suffering we are undergoing is inexcusable.

Anura Priyadarshana Yapa, MP, stated in parliament that the decision to float the rupee overnight without having the tools to defend it had been taken unilaterally despite the IMF and other experts insisting that it be done gradually. Whenever there was mention that GOSL was contemplating going to the IMF, Cabraal would issue a Twitter message stating that was not the case. He insisted on paying US $ 500 million of International Sovereign Bonds that matured in January 2022 despite many independent economists and corporate sector leaders saying that the money should be preserved for the people. There needs to be an enquiry as to why the ISBs were settled and why the rupee was floated overnight. In addition, The Institute of Chartered Accountants of Sri Lanka needs to seriously consider debarring the membership of Cabraal for bringing disrepute to the Institute.

Why the President and PM should resign

There is no doubt that the President, Prime Minister, and the Cabinet need to accept full responsibility for the disaster that has befallen the country. Attempting to wash their hands off by stating that the Gang of Four is responsible will not do. Their incompetence and arrogance have resulted in causing so much anguish and suffering to the people. The goodwill and even adulation that existed for the President and the PM for ending the civil war has been replaced with anger and hatred. To believe otherwise would be a monumental mistake.

Many independent experts from inception criticized the decision to ban chemical fertilizers and forewarned the severe consequences. However, their views were ignored and ridiculed. It is not good enough to say, “yes, I agree that I made a mistake”, but “let’s look for the solutions and not who was responsible for the mistakes.”

Many believe that the mistakes made are due to a lack of economic and financial knowledge and incompetence. The need of the hour is to accept responsibility for the errors made and resign so that competent people can take over. Similar to the Gang of Four, politicians too should be subjected to a commission of inquiry and punished for crimes ranging from incompetence to corruption.

Retrenching and re-skilling surplus public sector employees

The debate against seeking IMF assistance in view was always flawed. It is common sense that if your expenses consistently exceed your revenue, you need to reduce the expenditure whether the IMF mandates it or not. When reduced during an economic upheaval, government expenditure is referred to as “austerity”, a dirty word to those on the left. That austerity measures are needed due to reckless spending is conveniently forgotten. Many who have been responsible for managing the bottom line of an enterprise know that if 80 per cent of the revenue is spent on salaries, then there is no other option than going bankrupt unless steps are taken to reduce the expenditure.

In Sri Lanka, we face this predicament because successive governments gave nonexistent government jobs to party supporters and graduates unable or refusing to fit into the private sector. The inducement for seeking a government job ranges from a lifetime non-contributory pension, poor work ethic and lack of accountability for non-performance.

I came across a research document a couple of years back where it was disclosed that there are 320,000 peons and drivers in the public sector accounting for 17 per cent of the workforce. That the peons are non-productive is a fact as maybe most drivers. It is also stated that of the 1.5 million public servants, the country’s requirement is for only 800,000. In all probability, it could be pruned down further if better productivity is achieved. The question is whether the government will continue to employ the surplus workforce or steps taken to retrench and reskill them in the areas that require them.

During my tenure in the private sector, I was involved in both the manufacturing and retail industries, where there was a significant shortage of human resources. Similarly, the construction and garment industries also face a chronic labour shortage. Those who are surplus and are retrenched and reskilled will need to come to terms with a change in work practices. The need to work shifts requires either reporting to work by 7 a.m. or finishing work at 10 p.m. In addition, they will need to work weekends and even public holidays. The question is, how many of our people are prepared to do the hard grind?

There will also be a need for employers to re-look at the wage structure and raise the minimum wages. That there will be no lifetime pension, but only a provident fund contributed by the employer and the employee accumulated during the period of employment will be another discipline that needs to be learnt. That the provident fund collected on retirement needs to be prudently invested and managed will hopefully enhance the financial acumen of the average citizen.

My comments are based on actual experiences during my working career and discussions with others involved in the business. For example, I recall the owner of a construction company who was building a factory lamenting that he had a daily shortfall of about 150 labourers and that many skilled workers such as masons, electricians and plumbers had given up working in the industry to be three-wheeler drivers.

The folly of not pricing at cost

It is only now that the folly of not pricing fuel, electricity, and gas at least at cost is acknowledged by all and sundry. That the country’s long-term economic well-being was subordinated as politicians feared actions to increase prices would result in them losing the next election was lost among the electorate. Despite spiraling world prices, we all got used to driving our vehicles to the petrol stations whenever we wanted and pumped whatever we wanted. Similarly, we were happy and contented that electricity tariffs were not adjusted for eight long years despite the Ceylon Electricity Board losing billions.

When there was a shortfall of hydro and coal power, we expected the government to supply uninterrupted electricity at whatever cost and believed that a surcharge to recover the additional cost should not be implemented. When gas prices soared, we expected the additional cost not to be passed on to us. The rich and the middle class were happy to accept and enjoy lower income tax rates despite knowing that reducing taxes without an appropriate reduction in expenses would result in a financial crisis. Why worry when it is someone else’s problem!

The mistakes made by us, the electorate, over several decades are now truly upon us. The disclosure by the finance minister in his recent parliamentary speech that the country has only about US $ 50 million usable foreign reserves sent shivers down my spine. That we will need to beg and borrow to just survive from all and sundry is indeed a fact. However, I doubt that many still understand how serious is our predicament. That life will get even more unbearable is as sure as the sun will rise tomorrow. So to all those who still pontificate that we should not go to the IMF, my message is “just grow up.”