Features
The economy has collapsed
by Kumar David
Polite commentators are bashful and write in the future tense. They avoid the present and prefer “on edge”, “critical” and “reeling”, but this is asinine. It has already happened; all that is pending are food riots. “The president (of Sri Lanka) appealed to visiting Chinese foreign minister Wang Yi that it would be a great relief if debt payments could be rescheduled in view of the economic crisis” reported the Guardian (UK) on January 10, 2022. When a country begs for debt rescheduling it means that it is up the gum-tree, broke, can’t pay up; rescheduling is defaulting, politely. A few in the opposition have appealed for default.
The Island of 31 January said “Sumanthiran leads an MPs’ call: Postpone debt repayment”. Well Abraham wake up; it has happened. The government has affirmed all but officially that it has declared bankruptcy; there is no other interpretation of a plea for rescheduling addressed to the creditor holding 10% ($3.4 billion) of our foreign debt. Nearly half (47%) of Lanka’s foreign debt is to commercial markets and default cum restructuring will entail increase in interest rates on the amounts outstanding and it will pile on future pain. Interest rates the world over are on the up, Central Banks are tightening money supply in response to inflation concerns. Therefore, restructuring equals higher interest rates; Sri Lanka is sinking into a financial quagmire; that’s the bitter pill the JVP-NPP, Sajith’s outfit and Champika’s 43-Brigade cannot get away from – more on that later.
Debt, default, shortages, inflation, power-cuts, exploding gas cylinders, fertiliser lunacy, who doesn’t know all this? It will be a waste of your time and mine to recapitulate. A reasonable summary inference is that president and government will be ousted in the next election cycle, provided elections are not annulled by an illegal or an illegitimate artifice. I have often made a song and dance about such illegitimate possibilities and complained that the main opposition JVP-NPP and SJB and lesser outfits with a presence in parliament like the TNA were sleepwalking, oblivious to dangers. I will give that grumble a rest today and limit myself to what may happen during the remainder of this president and government’s term if they stay on to the end (three-plus years) and I will talk about election manifestos.
If president and government serve out their terms it is easier to prognosticate economic trends than to predict the fallout from unavoidable socio-political conflicts if the government is brought to its knees before its fated expiry dates. Some things seem unavoidable in 2022 or 2023; the government will throw itself at the feet of commercial lenders and China and eventually the IMF, imploring mercy. Fresh monies and swap deals will entail higher costs, eventually the IMF will have its way and impose substantial structural reforms. Let’s stop fooling ourselves, price rises, and cuts in subsidies and welfare are unavoidable. You don’t believe me? Listen to the Finance Minister and government ministers and MPs. Citizens who have big money are moving it out and owners of properties are selling and finding ways of doing the same at inflated market exchange rates – others argue that these are the prevalent real-rates. In simple words the net effect will more economic hardship. This remark applies not only to fungible goods, commodities and fuel but also to services like electricity supply-reliability and healthcare.
What about the trade balance, remittances and tourism earnings? A sharp decrease in the LKR value will increase exports and discourage imports but the political costs will be high. Can a regime facing an electoral guillotine do it? But how otherwise can it circumvent the hangman’s noose? The IMF is sitting back and waiting for the beggar to come to the door on his knees; time is on its side and there is only that much alms that China and India will dole out. A fall of the LKR will strengthen remittance inflow; it will attract more tourists since a declining rupee is equivalent to reducing wages and making services cheaper. So-called fiscal reform (raising direct and indirect taxes), rebutting wage hikes and reducing expenditure on health, education and welfare will invite direct populist conflict and social tension. The government’s choice: “To be or not to be”.
Where, for example, will the strike in the health sector which started last week (temporarily paused) end? It dragged on in defiance of a court order and presidential emergency decrees. There will be other strikes, more defiance. Will the regime resort to direct action, will people defy it and will the multi-party governing alliance survive confrontation between the working class and the state? While one by one answers to these questions are not possible, collectively one can see that the regime is snowballing into an existential crisis. I am not using words carelessly; it’s not debt, fiscal crises or shortage conditions that are deteriorating, it is an overall existential crisis. I would have preferred it the other way where we could simply have voted the president and government out of office. Instead the way things are moving we have a threat of protest movements and the state responding with extra-legal machinations hanging over our head.
This is the background as the election cycle moves to centre stage in three-plus years. In the normal order of things, the presidential election comes first in mid-2024 and this may be one reason why three candidates are already on offer – Anura Kumara (AKD), Sajith Premadasa (SP) and Patali Champika Ranawaka (PCR). There is another reason why presidential aspirants are popping up first. Apart from the NPP’s Rapid Response Manifesto the other two hopefuls are committed to retaining the presidential system; let’s be frank, both SP and PCR want to be president, both want the powers and the pomp of the presidency, neither will abolish it. The public too is fixated on presidency not parliament. Though it understands and rejects the evils the JR Jayewardene instituted presidency has brought to the country, it is fixated on the devilish drama of electing a president. Much newsprint and electronic quanta are devoted to kowda raja (who’s the king) drama. Tubby SP is well set on the inside track while long limbed PCR is making a run on the outside track. It is hard to see how PCR can displace SP as anointed favourite of the SJB; its only grit and greed that keeps him going. The JVP-NPP strategy is to lay long-term groundwork for the future.
The dark and dirty horse is the SLPP-Rajapaksa offering. The natural choice would be to re-nominate Gotabaya but his half-time record is so soiled that that seems suicidal. Mahinda is ineligible and Namal hilarious. The next best is Basil, but that would be a bacillus to some, in particular the Dead-Left. In Vasu’s party Basil was spoken of as a pox inflicted by crooked businesses in cahoots with imperialism. “Ten-percent a day will keep development away” will become the nursery rhyme of the next generation. It will be difficult for the government therefore to avoid offering soiled-goods-Gota re-nomination. (Will he accept?). This strengthens my guess that president and government will be sent packing in the 2024-25 election cycle.
Is there time enough for a turn around and recovery? Well stranger things have happened . . . but! There are two interesting recent changes in government tactics. Under Basil’s influence there has been a shift in foreign policy from a god-speaks-in-Mandarin orientation to a middle position between China and the Quad. This is most noticeable in economic decision making. China’s response to this disloyalty is as yet unknown.
The other change is that the government seems to have swapped its cloak and dagger appearance for an electoral strategy. Maybe it could no longer ignore allegations all around that a military move was the concealed spanner in its tool-kit.
The hurdles that the next government will encounter are Herculean. No regime whatever its ideological complexion can avoid the imperative of both pruning the fiscal deficit by cutting expenditure and raising revenue; both unpleasant. The former entails reducing subsidies and welfare, the latter necessitates more taxes on the wealthy and increased indirect taxation such as VAT and sales-tax. This medicine will be as bitter for the JVP as it was for NM in the 1970s, but the comrades will have to partake of the poisoned chalice as did the Double Doctor. Whichever team goes out to bat it will find itself on a sticky wicket for the first innings; the second innings will permit discretionary policy choice. Development come only after that; growth is incumbent on economic and social stability.
I am formalising by sequencing but the concept remains correct. Economic intervention by emphasising state sponsored or capitalist-market options, industrialisation strategy, how to mobilise labour and resources, all this follows economic stabilisation. This is true whether the perspective emphasises the responsibility of the state (Vietnam-China style), Champika’s re-imaging of JR in his oddly named 43-Brigade (they are not highflyers, or it would have been 43-Squadron!) or Sajith’s presumed eclectic mish-mash.
The 43-Platoon says it will increase revenue and prune expenditure. The current balance sheet looks like this: If next year government revenue is one unit (1.0), then gross government commitment amounts to 3.2 units, of which a little more than half (say 1.7 units) will be actual budgeted expenditure and a little less than half (say 1.5 units) will be debt servicing unless there is substantial foreign debt forgiveness. As I said any team that goes out to bat cannot run away from this dilemma in its first innings. The second innings is discretionary; Champika intends to strengthen market forces, expand the role of private entrepreneurship, call in the IMF, emphasise productivity enhancement and launch a tech-based economy. His plan includes homilies about renewing democracy, eliminating corruption, improving governance etc. but it retains the presidential system by implication. Nor is he famous for enhancing devolution to minorities and nothing like that should be expected. The 43 (Ali Baba managed with 40!) is JR-economics and ideology in Twenty-first Century garb.
And you may have noticed that the TNA and the Catholic Church seem to be in vanguard of the campaign to repeal the Prevention of Terrorism Act and to stop the resurgence of state-led white-van abductions. Where are the JVP and the SJB? Maybe they are too busy preparing for elections in a reversal of roles. Hmm, what a topsy-turvy world! While we await the Sajith and Rajapaksa Brigade manifestos in the coming weeks there is a lot on our plates already to think over.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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