Features
A PATHFINDER PERSPECTIVE ON THE ECONOMY
SRI LANKA HAS TO SET AN URGENT GLIDE PATH TO THE IMF:
The Sri Lankan authorities have been able to achieve stable macro-economic indicators despite the severe economic dislocation caused by the pandemic. Inflation has remained well within the 4-6% target range; and the improvement of the trade deficit has had a positive impact on the current account of the Balance of Payments. In addition, interest rates are at historically low levels and there has been some stability in the exchange rate. As in most other countries, growth has been negative, due to both demand and supply shocks in the domestic economy and the decline of external demand due to the slowdown of the global economy. Sri Lanka’s performance has been better than a number of other countries in the region.
However, the model that has underpinned the significant degree of stability in macro-economic indicators to date, is now coming under considerable pressure. The extremely low interest rates have been maintained through administrative action (financial repression). The under-subscription in bill and bond auctions are signs that this policy is coming under stress in a context where credit to government remains high while private sector credit is picking up. At the same time, the currency has also come under pressure. The SLR has been propped up by restrictions on imports and capital outflows. Recently, a ban has also been imposed on forward transactions in the forex market. Despite (or because of) this, there continues to be stress in the forex market as imports rise with the bounce-back of the economy from its contraction in 2020. In addition, the prices of oil and other key commodity imports have been rising in global markets increasing the demand for dollars in the local forex market at a time when supply remains constrained, due to a shortage of foreign earnings/inflows, borrowed or non-borrowed.
The import and capital restrictions currently in place have a negative impact on growth, employment and incomes at a time when priority needs to be attached to bouncing back from the economic scarring inflicted by the pandemic.
The most imminent threat to macro-economic stability, which can affect the whole economy, comes from the Balance of Payments, the external payments in particular. Sri Lanka’s external debt dynamics are extremely challenging over the next six months and urgent action is needed to address them and mitigate collateral damage which can have wide-ranging social and political ramifications. Gross foreign external reserves amounted to USD 5.7 billion (including USD 400 million in gold) as at December 31, 2020. Total debt-related payments during the next six months (February – July 2021) comprise: an International Sovereign Bond (ISB) maturity of USD 1 billion; SLDB maturities of USD 980 million; and interest payments of USD 482 million. In addition, the Reserve Bank of India (RBI) SARC SWAP of USD 400 million would need to be repaid this month (February 2021). This is intended to be a short term facility and cannot be extended further without staff-level agreement on an IMF Arrangement.
In normal circumstances, the expectation is that SLBDs would be rolled over. However, only 25 percent of the maturities of USD 200 million was rolled over at the last auction. This reflects the severe scarcity of Forex in the market. There is uncertainty, therefore, regarding how much of the maturing SLDBs of USD 980mn can be rolled over during the next six months. Any shortfall will deplete the external reserves. The shortage of foreign exchange is also likely to adversely affect the rollover of short term SWAPs with FCBUs which will be maturing over the next six months.
The upshot of all this is that there is a strong possibility that reserves will fall to extremely dangerous levels within the next six months (by July 2021). Unless there are significant inflows in the meantime, there will have to be severe compression of domestic absorption (consumption and investment), i.e., very painful austerity. Instead of a recovery, the economy could well experience further contraction. It becomes important, therefore, to examine the likelihood of inflows which would serve to offset the heavy debt-servicing burden over the next six months. Sri Lanka’s development partners (multi-lateral and bilateral) are expected to disburse USD 1.7 billion during the course of the whole of 2021. Some of this would be flowing in over the next six months. However, because this is project and programme lending, it would not be possible to utilize this funding to boost the external reserve position. Furthermore, the rating downgrades have meant that Sri Lanka is no longer able to access international capital markets at affordable rates (currently 15 percent) thereby curtailing a potential source of financing.
Specific sources, which have been announced by the authorities to fill the external financing gap, include the following:
* Term loan from the China Development Bank : USD 700 million
– SWAP facility from the People’s Bank of China: Yuan 10 billion; equivalent to USD1.5 billion (this facility could have conditions that will constrain its capacity to bolster usable reserves)
* SWAP facility from the RBI: USD 1 billion (this facility is tied to Port development and removal of some import restrictions complicating the completion of negotiations).
The delay in the completion of these transactions seems to indicate that there are challenges in each of these negotiations. Even if all three of these facilities materialize, it is extremely unlikely that it would be possible to get sustained bilateral support of this nature in the magnitudes required to meet the country’s debt obligations of USD 23 billion over 2021-2025. Hence one needs an approach that unlocks a wider base for sourcing external financing.
The second option is to seek the support of the IMF. This will also serve to leverage a number of other sources of external financing. Over 70 countries have been assisted by the IMF through the Emergency Facilities established by the Fund to provide countries with fast-disbursing financing to address the impact of the pandemic. Sri Lanka would be eligible for USD 800 million from the Rapid Financing Initiative. An arrangement with the IMF can also trigger direct budgetary support from the ADB (USD 500 million) and the World Bank (about USD 300 million). It can also pave the way for a rating upgrade and eventually regaining access to international capital markets.
Anchoring policies to an IMF arrangement would also provide foreign investors with greater confidence to invest in the country. However, in the present global and domestic climate, it is unrealistic to expect that FDI will play a major role in filling the external financing gap, particularly in the short term. It is also noteworthy that it is difficult to utilize FDI to give a direct boost to gross official external reserves as much of it would flow out of the country in the form of imports and other payments incurred by the foreign investor. However, in the medium term, FDI can increase the capacity to service debt by contributing to an increase in the production of tradables which would earn or save foreign exchange.
For IMF support to be secured, there has to be a clear medium term plan to achieve debt sustainability. The Fund’s Articles do not permit it to lend to countries where it cannot certify that the debt is sustainable. At present, the IMF finds itself unable to certify that this is so. All options would need to be considered including fiscal adjustment, as well as a market- friendly re-profiling of Sri Lanka’s external debt through an extension of maturities and some relief on coupon payments. This would serve to create some space both in the Government Budget and the Balance of Payments for growth-oriented stabilization.
It is noteworthy that the IMF is currently advocating and supporting a growth-oriented approach to stabilization with a back loading of adjustment. It must be pointed out, however, that Sri Lanka does not have a painless glide path to stabilize the economy. Kicking the can down the road would only serve to increase the severity of the austerity when it is inevitably imposed.
It is crucial that there is early and decisive action as a very disruptive hard default, involving hair-cuts for creditors, could well be looming on the horizon. There are signs that Sri Lanka is facing solvency rather than liquidity challenges. As experienced in other countries, such a default usually means soaring interest rates, a collapse of the currency and severe belt-tightening, which tends to impact the poor and vulnerable disproportionately with unpredictable social and political ramifications.
The longer-term solution for achieving sustainable debt dynamics involves running a primary surplus in the budget and promoting an accelerated growth trajectory.This involves not only stabilization of macro fundamentals but also structural reforms to increase productivity/competitiveness of the economy. Increasing investment, including FDI, and boosting the production of tradables, particularly exports, need to be an integral part of this narrative. The Pathfinder Foundation set out a roadmap to achieve this in its Report, “Pathfinder Beyond the Box: A New Economic Vision for Post – COVID – 19 Sri Lanka” in May 2020.
Features
Buddhist Approach to Human Challenges
Life, by its very nature, invariably presents a myriad of challenges that are fundamental to the human experience. The various social ills that afflict humanity cannot be understood without recognizing the profound human dynamics at play. Navigating these challenges according to Buddhism involves shifting from attempting to control external circumstances to mastering one’s internal responses. Central to these challenges are certain detrimental drives stemming from pernicious distortions in the functioning of the human mind.
According to Buddhism, human suffering—both on a personal and societal level—arises from three unwholesome roots: greed, hatred, and ignorance or delusion. These roots manifest primarily as the unbridled proliferation of these negative states, serving as the foundation for our conduct. The Buddhist perspective offers profound insights for confronting these difficulties by emphasizing the nature of suffering, known as dukkha. Buddhism teaches that suffering (dukkha) is an inevitable part of life and is fueled by greed, hatred, and ignorance or delusion. This approach promotes mental transformation through mindfulness, ethical living, and the cultivation of wisdom, empowering individuals to confront their struggles with clarity and resilience.
Furthermore, accepting that suffering and difficulty are inherent parts of the human experience—while expecting life to be free of challenges—is, in itself, a cause of suffering. It is also important to recognize that all situations, whether good or bad, are temporary. This understanding helps reduce anxiety when facing difficult times, as these will eventually pass, and it prevents possessiveness during happy moments. Cultivating mindfulness (sati) and living in the present moment without dwelling on the past or worrying about the future is essential.
Understanding that all things—emotions, situations, relationships, and physical bodies—are constantly changing and in a state of flux helps reduce the fear of loss and provides comfort during difficult times, ensuring that we know pain will pass. Moreover, recognizing that the self, or ego, is not a fixed entity minimizes selfish grasping, arrogance, and the tendency to perceive challenges as personal attacks.
At the core of many human challenges lie the three unwholesome mental qualities identified by Buddhism: greed (raga), hatred (dovesa), and ignorance or delusion (avijja or moha). These states of mind serve as obstacles to spiritual progress and underlie a spectrum of harmful thoughts and actions. The Buddha employed powerful metaphors to illustrate these forces, referring to them as the three poisons or fires that ignite suffering and trap beings in the cycle of samsara.
Greed leads to insatiable desires that obscure our awareness of others’ needs, creating a cycle of frustration. Greed encompasses all forms of appetite, such as desire, lust, craving, and longing, manifesting in both physical and mental forms. It embodies the concept of grasping, leading to clinging and an inability to let go. As an unwholesome mental state, greed can become insatiable and inexhaustible. People are often drawn to pleasant things, and no amount of forms, sounds, smells, tastes, tangibles, or mental objects can satisfy their desires. In their intense thirst for possession or gratification of desire, individuals may become trapped in the wheel of samsara, overlooking the needs of marginalized groups based on religion and ethnicity (as noted by Piyadassi Thera). Those who overcome greed realize that all mundane pleasures are fleeting and transient. In a society driven by consumerism, people may find themselves endlessly chasing after things of little value, becoming enslaved by them.
Hatred is another unwholesome mental state that fosters division and conflict, distancing us from genuine relationships. It encompasses unwholesome mental states such as ill will, enmity, hostility, and prejudice. Hatred can be subtle, lying dormant in a person’s mind until it finds expression in unexpected moments. This destructive emotion can degenerate into mass-scale violence and bloodshed within society. Today, hatred and hostility against minorities based on religion and ethnicity are prevalent in many countries. People are often targeted by bigotry and hate, leading to a rise in antagonistic and derogatory behavior toward certain religious and ethnic groups. Hatred, enmity, and retaliation do not foster spiritual well-being; rather, they vitiate our own minds. Buddhists are encouraged to cultivate metta (loving-kindness). Greed and hatred, coupled with ignorance, are the chief causes of the evils that pervade this deluded world. As noted by Narada, “The enemy of the whole world is lust (greed), through which all evils come to living beings. This lust, when obstructed by some cause, transforms into wrath.”
The most profound of these afflictions, ignorance (avijja) or delusion (moha), clouds our judgment and obscures our capacity for understanding, causing us to harm ourselves and others through misguided actions. Addressing bhikkhus, the Buddha declared, ” I do not perceive any single hindrance other than the hindrance of ignorance by which mankind is obstructed, and for so long as in samsara, it is indeed through the hindrance of ignorance that humankind is obstructed and for a long time runs on, wanders in samsara. No other single thing exists like the hindrance of ignorance or delusion, which obstructs humankind and make wander forever. This unwholesome mindset generates negative speech, actions, and thoughts, perpetuating our own suffering. As stated in the Dhammapada, “All mental phenomena have mind as their forerunner; if one speaks or acts with an evil mind, suffering follows.”
Buddhism urges us to go beyond merely addressing the symptoms of our problems. Instead, it invites us to explore the roots of our suffering and examine how greed, hatred, and ignorance manifest in our lives. By uncovering these sources of distress, we can cultivate essential qualities such as compassion, loving-kindness (metta), and acceptance. These virtues are crucial for ethical engagement with significant societal issues, including environmental challenges and social inequality.
In a world marked by material prosperity and emotional chaos, many individuals may feel lost or overwhelmed. The teachings of the Buddha remain relevant today, reminding us that the origins of our struggles often reside within our own minds. By practising ethical self-discipline and steering clear of destructive emotions like jealousy, anger, and arrogance, we can transform our experiences and relationships.
Buddhism teaches that cultivating wholesome mental qualities is essential for spiritual advancement. The positive counterparts to the three unwholesome states are non-greed (alobha), non-hatred (adosa), and non-delusion (amoha). These virtues represent not merely the absence of negativity but also the active presence of beneficial qualities such as generosity (dana), loving kindness (metta), and wisdom (panna). Each of these six mental states serves as a foundation for both personal growth and societal harmony.
Human beings are often tempted by moral transgressions rooted in unwholesome qualities. Actions driven by greed, hatred and ignorance require wisdom and mindful awareness to overcome them, allowing us to see the interconnectedness of all beings and act accordingly.
As we strive to abandon these unwholesome states of mind and cultivate awareness, we contribute positively to our lives and the broader world. By embracing Buddhist teachings, we learn that transforming our minds can significantly impact our experiences and the lives of those around us. Through this mindful practice, we can aspire to create a more compassionate, harmonious existence, transcending the limitations of unwholesome mental states and fostering a deeper connection with ourselves and others.
by Dr. Chandradasa Nanayakkara
Features
How does the Buddha differ?
Buddhism, perhaps, is not a religion if the definition of religion is strictly applied. However, by an extension of that definition, as well as by consensus, Buddhism is considered a religion and is the fourth largest religion with about half a billion followers worldwide. Of the four great religions in the world, Christianity is still way ahead with 2.6 billion adherents, followed by Islam with 1.9 billion and Hinduism with 1.2 billion followers. In most Western Christian countries church attendances are on the decline whilst the numbers following Islam are increasing with Islamic youth displaying signs of increasing religious ardour. There are recent reports that Buddhism has also joined the ranks of shrinking religions. Is this cause for concern? Is this happening by the very nature of Buddhism?
Hinduism, the world’s oldest living religion rooted in the Indus Valley Civilization and dating back at least four millennia, is considered to have evolved from ancient cultural and religious practices than being founded by a single individual, unlike the other three religions. The Buddha differs from Jesus Christ and Prophet Mohammed in many ways, the most important being that there is no higher power involved in what the Buddha discovered.
Jesus Christ is considered the ‘Son of God’ and Christianity is built on the life, resurrection and teachings of Christ with emphasis on the belief in one God expressed through the Trinity: God the Father, Jesus the Son and the Holy Spirit. Therefore, there is no room for questioning the words of the Almighty passed through the Son.
Islam, with its Five Pillars of faith, frequent daily prayers, charity, fasting during Ramadan and pilgrimage to Mecca, is founded on revelations made by Almighty God, Allah, to Mohammed, the last of his Prophets, which are recorded in verse in the Holy Book, Quran. Muslims consider the Quran to be verbatim words of God and the unaltered, final revelation. This leaves even less room for questioning.
In contrast, the Buddha achieved everything by himself with no help from any higher source. Rebelling against some of the practices in the religion to which he was born and seeking a solution to the ever-pervading sense of dissatisfaction, Prince Siddhartha embarked on a journey of discovery that culminated in Enlightenment, under the Bodhi tree on the full moon day of the month of Vesak.
Hinduism, or Sanatana Dharma as traditionally referred to by followers, encompasses the concepts of Karma, Samsara, Moksha and Dharma with a creator Brahma, preserver Vishnu and destroyer Shiva. In addition, there are multitudes of gods serving various functions and there are ritual practices of Puja (worship), Bhakti (devotion), Yajna (sacrificial rites) in addition to meditation and Yoga. The one thing that has blighted Hinduism, on top of sacrifices, is the caste system. The uncompromising attitude of Brahmins led to the formation Sikhism as well, long after the establishment of Buddhism.
Prince Siddhartha studied under eminent teachers of the day, of which there were many, but realised the limitations of their knowledge. Having already given up the extreme of luxury, he went to the other extreme of self-deprivation which after a search for six years, he realised also was not the solution to the problem. Exploring through his mind he realised the truth and came up with the Four Noble Truths and the Noble Eightfold Path. He shunned extremes and proposed the Middle Path which seems to hold sway in many spheres of life, even today.
Buddha’s greatest achievement was the analysis of the mind and scientists are only now establishing the accuracy of the concepts the Buddha elucidated, not with the help of supernatural powers or sophisticated machinery at the disposal of modern-day scientists but by the exploration of the mind by turning the searchlight inwards.
Having discovered the cause of universal dissatisfaction and the path to overcome it, the Buddha walked across vast swathes of India, most likely barefoot, preaching to many, in terms they could understand, as evidenced by the different suttas illustrating the same fact in different ways; to the intelligent it was a short explanation but for others it was a more detailed discussion.
In sharp contrast to all other religious leaders, the Buddha encouraged discussion and challenge before acceptance. What the Buddha stated in the Kalama Sutta, acceptance only after conviction, laid the foundation for scientific thinking.
The Buddha, being a human not supernatural, never claimed infallibility as evidenced by his agreement with his father King Suddhodana that ordaining his son Rahula without permission was a mistake and took steps to ensure that this did not happen again. In fact, the entire Vinaya Pitaka is not an arbitrary rule book laid down by the Buddha, but are the rules the Buddha laid down for the Sangha, based on errant actions by Bhikkhus. Long before the legal concept of retroactive justice was established, the Buddha implemented it in the Vinaya Pitaka.
In an interesting video on YouTube titled “Nature of Buddhism”, Bhante Dhammika of Australia (https://www.youtube.com/watch?v=KY8WfGJq2FI) discusses some unique aspects of Buddhism. Some religions are ‘high demand’ religions where the followers are required to strictly adhere to certain rules which is not the case in Buddhism and he opines that this has led to the gentleness of Buddhists, at times leading to even being lackadaisical! Interestingly, as a widely travelled person, he describes his personal experience of the change of people’s attitudes on going from places with Buddhist influence to others. Speaking of Sri Lanka, where he spent many years, he commends the traditional hospitality as well as lack of cruelty to animals. He refers to “Law based religions” where some things are compulsory whereas in Buddhism there is no compulsion. Buddha was not a lawgiver but recommended good behaviour, giving reasons why and encouraged thinking. Some religions are exclusivist, claiming that there is nothing in other religions. Buddhism is not and Bhante Dhammika refers to an incident where the Buddha encouraged a disciple who converted from Jainism to continue to give alms to his former Jain colleagues.
Have all these strengths of Buddhism become its weakness and the reason for the shrinking number of followers? Had Buddhism demanded more from followers would it have flourished better? Is the numbers game that important? These are interesting questions to ponder over and I am sure, in time, researchers would write theses on these.
Whilst total numbers may diminish in traditional Buddhist areas, more people in the West are recognising the value of the philosophy of Buddhism. Mindfulness, a concept the Buddha introduced is gaining wide acceptance and is increasingly applied in many spheres of modern life. Perhaps, what is important is not the numbers that practise Buddhism as a religion but the lasting influence of the Buddha’s concepts and foundations he laid for modern scientific thinking and analysis of the mind!
By Dr Upul Wijayawardhana
Features
Political violence stalking Trump administration
It would not be particularly revelatory to say that the US is plagued by ‘gun violence’. It is a deeply entrenched and widespread malaise that has come in tandem with the relative ease with which firearms could be acquired and owned by sections of the US public, besides other causes.
However, a third apparent attempt on the life of US President Donald Trump in around two and a half years is both thought-provoking and unsettling for the defenders of democracy. After all, whatever its short comings the US remains the world’s most vibrant democracy and in fact the ‘mightiest’ one. And the US must remain a foremost democracy for the purpose of balancing and offsetting the growing power of authoritarian states in the global power system, who are no friends of genuine representational governance.
Therefore, the recent breaching of the security cordon surrounding the White House Correspondents’ Dinner in Washington at which President Trump and his inner Cabinet were present, by an apparently ‘Lone Wolf’ gunman, besides raising issues relating to the reliability of the security measures deployed for the President, indicates a notable spike in anti-VVIP political violence in particular in the US. It is a pointer to a strong and widespread emergence of anti-democratic forces which seem to be gaining in virulence and destructiveness.
The issues raised by the attack are in the main for the US’ political Right and its supporters. They have smugly and complacently stood by while the extremists in their midst have taken centre stage and begun to dictate the course of Right wing politics. It is the political culture bred by them that leads to ‘Lone Wolf’ gunmen, for instance, who see themselves as being repressed or victimized, taking the law into their own hands, so to speak, and perpetrating ‘revenge attacks’ on the state and society.
A disproportionate degree of attention has been paid particularly internationally to Donald Trump’s personality and his eccentricities but such political persons cannot be divorced from the political culture in which they originate and have their being. That is, “structural” questions matter. Put simply, Donald Trump is a ‘true son’ of the Far Right, his principal support base. The issues raised are therefore for the President as well as his supporters of the Right.
We are obliged to respect the choices of the voting public but in the case of Trump’s election to the highest public position in the US, this columnist is inclined to see in those sections that voted for Trump blind followers of the latter who cared not for their candidate’s suitability, in every relevant respect, and therefore acted irrationally. It would seem that the Right in the US wanted their candidate to win by ‘hook or by crook’ and exercise power on their behalf.
By making the above observations this columnist does not intend to imply that voting publics everywhere in the world of democracy cast their vote sensibly. In the case of Sri Lanka, for example, the question could be raised whether the voters of the country used their vote sensibly when voting into office the majority of Executive Presidents and other persons holding high public office. The obvious answer is ‘no’ and this should lead to a wider public discussion on the dire need for thoroughgoing voter education. The issue is a ‘huge’ one that needs to be addressed in the appropriate forums and is beyond the scope of this column.
Looking back it could be said that the actions of Trump and his die-hard support base led to the Rule of Law in the US being undermined as perhaps never before in modern times. A shaming moment in this connection was the protest march, virtually motivated by Trump, of his supporters to the US Capitol on January 6th, 2021, with the aim of scuttling the presidential poll result of that year. Much violence and unruly behaviour, as known, was let loose. This amounted to denigrating the democratic process and encouraging the violent take over of the state.
In a public address, prior to the unruly conduct of his supporters, Trump is on record as blaring forth the following: ‘We won this election and we won by a landslide’, ‘We will stop the steal’, ‘We will never give up. We will never concede. It doesn’t happen’, ‘If you don’t fight like hell, you’re not going to have a country anymore.’
It is plain to see that such inflammatory utterances could lead impressionable minds in particular to revolt violently. Besides, they should have led the more rationally inclined to wonder whether their candidate was the most suitable person to hold the office of President.
Unfortunately, the latter process was not to be and the question could be raised whether the US is in the ‘safest pair of hands’. Needless to say, as events have revealed, Donald Trump is proving to be one of the most erratic heads of state the US has ever had.
However, the latest attempt on the life of President Trump suggests that considerable damage has been done to the democratic integrity of the US and none other than the President himself has to take on himself a considerable proportion of the blame for such degeneration, besides the US’ Far Right. They could be said to be ‘reaping the whirlwind.’
It is a time for soul-searching by the US Right. The political Right has the right to exist, so the speak, in a functional democracy but it needs to take cognizance of how its political culture is affecting the democratic integrity or health of the US. Ironically, the repressive and chauvinistic politics advocated by it is having the effect of activating counter-violence of the most murderous kind, as was witnessed at the White House Correspondents’ Dinner. Continued repressive politics could only produce more such incidents that could be self-defeating for the US.
Some past US Presidents were assassinated but the present political violence in the country brings into focus as perhaps never before the role that an anti-democratic political culture could play in unraveling the gains that the US has made over the decades. A duty is cast on pro-democracy forces to work collectively towards protecting the democratic integrity and strength of the US.
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