by Rajan Philips

President Anura Kumara Dissanayake has delivered an excellent first budget. It could easily be described as the best budget so far this century and presented in the most dire economic circumstances in Sri Lanka’s modern history. Following his consummate performance in parliament, the President waded into a post-budget forum and joined the country’s economic experts to “dissect new Govt’s maiden budget,” as headlined by the Daily FT, one of the sponsors of the event. Whether one agrees with him or not, there is no question that AKD has been listening to those who knows the subject, has diligently done his homework on the budget file, and knows what he is doing,.

The problem he faces is that he cannot be doing homework on every file for the entire government, and he must find a way to quickly address the collective inexperience of his cabinet. He should not let this inexperience become the enemy that kills the government from within. Hopefully, he will find a way to address this within the framework of the budget and in the delegation of ministerial responsibilities for its implementation.

Somewhere in the budget, the President refers to economic decentralization, to deconcentrate the top heavy Western Province. Unfortunately, the corollary of political decentralization could not find its place in the text. Equally important, the President should also pay attention to ‘cabinet federalisation’ (AJ Wilson’s description of one of DS Senanayake’s quite a few master traits), and more so as he moves ahead to implement the budget proposals.

Ultimately, the success of the budget will be measured in political terms. Read, electoral terms. AKD’s and NPP’s detractors will be winding themselves for political wrestling in the local and later the provincial council elections. The NPP could be expected to hold its ground, but not necessarily all two-thirds of it. It should not at all be strange if the NPP gains ground in the North and East even as it loses some of it in the South. To keep the inevitable losses to the minimum, the government must eschew any and all complacency, which, modifying Mao’s famous Redbook take on it, could be described as the enemy of elections.

Geopolitically, paraphrasing the French Marxist Regis Debray, the NPP government must have its overhead antennas fully alert, but its feet firmly planted on the ground in Sri Lanka. The government cannot avoid being distracted by the global tumults that Donald Trump is creating day in and day out. There will be ripples, even waves, around Sri Lanka depending on what the Modi government decides to do in India to harmonize with the Trump Administration in Washington. Even so, the government’s primary preoccupation in the context of the turmoil in America should be to protect for as long as possible Sri Lanka’s exports to the US which are significant for Sri Lanka’s forex earnings.

At the same time, and consistent with the budget objectives, even as it diversifies its exports the government must diversify its importers. For the next four years, as Trump unfolds his madness, there will be responsive realignments in the Global North even as there will be reconsolidations in the Global South. The NPP government will have to navigate Sri Lanka through these currents without being smothered by them.

There are of course the self-proclaimed Rajapaksa nationalists who want to hitch their broken political wagons in Sri Lanka to the passing hegemon in America. They are in fact ethno-narcissists just like – but writ-small – the racial narcissist that Trump is. Ridiculous as these forces and their politics might seem, indeed as they are, the government should not underestimate their potential to do harm even by accident. Look at Bangladesh to see how political fortunes can dissipate fast, even though the NPP government is in no way comparable to Sheikh Hasina’s rotten government. The eternal home truth is the quick rise and the quicker fall of Gotabaya Rajapaksa.

Setting the Budget Context

The budget speech outlines as its backdrop the 2022 economic crisis that has now become the Rajapaksa era legacy, and as its context the overwhelming verdict of the people in the 2024 presidential and parliamentary elections. In this context, the President calls the budget both “historic” and “challenging,” because the government has to not only lay the foundation for fulfilling the people’s aspirations, but also to dispel “the wrongful picture (of us) created by the myths and malicious political propaganda against our economic policy and vision.” “We have succeeded in that,” the President asserted.

The government has proved its expectant critics wrong and stabilized the economy. All the indicators confirm that – the relatively stable exchange rate at one USD for LKR 300, and not LKR 400 as recklessly scare mongered; the lowering of the Treasury bill rate (8.8%) and getting inflation under control; forex reserves rising past USD six billion; finalizing agreements over debt-restructuring; and most of all keeping essential goods available and avoiding queues. In fairness, the credit for starting the process of economic stabilization belongs to Ranil Wickremesinghe, but post-election expectations in political circles have been that things will start to unravel due to NPP’s inexperience and even incompetence. That did not happen, and President AKD and the NPP government are justified in claiming credit for it.

Mr. Wickremesinghe may have even fancied that another economic crisis this time under an NPP government would give him a second kick at the can of power. No such luck. RW is now part of a team of exes – former ministers and presidents including Maithripala Sirisena – trying to figure out a way to stay relevant in today’s politics. Looking at this aging crowd outside parliament and its slightly younger version in the opposition within parliament, the NPP might fancy its chances of retaining power for more than one cycle of elections. But what the NPP has to contend with ultimately will not be ill equipped politicians but a frustrated electorate.

Apart from President AKD’s versatile feats, the NPP government has little to show to keep the people contented. Recurring rice shortage, the shortfall in coconuts, and the power outage blamed on a monkey tripping off a transformer have certainly taken the shine off the government. Looked from the other end, rice, coconuts and the power outage seem to the only shortcomings that the government is being picked on by media pundits and the political class. But what should concern the NPP government is that any one of them (rice, coconut or power), all of them together, or any similar shortages or failures, are enough to rile the people and bring down a government. Not long ago, it was called aragalaya.

Budget as Political Reset

The budget speech lays down the principles underlying the government’s approach to the economy: sectoral growth sustained by participation and even distribution on the supply side; and balancing roles for the market and the government on the demand side. A GDP growth rate of 5% is targeted for the medium term, predicated on a strong export sector performance while maintaining price stability and ensuring social welfare. Promoting investments, leveraging logistics, revamping tourism, digital transformation of the economy, and unleashing SME potentials through new credit structures are highlighted as the main growth poles. Allocations for health, education, food security, and social benefits are intended to rebuild and strengthen country’s social welfare system.

There is emphasis on Regional Development, including the assurance of special programmes for the Eastern Province, the Malayaga Tamils, and the Northern Province, but there is no mention of Provincial Councils and Local Government bodies and their agency roles in regional development. Regional industrial zones are identified including the promotion of Chemical Manufacturing in Paranthan, KKS and Mankulam in the Northern Province, Galle in the South and Trincomalee in the East. If some of them were to materialize the North and East might be seeing state sponsored industrial activity after more than 70 years when GG Ponnamabalam was Minister of Industries and Fisheries.

Auto Parts and Rubber Products manufacturing is also identified for promotion through industrial zones. What is not clearly indicated is whether new regional industrial initiatives will be tied to the export sector without which they may not be viable, as past experience has shown. Also, on the export front there is no identification of specific products and target markets to match the significant export sector growth that is being championed. Generally, for industries, there should be guardrails for minimizing and mitigating adverse environmental effects.

The budget rightly focuses on the modernization of public transport. Specific projects are identified for bus transport in Colombo and for the rail sector, including the revamping and the extension of the KV Line, multi-modal transport terminal in Kandy, and the expansion of the Thambuththegama Railway Station to function as a hub for transporting agricultural products. Large scale transport projects and rail transport are invariably the responsibility of the central government, but bus transport operations including those in Colombo and Kandy are better assigned to provincial and even larger municipal governments.

The budget provides for settling the legacy debt of the Sri Lankan Airlines (SLA) in the hope that SLA would hereafter become a viable enterprise. For other SOEs, the budget is proposing the setting up of a Holding Company again with the hope of revitalizing the mostly under-performing State Owned Enterprises (SOEs). Whether this approach is motivated by patriotic sentiments or political calculations, there is little support for it from past experience, except for enterprises in the crucial servicing and energy sectors.

The budget gets quite specific in its proposals for the agricultural and food sectors, especially rice and coconuts. At long last, there is official admission at the highest level that there is no data and information system for the “entire value chain” from paddy production to rice consumption. There is no immediate solution to this except the assurance to find one through the ADB funded “Food Security Livelihood Emergency Assistance Project” and a related World Bank project.

Coconuts are easy to count and difficult to hide. Some 4,500 million nuts are the projected demand for 2030, with 2,700 for the coconut industry and 1,800 for household consumption – at one per household per day. The problem is with production and the budget is allocating money for high yielding seedlings to be used in a new Northern Coconut Triangle extending from the coconut rich Northwestern Province, recommended by the Coconut Research Institute and mirror imaging the long established Southern Coconut Triangle. Better later than never, even when it comes to nuts.

All in all, the budget provides a good framework for the NPP government to reset its political road map. To succeed, the resetting must involve delegations at the ministerial level and following through to local communities and political grassroots. Equally important will be the medium in between, and the challenge to the NPP government is in resurrecting and using the currently defunct provincial and local government agencies.

(Excerpted from In Pursuit of Governance, autobiography of MDD Pieris, Secretary to the Prime Minister)

From a large array of issues, one could refer to, I would at this point select just a few others of some interest and importance, which came up during the last two years of the government. One such was an unfortunate misunderstanding with the Maldives. One afternoon, during a period I was acting as Secretary Ministry of Defence and Foreign Affairs, I was with the Attorney General, Mr. Victor Tennekoon, in his Chambers in the Attorney-General’s department, discussing some important legal issues, when there was a frantic call from the Foreign Ministry.

Mr. Ali Manikku, who enjoyed a special official status- with the President of the Maldives, had been searched by our Customs, when he was attempting to enter Sri Lanka for a few days, before proceeding to Singapore. The Customs had found a substantial amount of Foreign currency on his person, and the officer in charge had confiscated this currency and imposed a heavy fine. Mr. Manikku had a diplomatic passport.

The Maldivians were furious. They considered this a gross insult. The Maldivian High Commissioner had wanted to see me immediately. The Prime Minister and WT were out of the country and this was quite serious. I therefore, cut short my discussions with the Attorney General and got back to office to receive the Maldivian High Commissioner. By this time I had rung up DBIPS Siriwardhana, the Principal Collector of Customs, who also thought this should never have happened, but said that technically his officer was right, because any foreign currency being brought into the country should have been declared.

Apparently, it had not happened in this case. That was the Customs version. The Customs officer should however, have been more circumspect, since the passenger held a diplomatic passport. The High Commissioner was quite agitated and emotional about this “Insult” directed at a person of Mr. Manikku’s status and demanded an apology and the punishment of the officer. I did apologize, but I tried to explain to him that whilst the officer showed poor judgment, he had performed his duties in terms of the regulations. The High Commissioner was not satisfied. What he demanded was a formal apology from the government. He was not satisfied with my expression of sincere regret, nor was he prepared to understand the position of the Customs officer.

Matters were simmering in this state, when the Prime Minister came back. An early opportunity was afforded to the High Commissioner to see her. The Prime Minister too was extremely conciliatory and expressed her personal regrets. She explained that the close relations between the two countries should not be affected by a single episode involving an error of judgment by a solitary officer. This had nothing to do with the policy of the government, which was one of close friendship.

The Maldivians were still not mollified. They wanted to send a team of three Ministers to Colombo for discussions. We agreed. Their Minister of Finance, Minister of Fisheries and another Minister arrived and a meeting with the Prime Minister was arranged. I sat in at the meeting. After the preliminary exchange of greetings and pleasantries, the Ministers took up the question of the hurt that had been caused, and the serious effect it had on bilateral relations.

The Prime Minister adopted a tone and manner of deep regret and expressed her personal apologies, but stated that a demand for a public apology constituted in her view a blowing of this episode beyond the realms of reality and reason. But she went out of her way to assuage any hurt feelings. At this point, one of the Ministers became rather curt and aggressive. He told the Prime Minister, that what had happened was an insult to the Maldives, and that in the light of this, they would have to review her relations with Sri Lanka, in the course of which they would have to think about stopping the Maldivian fleet victualing and bunkering in Sri Lanka and sending it to Singapore for these purposes, which would constitute a significant loss of business and foreign exchange to Sri Lanka.

The Minister seemed to have misinterpreted the Prime Minister’s conciliatory stance and expressions of regret for weakness. If one thing could be said of the Prime Minister and whatever other criticisms could be leveled against her or her policies, weakness could certainly not have been one of them. Amidst coups and insurgencies she had amply demonstrated her unruffled and unshakable strength of character.

She was not going to take a threat from anybody. She responded immediately; looked the Minister fully in the eye and in an icy tone said “Mr. Minister, small as we are, sometime ago, when we took

the sovereign decision to nationalize the foreign oil companies operating in Ceylon, the United States cut off all aid to us and even closed down their aid office. We survived. We have also survived many other hazards. When you stop sending your fleet to Colombo and divert it to Singapore, we will still survive.”

The two other Maldivian Ministers were visibly upset about their colleague’s blunder. They apologized profusely. So did the Minister who made the offending remark. But the Prime Minister has had enough. She informed them politely and firmly that we had sincerely regretted this incident, which was pure accident, and also expressed our regrets. If they were not satisfied, it was entirely up to them to take whatever steps, they considered necessary. As far as we were concerned, there was nothing further we could do. Thus ended the discussion. The matter was not pursued thereafter, and gradually the whole episode was forgotten.

By Uditha Devapriya

The Committee on Public Enterprises (COPE) recently made some disclosures about certain events organized, and transactions entered into, by a government agency during the last two years that said much about the state of impunity, and I daresay elitism, which was part and parcel of the previous government. Though these allegations have yet to be proved, I thought they made it clear that the present administration needs to step up its game in probing into the excesses and abuses of its predecessor.

The allegations in question are, all things considered, damning, and since they have been reported in the local press, I will not get to them. Essentially, COPE has ascertained that, immediately prior to the presidential election last year, certain procedures relating to procurement were violated in deference to the wishes of the organization’s leadership at the time. If true, the amounts concerned would run into hundreds of millions of rupees. Taken in themselves, this may be just the tip of the iceberg: as a friend correctly remarked while watching the proceedings with me online, COPE is likely to grill other government agencies in the coming few weeks. Yet taken together, they reveal, for me, disclosure by disclosure, the sense of impunity that was so characteristic of the previous government.

I believe the NPP has its faults, and I think that it’s only fair to point them out when they need to be. This government’s best friends are its critics, and we need to note the criticisms that are aired every week by the likes of Dayan Jayatilleka and Kusum Wijetilleke.

Yet even considering this, there is no denying Sri Lanka’s first center-left party in decades has brought into the government a fresh outlook and a clear mandate for reform. More than anything, there is absolutely no sense of regency in the air: no sign, at least not yet, that old school ties and elite connections will shield officials from due process. This is a breath of fresh air not just from the Wickremesinghe presidency but the yahapalana administration, the latter of which was undone by the politics of class and prestige Wickremesinghe’s premiership, and much of his Cabinet, exemplified. It is this sense of regency that is up on trial, and I, for one, could not be any happier.

There is also no denying that the reformism of this government differs considerably from the faux reformism of the yahapalana administration. The present government was elected to power on pledges of rooting out corruption and mismanagement. The challenge it faces now is institutional: how to weed out the bad eggs from organizations which have been sustained by those bad eggs for so long. The solution may not be, as supporters of the NPP think, to do a Kristallnacht on government agencies. Rather, it should be a longer and phased out process. And a crucial part of that process should be to make as many verifiable disclosures as possible about the misdeeds of past administrations.

This is not to say that we should expect shifts and ruptures immediately. Even with a new government in power, changes are going to come slowly. But informing the public on how exactly past governments let off certain officials on questionable, dubious grounds, and revealing to them the hollowness of the reformist and developmentalist rhetoric of its predecessor, would serve the NPP well. This is because there is much anger at what was allowed to happen under the previous government, but also much frustration with the slow pace at which reforms are being rolled out by the present regime.

Tied to this is the critique that the NPP is going ahead with the economic policies of the Wickremesinghe presidency. The NPP’s defense is that it has no other choice, or to put it bluntly, that there is no alternative. Yet even with the limits of neoliberal restructuring – which is what IMF engagements amount to – the government has tried to discontinue its predecessor’s reforms, including privatization of strategic assets and relations with China. With regard to its foreign policies, too, one can air criticisms, which Dr Dayan Jayatilleka has done in his most recent column.

Yet here too, the government has to perform a difficult balancing act. Dr Jayatilleka notes that we no longer possess the intellectual caliber of the Chandrika Kumaratunga cabinet. I would agree, and would add that no government since 2004 has had that caliber, barring a few exceptions. But one must grant the NPP the benefit of the doubt. As far as its mandate is concerned, I think, it is focused on revealing the misdeeds of past regimes. It is true that this in itself will not be enough to make up for its less than proactive responses to the price hikes, shortages, and other policy problems. It may also be true that attacking certain sacred cows – prime among them Mahinda Rajapaksa – may provoke a backlash against it if taken too far. But it has a mandate, and part of that mandate has been to show that, on a balance of scales, the regency that was part of the State is fading away.

For better or worse, for a vast segment of the population, the course of this government will depend on how far they will go to uproot norms and practices that were accepted as part of the political system for so long. I am aware that this is a difficult task and a tough ask. No government so far, however reformist they may have been, has had the courage to confront directly the misdeeds of its predecessors. One may be tempted to single out the yahapalana government as an outlier in this respect, but really, with all due respect to CIABOC and the other Commissions that government established, there was no real progress on weeding out the fundamental rot in our system – perhaps because the rot was allowed to continue if not thrive considerably, vis-à-vis the Bond Scandal. The NPP is the only outlier we have for this. If it fails in this essential task, we will truly have run out of alternatives.

Uditha Devapriya is an independent researcher and international relations analyst who can be reached at .