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Elections cast a shadow of uncertainty over Sri Lanka’s economic recovery

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By Dushni Weerakoon

(East Asia Forum) Nearly two years after announcing a debt default in the middle of a severe social and political crisis, the Sri Lankan economy is showing the first signs of recovery. Year-on-year inflation dropped sharply to a low of 1.5 per cent in October 2023 from its peak of 70 per cent a year earlier. Interest rates are edging down accordingly and the highly volatile currency is now fluctuating within an acceptable range.

After the longest and deepest stretch of negative growth — lasting seven consecutive quarters — the economy finally returned to positive growth of 1.6 per cent in the fourth quarter of 2023. While the modest recovery may appear underwhelming, it still marks an important milestone for a country that suffered such a harsh economic setback.

The architect of this semi-recovery, Sri Lanka’s President Ranil Wickremesinghe, is yet to declare his intentions as Sri Lanka heads into the all-important presidential elections in 2024, where voters will decide who will lead the country for the next five years.

With the country’s Supreme Court apportioning responsibility for the crisis to the previous government led by former president Gotabaya Rajapaksa in a ruling handed down in November 2023, attention is turning to sustaining the recovery and deciding who can be best trusted to manage it. If polling numbers are to be believed, the front runner is from a Marxist-Leninist party — the Janatha Vimukthi Peramuna — which secured a mere 3.2 per cent of the popular vote in 2019.

The turnabout largely reflects popular disgruntlement with the day-to-day struggles of falling real incomes and lost livelihoods. While tax increases, market-based pricing on fuel, a shake-up of the welfare system and a clampdown on spending under the terms of Sri Lanka’s Extended Fund Facility (EFF) with the International Monetary Fund (IMF) are repairing the country’s public finances, the average citizen has suffered deeply.

Unlike in the past, where successive IMF programs were used to paper over problems and leave the job of overhauling the economy half done, this time around there is a critical need to convince Sri Lanka’s foreign creditors of its commitment to staying on course.

A concern is the economy’s continued high exposure to external shocks as external debt restructuring negotiations drag on. In October 2023, there was marked progress as Sri Lanka reached a preliminary agreement with China’s Exim Bank and secured the agreement of other large bilateral creditors like Japan and India. Sri Lanka has yet to reach an understanding with the country’s bondholders. An October 2023 proposal by bondholders for GDP-linked bonds was turned down by the Sri Lankan authorities. Without a final restructuring agreement, dollar infusions from bilateral donors, development partners and private investors remain a trickle rather than a flow.

It is also not helping that export earnings are falling. By October 2023, earnings had shrunk by over 10 per cent on the back of higher domestic production costs and sluggish global demand. While earnings from tourism and worker remittances are improving, the fact that vast numbers of Sri Lankans are leaving the country in search of better prospects is also of serious concern. With weak household spending and less than two months of foreign reserve import cover to deal with a volatile global economy, Sri Lanka’s recovery path is far from smooth.

While the tax burden is deeply unpopular, Sri Lankans will have to live with higher taxes, a public spending squeeze and a drop in living standards regardless of the promises politicians make before the 2024 elections.

Sri Lanka received the second tranche under the EFF agreement in December 2023. Delivering on the EFF commitments is crucial to tapping further budgetary assistance from multilateral financial institutions and retaining the goodwill of Sri Lanka’s sovereign creditors. With hardly any room for policy manoeuvring on the macroeconomic front until the economy is on a surer footing, what the elections may disrupt is the more challenging regulatory reforms that could accelerate the recovery in lost output.

Ranil Wickremesinghe is pursuing reforms to transform the land and labour markets, overhaul state owned enterprises and modernise the education system. Relaxing labour laws, expanding the private sector’s role in delivering tertiary education, selling government stakes in state owned enterprises or entering into regional trade agreements run up against vested interests. These initiatives will slow down in the run up to the election and whether they get picked up thereafter will depend on the electoral outcome. The strategy for now appears to be to ring-fence as much of the reform agenda as possible through legislation.

The crucial 2024 elections will do much to decide Sri Lanka’s future. The focus is not only on the economy but also on the need for stronger institutions and governance mechanisms. Weaknesses in governance are largely faulted for triggering the economic crisis. All these issues may make voter behaviour more unpredictable and tempt presidential aspirants to make unrealistic promises in the hope of attracting votes.

These claims and counter-claims will add to the uncertainties, but the grim reality for any eventual winner is that there is a gruelling recovery path ahead and any policy disruption will only make it that much more difficult.

Dushni Weerakoon is Executive Director and Head of Macroeconomic Policy research at the Institute of Policy Studies of Sri Lanka.



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Tasks for the South in current world disorder

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Army Tactical Missile Systems (ATACMS) can reach up to 300km (186 miles) and are tough to intercept due to their high speed

The decision by the Biden administration to arm Ukraine with long range missiles, hitherto not supplied to the latter, would undoubtedly further escalate and compound the Ukraine conflict. The move is likely to receive a like reaction from the Russian authorities, provided effective measures are taken by the world community to resolve the bloodletting in the Ukraine through a negotiated settlement.

US long range missiles would go some distance in meeting Ukraine’s defence needs but considering that the bolstering of Ukraine’s military capability would not bring any short or medium term relief to the suffering people of the Ukraine, it is open to question whether the Biden administration did right at this juncture through its decision on long range missile supplies.

Besides, the measure would not help in deescalating international tensions stemming from the Ukraine war, since we are bound to see a further intensification of the spiraling violence in Ukraine and its adjacent region.

However, it should be also plain to see that the Ukraine situation has worldwide security implications in view of comments by the Russian authorities to the effect that the decision on long range missiles would represent NATO’s ‘direct participation’ in the Ukraine conflict. Considering that the provision of the missiles could be seen by the Russian side as a ‘direct participation’ of NATO in the war, the world has no option at present but to merely hope fervently that further indiscretions would not be committed by the West and Russia in the Ukraine theatre that would raise the possibility of a full-blown regional war. Needless to say, in such a case international security would be further compromised.

There is an urgent need for good sense on the part of both sides to the conflict. Even as this is being written, the news is that Ukraine has unleashed some of the missiles into Russian territory. Ukraine could very well be motivated to use the missiles as a deterrent measure but given that Russia is unlikely to step back any time soon from the divisive course it has adopted in the Ukraine, the security situation in Eastern Europe could be seen as heading for increasing volatility and uncertainty.

The incoming Donald Trump administration has indicated that it would be working towards a kind of win-win solution in the Ukraine but the challenge before it would be to concede some of Russia’s territorial demands while ensuring Ukraine’s total sovereignty and self-respect. This would prove a Gordian Knot of sorts considering Russia’s obduracy thus far.

Besides, Ukraine’s security would need to be guaranteed. How would Trump assure Ukraine on this score and withhold from it vital weaponry which the latter sees as essential for its future security? This too would prove a knotty negotiating point.

Even on the Middle Eastern front, such dilemmas loom for the incoming Trump administration. A carefully worded statement by a UN Special Committee on the Middle East quite rightly states that the violence inflicted by the Israeli state on the Gaza is ‘consistent with characteristics of genocide’ and no time should be lost by pro-peace sections to bring the blood-letting to an immediate halt.

However, total peace and stability cannot be achieved in the Middle East without ensuring Israel’s continued security. This requirement is usually overlooked or does not come in for sufficient mention by those sections of the international community that take on themselves to scrutinize and comment on the Middle East situation. Going forward, the Trump administration would need to take on this complex challenge of meeting the needs of the Palestinian people while ensuring Israel’s legitimate right to survive and thrive as an inviolable state. Besides, the administration would need to breathe new life into the ‘Two State’ solution and render it workable.

It would accrue to the benefit of the Ukraine and the Middle East if Trump could convince the Putin regime of the need to help de-escalate the relevant conflicts and work towards negotiated solutions in both theatres. The ideal situation would be for the total membership of the UN Security Council to be united in working towards a de-escalation of the mentioned wasting conflicts. However, at present, the major states within the UNSC do not see eye-to-eye on these questions and this renders peace-making difficult.

In this exacting situation the global South would need to examine the possibility of exerting itself to the maximum to bring about an end to the wasting conflicts in focus. Right now, the global South is both wide ranging and fluid. Some decades back, this was not the case. Formations such as NAM and the G77 gave it a more or less definitive identity. Today, the mentioned bodies are almost non-existent.

However, in a vital sense the South exists because the causes which were espoused by organizations such as NAM are by no means irrelevant. For example, the challenge of keeping an equidistance between conflicting major powers, remains for the world’s powerless.

Likewise, poverty is continuing to be widespread in the South. It is true that one cannot find a country today that has not gone in for market reforms but even in the ‘success stories’ of the South, such as India, poverty remains starkly. For the majority of the South’s countries, market reforms have not ended poverty. On the contrary, the chasm between the rich few and the poor many has widened alarmingly.

Accordingly, the causes that gave the global South an identity and a mission remain. The challenge at hand for the South is to urgently regroup and to continue to champion the causes it once did. Although in a traditional sense Non-alignment does not exist, to consider one issue area, the need grows by the day for the poor to continue to steer clear of the big powers but to exist with them with cordiality. Such cordiality is Non-alignment creatively re-interpreted.

Accordingly, the Non-aligned Movement needs to be revived because its relevance has not eroded fundamentally. Major powers of the South, such as India, South Africa and Indonesia, for example, need to consider coming together and giving leadership to the world’s poor and powerless.

The voice of a vigorously regrouped and revived South cannot be ignored in international politics because it possesses the numbers. Such numbers would continue to carry weight in the forums of the world that count in the vital matter of ushering a measure of international peace and security.

These are seemingly ambitious enterprises for the South but they need to be undertaken because a Non-aligned Southern bloc would carry more credibility in the world’s theatres of conflict and war and be accepted as a genuine peace maker in contrast to the big powers of the East and West and their alliances, who would be distrusted by conflicting sides on account of their partialities and divisive agendas.

Clarification

By an inadvertent error it was mentioned in this column last week, (See ‘Timely theatrical exploration of Middle East Conflict’, The Island of November 14th, 2024, page 4), that the Rohingyas were driven out of their land by ‘Bangladesh’s military rulers’. The statement should stand corrected to read: by ‘Myanmar’s military rulers.’ The error is regretted.

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Hidden gem in Los Angeles

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Glam Scene

Patrick Rutnam, is a Sri Lankan-American actor, born in Los Angeles, in the USA. His film debut was in the action-thriller ‘A Common Man’, co-starring with Ben Kingsley. He has also co-starred in the HBO Series ‘Ballers’ with Dwayne ‘The Rock’ Johnson.

Dirk Tissera, Founder, Publisher and Editor-in-Chief of The ANCHORMAN, Canada, had a chat with Patrick Rutnam, and this is how it all went…

GIVE US A SMALL BACKGROUND OF YOUR LIFE, EDUCATION, SCHOOL, MUSIC, AND ACTING:

I was born and raised in Los Angeles, CA. Specifically the San Fernando Valley, in North Hollywood. I went to High School at an All-Boys Catholic School, called Crespi Carmelite High School, in Encino, where I met some of my best friends at that Catholic institution. I then went on to further studies at New York University, Tisch School of the Arts, earning a Bachelor of Fine Arts, and studying Drama within the Atlantic Theatre Company. I was exposed to acting through my father’s (George Rutnam) love of the movies and music. We watched a lot of westerns and classic cinema growing up, and his influences blended into the subconscious of my brother and me. The music that ran through our household were those of the 60s/70s, lots of Elvis, the Beatles, Cat Steven, Billy Joel, CCR, Cream, and Sly and The Family Stone, to name a few.

*  HOW AND WHEN DID YOU GET INTO THE MUSIC AND ACTING SCENE?

When I was kid, we would take trips to Universal City Walk to see movies. And on one occasion, I really wanted my parents to take me to see ‘Toy Story’ when it first hit theaters. I was adamant about seeing that film. All my friends at school were talking about it. It was the only thing that mattered to me at that time. I remember my father deciding against ‘Toy Stor’ and buying tickets for ‘Goldeneye.’ I was extremely disappointed and threw a tantrum, crying, etc., the sort of tantrum that would cause kids to think that life is over. I went into the screening of ‘Goldeneye’ as an unhappy camper, fresh tears still pouring out of my eyes. Then walks out Pierce Brosnan, in the opening sequence of ‘Goldeneye.’ My eyes dried up faster than Bond could pull the trigger. Something changed in me, and I knew my life would never be the same. I wanted to be Pierce Brosnan. I even changed my hairstyle to copy him. At times, when I’m feeling particularly delusional, I still think I look like Pierce Brosnan. I knew from then on, I wanted to play. And that spark has sat with me throughout elementary school plays, high school Shakespeare, NYU training, Off-Off Broadway NY theatre, film and TV Production…and, to date, where I sit here reflecting on where I’ve been and what lies ahead.

*  IN THE MOVIE ‘A COMMON MAN’ WHAT WAS YOUR EXPERIENCE LIKE TO ACT NEXT TO BEN KINGSLEY?

Ben Kingsley is a consummate professional. It was amazing to watch him take ownership of a role and bring it to life. He would wake up in the wee hours of the morning while shooting and live every step of his life in support of the work. It was truly inspiring to see such work ethic. And what we see on screen reflects that. I really took notice when a particular line of action didn’t feel natural to him. He would bring attention to it and find a way to grab the truth of the moment.

The scene now…Gavin, dad George and Patrick

ALSO IN THE SERIES ‘HIDDEN POCKETS,’ HOW DID YOU COME UP WITH THE TITLE? AND WHOSE IDEA WAS IT? WHEN DO YOU PLAN ON COMPLETING THIS SERIES?

‘Hidden Pockets’ came about upon the passing of Anthony Bourdain (American celebrity chef, author, and travel documentarian). I was deeply saddened by such a raw remarkable soul losing his voice in this world. And around the time of his passing, I was taking multiple trips to Sri Lanka, seeing things most people never thought existed. It was then that I realized we should capture one of those trips and document the discovery of parts of the world unseen to the outside eye. Even local Sri Lankans were shocked at the hidden spots and peoples we would find on these visits. I took my love and admiration for Anthony Bourdain’s style and combined it with my love of discovery. A “Pocket” is defined as a place within a bag or garment that can safely store valuables. Well, the places and peoples we discovered on our journey were truly valuable, not just to Sri Lanka, but to humanity. And they were often “Hidden” out of plain sight. Thus, the name ‘Hidden Pockets.’ There’s been renewed interest in airing the pilot episode in Sri Lanka, and as a part of Airline Entertainment Content. There was interest by a development creative at CNN as well. I’m open to taking ‘Hidden Pockets’ in the direction where it seems to find the most momentum.

WHEN DID YOU START YOUR FREIGHT-FORWARDING JOB WITH YOUR DAD’S BUSINESS?

My brother and I often joke that Master Forwarding is my Dad’s first child. He started in in 1980 with a focus on white glove logistics support, and even though it has had its ups and downs, like any business, it continues to run strong to this day, because of its DNA. I grew up in this industry, because he would always take us to work when he needed to attend to something. I fondly remember eating lots of Jack-in-the-Box Tacos and watching him treat every client and shipment with the utmost care. He would tell me, “I may not be a doctor, but I treat every ORDER like a patient. It’s my job to make sure each ORDER is taken care of, no matter the challenge, like a DOCTOR who takes care of his patients.” I grew up filing files away at the office and continue to support the family business in many ways, most notably in making sure we conduct ourselves with the new tools available in technology. It’s a fine line to make sure we use technology to support our service-oriented workflow.

*  TELL US SOMETHING ABOUT YOUR INTERESTS IN LIFE?

I love music, film, and all forms of artistic expression. I also love reading Non-Fiction. Right now, I’m reading Al Pacino’s memoir, ‘Sonny Boy’.

WHAT KIND OF INFLUENCE HAS YOUR DAD AND MUM HAD ON YOUR LIFE ?

I owe my personality and emotionality to both my parents. My mother was Miss Sri Lanka in 1981, and I’m so proud of her humble and modest nature. I’ve never met anyone else with such a high moral resolve, and I still marvel at her strength. It’s hard to put into words the effect that my father has had on my life. He’s been that supportive rock, and continues to believe in me, at times when I don’t believe in myself. To put his influence into words would not do him justice.

WHAT KIND OF MUSIC DO YOU LIKE AND WHAT INSTRUMENTS DO YOU PLAY, BESIDES GUITAR?

I really love all types of music, but my favourites tend to be acoustic singer/songwriter tunes. Cat Stevens, Neil Young, Jack Johnson, Dave Matthews, Billy Joel, Young the Giant, Michael Kiwanuka come to mind right now. But the playlist is ever-changing. I’m currently digging this indie rock group centered on two female vocalists, called ‘Lucius’. They’ve got a special sound that really speaks to my energy.

ARE YOU DATING ANYONE NOW AND WHEN DO YOU PLAN TO SETTLE DOWN AND START A FAMILY?

Dirk Tissera: Founder,
Publisher and Editor-in-
Chief of The ANCHORMAN,
Canada

Not dating anyone at present. I’ve honestly been focused on my career more than ever, but I’m certainly open to someone. I’ve been sort of a late bloomer as it comes to dating, so it took some time for me to figure out what I want. I’m a searcher, and I know that special someone is out there. Once that is sorted out, I would be open to starting a family. In the meantime, I’m okay with being known as the ‘COOL UNCLE’.

HOW OFTEN DO YOU VISIT SRI LANKA, AND WHAT DO YOU THINK OF THE COUNTRY AND ITS PEOPLE?

I tend to go once or twice a year, but, definitely, at least once a year, to spend time with my mother and family out there. Sri Lanka has always had the most soulful people in the world. There’s a certain love and care amongst its people that feels pure. Even though Sri Lanka has carried a historical weight of poor governance, nothing can change the character of those that live there. Let’s hope this new direction will create a rising tide, lifting all boats. In terms of cultural output, Sri Lanka has an excellent musical scene, and a film community that is making huge strides. Pretty soon, you’ll see more and more Sri Lankans in the global mainstream.

*  WHAT IS YOUR ULTIMATE DREAM IN LIFE ?

To express myself, as creatively as possible, as an artist, both in film and music. Hopefully such expressions will lead to success. And hopefully such successes will lead to inspiring others to do the same. Ultimately, I would love to gain enough attention, security, and success as an artist, so that I can build a production company bringing more risk-taking artists and content to the world.

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A healthy Smoothie…

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Hey, I decided to do something different this week…a recipe for Papaya and Ginger Smoothie.

You will need 1/2 cup papaya chunks, 1/2 banana, 01 teaspoon grated ginger (or ginger powder), 1/2 cup coconut water and 01 tablespoon chia seeds.

Peel and chop the papaya into small chunks. Peel the banana and break it into smaller pieces. Grate the Ginger: If using fresh ginger, peel and grate about a teaspoon. If using ginger powder, measure 01 teaspoon.

Add the papaya chunks, banana, grated ginger, coconut water, and chia seeds to a blender and blend until smooth: Blend on high until the mixture is smooth and creamy. If needed, add more coconut water to adjust the consistency.

Pour the smoothie into a glass and enjoy immediately.

Benefits:

Papaya: Rich in vitamin A, antioxidants, and enzymes like papain, which help support skin health by promoting collagen production and reducing wrinkles. The enzymes also aid digestion.

Ginger: Known for its anti-inflammatory and metabolism-boosting properties, ginger can help reduce bloating, improve digestion, and support weight loss by increasing thermogenesis (fat burning).

Banana: Provides a natural source of potassium, which supports heart health and helps maintain healthy blood pressure levels.

Coconut Water: Hydrates the body and replenishes electrolytes, helping to maintain proper fluid balance.

Chia Seeds: Packed with fiber, omega-3 fatty acids, and antioxidants, chia seeds support digestion, help stabilize blood sugar levels, and keep you feeling full longer, aiding in weight management.

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