Ravi: What I did as Finance Minister was like running a tavern without arrack

By Saman Indrajith

UNP Assistant Leader and former minister Ravi Karunanayake, in an interview with The Island conducted on July 30, says there is no significant threat from his party’s offshoot, the SJB, which he describes as only ‘a mere irritant factor.’ Excerpts of the interview:

Q: The country is going through very turbulent times. The economy is in the doldrums. Many developing countries, including Pakistan, have opted for requesting loan waivers from their lenders such as China, considering the impact realities of COVID-19. As a former Finance Minister do you think Sri Lanka should do likewise?

A: In the current situation we see the country’s revenue dwindling. There is a yawning gap between revenues and cost of living, and this gap has led to the widening of the budget deficit, which cannot be bridged with taxes. In the process of cushioning this impact you have to reduce either the recurrent expenditure or the country’s loan commitments. One of the two has to be reduced to make the fiscal space possible for the country’s economy to move forward. I do not see that happening. The revenue is dropping and expenditure increasing and this has caused the alarming fiscal imbalance. Economic disparities seem to be becoming more complicated by the day. In this situation, seeking loan waivers is not the answer. If you ask for waivers, you’ll lose the opportunity of getting loans in the future. The impact of loan waivers would vary on bilateral and multi-lateral loans which are a few and far between but not so on international sovereign bonds. It would lead to a negative economic outlook. When I took over the Finance Ministry, we had a negative outlook. We had to convert it into a positive outlook and we went forward. Under this government, such good work is being undone and the country is moving backwards. The World Bank has moved Sri Lanka from a medium-income earning country to a low-income earning country.

Q: What is the solution?

A: We have to navigate through these turbulent times. For that we need a strong national economic agenda, which should be able to address the issue of decreasing revenue and keep the economy afloat.

Q: The government has received encomia for handling the COVID-19 threat professionally. It is popularly thought that a UNP government would have made a mess of the battle against coronavirus and economic recovery. What would you say to this?

A: If we are elected, our immediate intention should be to restore confidence in the people, in the investors, in the local and foreign markets. We need to create a situation where people would get economic activities restarted. It is a matter of how you would be able to rekindle that confidence. For that you need consistent and coherent policies. At the moment we have policies that change by the day. When we were elected to office on Jan 8, 2015 the country’s economy was not better than this. In a way it is same with the post-COVID-19 situation.

The other factor is that the country’s economy had been in the doldrums well before the COVID-19. The impact of pandemic started on March 21, but economy had started experiencing trouble well before that. The main reason for that was because the government tried to reduce VAT from 15 to 8. And with many other things, the resultant loss was about 600 billion rupees. That amount is almost one third of the government revenue for the year 2019. When you don’t have revenue, there is no economic kick start. You lose 600 billion and the economy is going to tailspin. On the other hand, none in society would feel any relief from VAT reduction because of that increases that have taken place are so much more. With the 600 billion just thrown down the drain there has been no resultant economic gain.

Q: On the political front, the split within the UNP resulted in a confusion among UNP voters. The SJB has emerged a formidable political force. What do you think the impact of the split on the UNP’s electoral performance?

A: Our fight is with the SLPP and not any other party. This government has been in power for eight months. It’s almost one fifth of its full term. During this period, the cost of living has gone up dramatically and now it is almost 40 per cent. There have been job losses though the government promised to create many more. The SJB is a by-the-way party. Our main focus is to ensure that we are engaged with the main opponent rather than by-the-way parties. Every time when there is an election such by-the-way parties are formed by breakaway groups. It is like old leaves falling from a tree. New leaves will appear and fill the gaps. The UNP is such a strong party that it will not be affected by splits.

The people who have left the party have something in common. They are people who lost badly in their electorates at the last presidential election. Their leader lost that election. The SJB is only an irritant factor.

The UNP is a reservoir of talent. Whenever there is a slip-off we have lot of new talent to remedy it. The UNP is the oldest party in the country and it is getting stronger.

Q: Speculation is rife that the SJB members will join the UNP after the election. Some UNPers have said they will never allow them to return to the party’s fold. In your case, you were with Lalith Athulathmudali and Gamini Dissanayake when they left the UNP to form the DUNF and contest under the Eagle symbol. The DUNF was a splinter of the UNP like the SJB. Years later, DUNF members returned to the UNP’s fold. So, what’s wrong with the SJB members coming back to the UNP?

A: You cannot compare the two events. The bravest in the UNP at that time such as Lalith Athulathmudali and Gamini Dissanayake challenged what they saw as wrongs within the party. So, they were virtually thrown out of the party as a result of their struggle for democracy. In the present instance, some disgruntled party members have left the UNP as they could not achieve their ambitions.

I beg you not to compare the two events for it’s unfair by Lalith, Gamini and others of their calibre, who formed the DUNF.

The final outcome of an event is determined by the performance of a team. If you are a member of a cricket team, you have to be led. You cannot be led by the spectators outside the field. You can’t win the match by singing hosannas for his father or grandfather. Your success hinges on your performance.

The SJB lied to the people and they lied to the judiciary. That is why it lost the case. When it appealed to Court of Appeal and they had to pay Rs 25,000 fine as well. So, now the people can understand that their version of what happened at the Working Committee meeting of the party was not true.

With regard to the rumours of their return after the election, I must say the UNP is not a rest house where you come and go as you please.

Q: Some opposition parties have criticized the government’s handling of the COVID-19 crisis. Do you subscribe to this criticism?

A: COVID situation is something unprecedented. We would give our support to the government to face any such crisis for the sake of the people. I believe the government is doing its best, given the situation. But I cannot say the same about its handling of the economy.

Winning the COVID-19 war and winning the economic war are two different things. You cannot justify losing the economic war in post-COVID situation even if you fare well in your fight against COVID.

Q: The yahapalana government failed to prevent the Easter Sunday carnage. Don’t you think those terror attacks will have an impact on the outcome of the upcoming election as well?

A: If you say the Easter bombing had an impact on the then government’s electoral performance, then the COVID-19 pandemic will have a similar impact on this government. If people are guided by their emotions in casting their votes, then they will vote against this government. The economy is in tatters, companies are closing, cash flows are threatened and it is these major problems that will have an impact on the outcome of the upcoming election.

Q: The Easter Sunday carnage took place under a UNP government and the presidential election results show that people are concerned about national security and their safety. What would you say?

A: Well, it is unfair to say it happened on our watch because basically all security matters were in the hands of a single person, who is not in the government when this disaster occurred. It happened during the time of our government but everybody knows that the Prime Minister was not even invited to the national Security Council meetings. Everything was handled by the Presidential Secretariat. It was virtually one man show going on. We see the same now as investigations are on for eight months, but nothing new has been found out.

Q: What do you have to say about the disastrous MCC agreements with the US? Some opposition parties have already accused the government of duplicity?

A: They promised to dump the MCC agreement if they were elected. Have they thrown the MCC agreement? What a fuss they made prior to the presidential election. They said that the country would be under the dictates of America; the country would be divided and we would have to get visas to enter parts of our own country beyond Anuradhapura. We call upon the government to state its standpoint. If they reject the MCC agreement then they could tear it off and, if not, they have to admit that we did the right going ahead with it. It first started under the Mahinda Rajapaksa government; we went forward ahead because it was a grant in appreciation of good governance. What’s wrong with that?

Q: The SLPP is seeking a two-thirds majority to do away with the 19th Amendment to the Constitution. How do you propose to counter this campaign?

A: The 19th amendment was brought to do away with the 18th Amendment to the Constitution. The 18th amendment allowed the President to act according to his whims and fancies. So, the 19th Amendment had to be brought in. It was the will of the people.

At the time the 19th Amendment was introduced there were two opinions — either to do away with the presidential system or reduce its executive powers. I believed that we should do away with the executive presidency and give more powers to parliament. The 19th Amendment was introduced to pave the way for scrapping the executive presidency. People since 1988, have voted for its abolition but none of the governments care to respect their will.

Q: Treasury bond controversy had a huge impact on the UNP. Allegations have been levelled against you as well. What kind of impact this issue will have on the upcoming election?

A: This is a miscarriage of justice. I happened to be the Finance Minister, but the Central Bank was under the Prime Minister and other commercial banks were under Kabir Hashim. It was not the Prime Minister but his deputy Minister Harsha de Silva who did all the work at the Central bank. Both of them have been kept out of this issue while people who are not relevant were dragged into it.

There were five committees on the matter. First there was the Pitipana committee. There is nothing against me. Then there was DEW Gunsekera Committee. He was in the opposition then. His report does not say I was involved. Then there was Sunil Hadunnetti-led COPE investigation. They found nothing against me or the party. Then there was a presidential commission. There is nothing mentioned in their report about me with the issue at hand. They also found that Central Bank officials are responsible for this. Have any of them been questioned? Then there is another report of which 108 pages are missing. Why are they missing? Why hasn’t it been published? These were the things in the hands of the then President. It was a political witch-hunt. It was aimed at character assassination. Then there was a forensic audit report. It shows very clearly what happened during the period of 2005 to 2015. Why is that report not brought out and why action has not been taken on its findings? They have clearly stated that losses have occurred since 2005 onwards and that Central Bank had not got relevant approval for the implementation of private placements. When this question arose, I, as the finance minister, asked the Auditor General to compare what had been happening since 2005 to 2015. All are silent. They are trying to kill the messenger and distract public attention. That is an absolute national crime. At the moment those investigations have got nowhere, found nothing at all, and why are 108 pages missing? Why is that, not a single Central Bank official has been even basically mentioned? Because these are the guys- the central bank officials, not all of them but seven or eight people. They live luxurious lives. They are earning 2.5 or 3 million salary and dictate terms to people who get by on 25,000 to 30,000 a month. It is said that the monetary policy is being pursued by the Central Bank. The government’s or the financial minister’s role is to handle the fiscal policy. But the central bank was always at loggerheads with the government. We believe that the innocent people should have low interest rates on their borrowings, so that you could bring about an economic upturn, but the Central Bank officials pursue a high interest rate where they basically think that would ward off inflation. This is the problem that exists. And this menace must come to an end. These are the people who created it. Once again, I say I was not in charge of the Central Bank; I was not in charge of the commercial banks. Then why am I being accused of something I did not do? This is simple case of character assassination. That has to be corrected. When I was the Finance Minister, what I did was like running a tavern without arrack.

I was the Finance Minister but I did not have the banks under me. Even then we were able to bring economic stability. We were able to bring in financial discipline. We established the focus on right financial directions. That was during the three years I was in charge of the finance ministry. Some of them who are engaged in character assassination have left the party. They were responsible for the footnotes of the Sunil Handunnetti COPE report. Why do they hold me accountable for this? It was they who involved in it. People within the country did not recognize us, but outside world recognized us and that was how the Bankers’ Institution in the UK, which is highly respected one, voted me the best finance minister Asia Pacific for 2017.

Q: What plans does the UNP have for the future of the younger generation of the country?

A: Not that you cannot develop this country. It’s a matter of whether you want to develop this country or not. The talent is there, the opportunity is there and we do not apply ourselves in order to get to that. My best comparison is Sri Lanka in the time we got Independence 72 years ago, we had a per capita income of $ 49 and Japan had $ 48. Japan got battered in the Second World War and without any natural resources, they are basically today enjoying a per capita of 55,000 dollars while in Sri Lanka its 4,000 dollars.

Q: The UNP is doomed in the opinion of its critics. How do you counter this view?

A: Before talking of the party’s future, I should say we should talk of the present. We should handle it very dexterously. The UNP is very hierarchy-oriented, very seniority-oriented and competency-oriented party. In election times you hear various things from people who cannot even stand on their own feet. In the UNP, we have a leader in the party and our emphasis is on discipline. As for the party hierarchy Mr. Ranil Wickremesinghe is the senior most and next to him is John Amaratunga and I come next to him in order of seniority. I guess competency, discipline, loyalty, comradeship all would be put together and at the right time we will come as the right team.