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SL economy, IMF claims, and reality

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Peter Breuer, Chief of IMF Mission to Sri Lanka has claimed that the Sri Lankan economy is showing signs of progress. The monetary and fiscal measures like tax increases and particularly the debt moratorium may have resulted in giving some breathing space for the country to recover from the period of extreme hardship caused by non-availability of foreign exchange to import essential requirements. Now, there are no fuel and gas queues and shortages are not severe. Economic parameters like GNP, inflation, are improving, tourism, are positive, and foreign remittance is flowing in. All these signs are favourable and could make the economist say the economy is doing well.

However, even in the field of economics as it applies to our country there are looming crises. The foreign debt has to be paid in the future and that will be a severe strain on the country’s foreign reserves. Import/export imbalance has been widening mainly due to the lower demand for our products and also the slow growth of production. Our overall export earnings have been declining in the post-Covid period. The Export Development Board has said that cumulative merchandise exports in 2023 decreased by 9.54 percent compared to 2022 (EDB report 31.1.2024). Unless the situation improves quickly foreign reserves which are satisfactory at present may decrease forcing the country to take more loans.

The following facts would substantiate this reality. Sri Lanka’s earnings from exports was only 23% of the GDP in 2014 and it has been around that figure since 1977. We have not been able to improve this situation. There is no way we could change this equation to any significant degree because to increase exports we have to increase imports too. To overcome these problems, we must attract investors (most of whom are Robber Barons) and prepare an investor friendly environment (often by denying the rights of workers and at the risk of environmental degradation) and be able to compete to capture our share of the market (which is often manipulated). This is well-nigh impossible for Sri Lanka as well as other developing countries.

We are not alone in this predicament. This system often leaves us short of dollars for our essentials, and we are forced to borrow from international lenders. Then, we turn to the IMF, which has been created for the purpose of keeping countries like ours afloat. This remedy is often worse than the malady and consequently the poor suffer more than others. The fact that we will never be able to come out of this mess becomes clear when we consider the following.

The new wealth produced by the world since 2020 has been USD 42 trillion. Two thirds of it have gone into the pockets of 1% of the world population. The whole of the rest of the world population, i. e., 99%, will have to do with one third of this wealth, which was largely produced by them. Further, during the last few decades, the debt burden of poor countries has increased by 12 %. Inequality between the rich and the poor has increased by 8%. These facts and figures show that the poor countries could never come out of poverty by following the economic policies they have followed in the past. They must, jointly if possible, work out new policies and mechanisms to come out of their poverty.

Contrary to the IMF claims, we are already witnessing the ill-effects of their policies on the lower middle class and the poor. Child malnutrition, stunting, and school dropouts are rising by the day. Although the IMF says these issues must be addressed by welfare measures, these don’t seem to be sufficient to mitigate the problem. Far-reaching effects of child malnutrition and inadequate education are well known and our country has been experiencing these ills continuously in the past. Health and education are imperative for economic development. As per the Family Health Bureau’s Nutrition Month 2023 Summary Report, the percentage of children under five years, who are underweight, was reported to be 17.1%, compared to 15.3% in 2022 (16.9.2023).

The ultimate future economic loss due to child malnutrition, which has health and mental development implications, is apparently not in the IMF equation. A World Bank report warns that malnutrition is costing poor countries up to 3 percent of their yearly GDP, while malnourished children are at risk of losing more than 10 percent of their lifetime earnings potential (20.3.2006). According to the report—malnutrition has long been known to undermine economic growth and perpetuate poverty, and yet, over previous decades, the international community and most governments in developing countries have failed to tackle malnutrition, even though well-tested approaches for doing so exist. The report says developing countries that invest in better nutrition for their children get high returns on their spending. A group of the world’s leading development economists, including three Nobel Laureates, concluded in a 2004 study known as the Copenhagen Consensus, that nutrition investments were one of the ‘best buys’ that developing countries could make in reducing poverty and improving economic growth.

There may be some chance of getting out of this vicious cycle by a process of import substitution. It may be easier to save foreign exchange by cutting down on the imports, which could be produced locally. We have been importing a significant quantity of commodities that could be produced locally. If Sri Lanka could produce the essential food items, the import expenditure could be reduced by about 50%. If import of non-essential goods is stopped another 25% could be saved. Then, our export earnings will be adequate for the essential needs of fuel, etc. Moreover, if the goal of 70% of renewable energy could be reached, which should not be difficult for a country blessed with ample sunlight, we could save enough of the export earnings for development work. All developing countries must strive for self-sufficiency and move away from export oriented, debt dependent economies. Indonesia has achieved economic development by increasing its agricultural output, which has risen to 15% of the GDP whereas in Sri Lanka it has remained at 8% for the past several decades.

Joseph Stiglitz, Professor of Economics at Columbia University and former senior vice president of The World Bank and Nobel Memorial Prize winner, wrote in April 2000 in an article for the New Republic “They will say the IMF’s economic ‘remedies’ often make things worse – turning slow-downs into recessions and recessions into depressions.  And they will have a point.  I was chief economist at the World Bank from 1966 until last November, during the gravest global economic crisis in a half century.  I saw how the IMF, in tandem with the US Treasury Department, responded.  And I was appalled”.  He was made to resign from his post in the World Bank. John Maynard Keynes in his book, ‘National Self Sufficiency’ (1933), says: “Ideas, knowledge, science, hospitality, travel, – these are the things which should of their nature be international.  But let goods be homespun whenever it is reasonably and conveniently possible and above all let finance be primarily national. Experience accumulates to prove that most modern processes of mass production can be performed in most countries and climates with almost equal efficiency.”

N. A. de S. Amaratunga



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Opinion

Praise to ex-President Ranil Wickremesinghe!

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Ranil

In the despicable absence of an urgent practical response on the part of the JVP-Anura Kumara Dissanayake-led NPP government to the devastating 28th March earthquake in Myanmar, ex-president Ranil Wickremesinghe has made a very timely and sensible proposal regarding how to assist our disaster stricken fellow humans in that country. ex-president Wickremesinghe! Thank you very much for saving, at least to some extent, Sri Lanka’s still unsullied reputation as a sovereign state populated by a most humane and hospitable people. You have again demonstrated your remarkable ability to emerge as an able state level troubleshooter at critical moments, this time though, just by being a mentor. It is a pity that you don’t think of adopting a more universally acceptable, less anglophile version of principled politics that will endear  you to the general electorate and induce the true patriots of the country to elect you to the hot seat, where you will have the chance to show your true colours!

The ordinary people of Myanmar (formerly called Burma) are remarkably humble, polite and kind-hearted just like our fellow ordinary Sri Lankans. There’s a natural cultural affinity between us two peoples because we have been sharing the same Theravada Buddhist religious culture for many centuries, especially from the 4th century CE, when Buddhism started making gradual inroads into the Irrawaddy Valley through trade with India. Whereas Buddhism almost completely disappeared from India, it flourished in Sri Lanka and Burma. Nearly 88% of the 55 million present Myanmar population profess Buddhism, which compares to 72% of the 22 million population in Sri Lanka. Wickremesinghe has been mindful enough to take a glance at the historicity of close Myanmar-Sri Lanka relations. And he didn’t mince his words while giving some details.

At the beginning of his statement in this connection (which I listened to in a video today, April 1, 2025), Ranil Wickremesinghe said that our government has expressed its sorrow (but little else, as could be understood in the context). Countries near and far from Myanmar including even partly affected Thailand, and India, China, and distant Australia have already provided emergency assistance.  Referring to the special connection we have with Myanmar as a fellow Theravada Buddhist country, he said that both the Amarapura and Ramanna nikayas brought the vital higher ordination ritual from there. We must help Myanmar especially because of this historic relationship.

When an earthquake struck Nepal, the birthplace of the Buddha, in 2015, we sent an army team to assist. On that occasion, Sri Lanka was the second country to provide relief, India being the first, with China becoming the third country to come to Nepal’s help. Today, India, Thailand, Malaysia, China and Australia have dispatched aid by now.  Last year Sri Lanka gave 1 million US Dollars for Gazan refugees. We need to take a (meaningful) step now.

Wickremesinghe proposed that the army medical corps be sent to Myanmar immediately to set up a temporary hospital there. The necessary drugs and other materials may be collected from Buddhist and non-Buddhist donors in Colombo and other areas.

Emphasising the ancient friendly relationship between Sri Lanka and Myanmar, Wickremesinghe mentioned that King Alaung Sithu I (of the Pagan Dynasty, 1090-1167 CE) sent help to (Prince Keerthi who later became) King Vijayabahu the Great (1055-1110 CE) to defeat and drive away from the island the occupying Cholas after a 17 year long military campaign. The grateful Lankan monarch Vijayabahu, during his reign, offered the Thihoshin Pagoda (name meaning ‘Lord of Lanka’ pagoda, according to Wikipedia) and a golden Buddha image to the Myanmar king. (This pagoda is situated in Pakokku in the Magway region, which is one of the six regions affected by the recent earthquake. I am unable to say whether it remains undamaged. Though the monument was initiated during Vijayabahu’s lifetime, the construction was completed during the reign of King Alaung Sithu I {Wikipedia}).

Wickremesinghe, in his statement, added that it was after this that a strong connection between Sri Lanka and Myanmar started. In some Buddhist temples in Myanmar there are paintings by ancient Lankan painters, illustrating Jataka stories (Stories relating to different births of Buddha). Among these, Wickremesinghe mentioned, there is a painting depicting the duel between (the occupying Chola king of Anuradhapura) Elara and (his young native challenger from Ruhuna prince) Dutugemunu. (Although Wickremesinghe did not talk about it, a fact well known is that there is a copy of our Mahavamsa in Myanmar. In reporting the ex-president’s speech, I have added my own information and information from other sources. I have put this within parentheses)

Let’s hope President Anura Kumara Dissanayake is wise enough to derive some benefit from his predecessor’s mentoring in the name of our beloved Motherland.

Rohana R. Wasala

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Assisting solar power debate in Cabinet

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Authors: Directors of Solar Village SDG CIC
www.solarvilllagesdg.org
I.M. Dharmadasa (Emeritus Professor), Nilmini Roelens (Solicitor) and Saroj Pathirana (Journalist)

The purpose of this article is to inform the Cabinet discussion on Solar Power proposed by the Ceylon Electricity Board (CEB)

Net metering and the Prosumer

The CEB has put forward a motion to the Sri Lankan Cabinet which proposes to reduce the unit price payable under the various net metering schemes to the “prosumer” (the owner of a solar panel system).

A prosumer is a blend of producer and consumer, referring to individuals who both create and consume. This is based on the notion that most producers of electricity through self-owned solar panels generate more than double their own needs as consumers. It thus enables the prosumer to connect to the national grid and receive money on a pay back scheme from the CEB for the excess electricity they produce.

What is this debate about?

Currently there are four schemes.

The Public Utilities Commission of Sri Lanka explains the various schemes involving roof -top solar solutions thus under a heading published in October 2023 – Rooftop Solar PV Connection Schemes. The two most noteworthy schemes are the Net plus and the Net plus plus schemes.

https://www.pucsl.gov.lk/rooftop-solar-pv-connection-schemes/

Through the NET Plus Plus Scheme CEB regards the prosumer as a mini power plant holder which maximises roof top generation well beyond the prosumer’s own needs making maximum use of extra roof space. This would work well for schools and companies with large buildings. CEB used to pay Rs. 37 per unit to the prosumer for up to 500kW. This unit price was available between 26 October 2022 to 1 July 2024. However, as of 1 July 2024 the unit price was reduced to Rs. 27.

We understand the new CEB proposal to the cabinet is to scrap this scheme altogether.

In relation to the Net Plus scheme which is the more accessible and popular scheme for ordinary householders the current CEB proposal is to reduce the unit price even further to Rs. 19 for solar power systems generating less than 20 kW, whilst for those generating between 20 – 100 kW the unit pay back will be Rs.17 and those generating between 100 – 500 kW will receive Rs.15 per unit.

The installation costs of a 5-kW solar panel is now around Rs 1.0 million. The cost of solar panels has in fact come down over the years and the units are recyclable. The lifespan of a solar unit is expected to be in the region of 22 to 25 years. There are now over 300 active solar companies in Sri Lanka. This is a rapidly growing sector with the prospect of generating employment for tens of thousands of young Sri Lankans for many years to come as technicians, administrators and entrepreneurs. The potential advantages for the economy are extensive Sri Lanka’s growth of the renewable energy sector using freely available sunshine available virtually all year-round given the geographical proximity to the equator

It is not just about reducing the electricity bills of the prosumer. This green energy solution would also mean we avoid the heavy annual cost of the import of fossil fuels into Sri Lanka which very seriously affects its balance of payments each year. The unwarranted need for environmentally damaging energy sources like coal, diesel and nuclear (with its inherent dangers and enormous costs), etc., will lead to a meaningless downward spiral of more debt, enhanced climate risk and pollution.

The intermittency argument

The argument of intermittency of renewables is a misguided premise. Some may argue that seasonal variations of renewables such as solar or hydro power may make them unreliable. This can very easily be remedied by investment in a smart grid. This can be done by upgrading the existing transformers and grid lines. A policy decision would be required at cabinet level to advise the CEB to reinvest any profits for this purpose.

Green Hydrogen is the future

Solar generated power can be harnessed to invest in Green Hydrogen solutions which could mean that rather being an importer of fossil fuels, that the rest of the world is turning away from, Sri Lanka becomes an exporter of green hydrogen to countries in the northern hemisphere where sunshine is scarcer.

Picture what it could do to the Sri Lankan economy if, rather than being dependent on imports of polluting and expensive fuel which can exacerbate the climate crisis, we transform our island into an eco-tourist paradise and become an exporter of clean green hydrogen.

Green hydrogen is created by splitting water molecules into its components of Hydrogen and Oxygen. The hydrogen gas can be compressed and stored for export. The minimum voltage required for splitting the water molecule is about 1.50 Volts DC and scaling up and commercialisation is happening throughout the world currently.

Rebranding Sri Lanka as a renewable energy island

To limit imports of fossil fuels for automobiles, a policy decision at governmental level could provide concessions for electric cars for solar roof owners and encourage the use of solar powered charging stations. The annual cost of imports of petrol and diesel would reduce overtime as Sri Lanka encourages clean and green electric cars.

Whilst the rest of the world is turning to renewable energy with alacrity, Sri Lanka ought not turn to fossil fuel imports in breach of its commitments to the international community.

In 2015 Sri Lanka signed up to the United Nations 2030 Agenda. Ahead of the Paris Summit Sri Lanka set out its climate action plan which the UN Framework Convention on Climate Change (UNFCCC) stated “Countries have agreed that there will be no back-tracking in these national climate plans, meaning that the level of ambition to reduce emissions will increase over time.”

(https://unfccc.int/news/sri-lanka-submits-its-climate-action-plan-ahead-of-2015-paris-agreement)

Sri Lanka has a real opportunity to rebrand itself as a renewable energy island. This means moving towards the commitments made at UNFCC – COP25, Sri Lanka Country Statement in Madrid in December 2019:

“Sri Lanka recognises the importance of the role of COP and highlights the need to take effective and definitive steps for finalising the follow up actions of the Paris Agreement.

The rise of the global mean temperature and the resulting changes have created adverse impacts on key sectors of Sri Lanka, such as agriculture, forestry, biodiversity, marine and fisheries, tourism and energy (hydro power) sectors, leading to disastrous effects on its people, ecosystems and economy. According to official statistics from 2008 to 2018, droughts, floods and landslides have affected over 15 million people, and losses and damages resulting from these calamities have been borne by Sri Lanka’s national budget… Sri Lanka is committed to inclusive and participatory climate actions to ensure that affirmative actions are taken to address the vulnerabilities of climate change.“https://unfccc.int/sites/default/files/resource/SRILANKA_cop25cmp15cma2_HLS_EN.pdf

Why is reduction of the unit price a very regressive, harmful measure?

The reduction will discourage the use of clean renewable energy in favour of higher imports and a move towards dangerous and expensive sources of energy.

The consequences of a reduction of unit price will thus be far reaching beyond the loss to the prosumer.

Lithium battery storage options mean that even when the sun stops shining at night or in the wet season the solar panel produced energy can continue to be used. It is very likely that current solar companies will need to diversify to survive and move towards lithium battery storage solutions and inverters so that year long, 24-hour access to energy is available without recourse to the national grid for their customers. As individuals and institutions go off grid CEB’s income will dwindle in the long run as the private sector takes over.

Recommendations to the cabinet

We make the following recommendations to the Government of Sri Lanka:

(i) At present we have a fragile grid, and the CEB should strenuously endeavour to minimise energy leakages and improve the grid by replacing weak transformers and grid lines. Such continuous improvements will enable us to move towards a “Smart Grid” enabling absorption of large amounts of intermittent renewable energies like wind and solar.

(ii) At present we have ~1500 MW of renewables installed, comparable to hydroelectricity. When solar power is plentiful during the daytime, hydro power can be reduced simply by controlling the water flow without any technical difficulties. This is one way of assuring energy storage while balancing the grid energy.

(iii) Another solution for this is pumped-water storage plants. It is important to follow through with such measures which have now been under discussion for some time.

(iv) The future energy carrier is green hydrogen (GH) produced by electrolysing water using both wind and solar. A global Green Hydrogen revolution is taking place, and GH can be used to run vehicles using fuel cell technology. Trains and buses are being run with GH technology in Europe. GH can also be converted into ammonia and methanol to produce fertilizer and be applied for other industrial uses. Sri Lanka must not be left behind.

(v) GH can be stored and burned whenever energy is needed, especially during nighttime. Only water vapour is produced during the burning of hydrogen without any air pollution. Sri Lanka already has the Sobhadanavi LNG plant which is almost ready to use. Since we must import LNG to run this power plant, we should be able to reduce the LNG import bill by half by mixing the natural gas (methane) with the locally produced GH. See here:

(vi) Local solar energy companies should install high quality solar energy systems and provide “after sale services” in accordance with their guarantees.

(vii) PV companies should also be encouraged to collaborate with local electronics departments to manufacture accessories like inverters and other components needed for these systems, creating new jobs, and reducing the total cost of the systems.

(viii) In addition to grid tied solar roofs, the PV companies should also market hot water systems and water pumping systems. As a country reliant mainly on agriculture, solar water pumping and drip irrigation systems, especially in the dry zone, provide a huge potential for increasing food production.

(ix) Battery capacities are improving, and costs are coming down. This can be encouraged pending replacing grid infrastructure.

(x) It is important to increase public awareness through government funded campaigns. The public should recognise the dangers of using imported and expensive fossil fuel and the importance of using renewables.

(xi) The public should also recognise the advantages of having a clean environment, health benefits and enhanced living conditions.

(xii) A community development project called “Solar Village” to empower needy communities, accelerate their sustainable development, reduce poverty and take climate action has been developed over the past two decades. Seven solar villages have been established and funding for three more solar villages have been obtained.

Solar Village SDG, a UK based community interest company has been established to encourage the use of renewables and to pilot programmes which will support sustainable development goals. This includes providing access to a quality education for all via smart rooms which will be set up alongside solar villages in rural schools. Such initiatives could be encouraged and supported.

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Opinion

How monks practice Buddhism in Sri Lanka

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Time was when we had to observe the five precepts chanting in front of the omnipresent Buddha statue in every Buddhist household, and pay homage to parents straight afterwards. Attend mandatory Sunday schools, trek about 6 miles (return) to Moratu Vidyalaya’s main hall together as a family on Fridays to listen to a sermon by erudite visiting monks from the Vajiraramaya and elsewhere.

Having been settled in the UK for half a century, I can only go by what I read and hear from Sri Lankan friends and families. All those practices seem to have changed for the worse, sadly! Living in luxury, temples are run on business models nowadays! Monks ask what they wish to eat at alms-givings, including pork, etc., tell how much it costs the laypeople to invite them, etc! Unbelievable to say the least! I dare say it seems to start from the top of the hierarchy – the Kandy Temples, where the prelates live and are patronised by all politicians from Presidents, Prime Ministers and others! Some monks engaging in politics is not uncommon! For example, a recent statement made by Ven. Dodampahala Rahula Thera during a religious ceremony held to bless former President Ranil Wickremesinghe on his birthday has sparked widespread discussion on social media.

Speaking at the event, Ven. Rahula Thera had claimed that he had advised then-President Wickremesinghe not to import fuel ahead of the 2024 Presidential Election. However, the Thera has since clarified that the remark was made in error due to the pressure of the moment. Pertinent question is why did he choose such intervention?

All these are in such sharp contrast to Buddhist monks in the Western world and South East Asia where they shun luxury to lead a truly monastic lifestyle in order to practise what they preach.

Respected and loved in his own country as a man of great wisdom, Ajahn Cha was also instrumental in establishing Theravada Buddhism in the West. Beginning in 1979 with the founding of Cittaviveka commonly known as Chithurst Buddhist Monastery) in the United Kingdom, the Forest Tradition of Ajahn Chah has spread throughout Europe, the United States and the British Commonwealth. The dhamma talks of Ajahn Chah have been recorded, transcribed and translated into several languages.

More than one million people, including the Thai Royal Family attended Ajahn Chah’s funeral in January 1993 held a year after his death due to the “hundreds of thousands of people expected to attend”. He left behind a legacy of dhamma talks, students, and monasteries. The little I know of Buddhism teaches me to practice His Noble Teachings. It follows therefore the importance of listening to practising Buddhist monks who actually command respect, not by their titles! They don’t mean anything to me. Not familiar with various Nikayas, I think Buddhist monks should have both their shoulders properly covered in the interests of propriety! Though not a vegetarian, I believe in Ahimsa as even little spiders feel pain. Though my wife is scared of them, I tell her they are scared of her, more to the point! So, I catch the innocent crawly creatures by hand to throw them out of harm’s way! We have stopped the practice of throwing inevitable food waste into Council provided bins, instead collect them on a regular basis to feed wildlife we have in abundance around rural Wales we live in. They are all gone the following day including old marrow bones after our two little dogs finish with them! It gives us great pleasure! In the end, it all boils down to respecting Mother Nature! It’s Mother’s Day today to remember Mother Nature and how proud I am of my surname!

Sunil Dharmabandhu

Wales, UK

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