‘Fortunately, help came from IMF in 2022 when economy suddenly plunged into crisis’

By Sanath Nanayakkare

Mahinda Siriwardana, Secretary to the Treasury and the Ministry of Finance recently warned that any policy inconsistency in handling the economy or veering away from the current fiscal consolidation programme would lead to disaster with no hope of future bailouts for Sri Lanka.

“The Public Finance Management Bill should have been brought many years ago. How many drafts were made – how many years were spent – before it was eventually finalized? We waited till we had our ‘back hit the ground’ to bring this. Why couldn’t we bring it earlier? There are several other things also that we should have done to avoid the crisis, but we didn’t,” he said.

“I am saying this from my personal experience. When you look back at the last two years and compare it with now, we have achieved relative stability, but we are still not in a comfortable position as a country. At the Treasury we are aware that the country is in a difficult place. But that difficulty is not visible on the surface. Fuel is available, electricity is available and public and private transportation is in place. As public servants, we got our salaries because the government didn’t impose s pay cuts like in Greece during the bailout program of the International Monetary Fund. That’s a good thing. But we still pay the salaries with difficulty.

Now that money printing has been brought to an end, government revenue has to come from taxes. In addition, we are trying to restrict our spending. That is not easy. For many decades, we have been used to one method and it is very difficult to change it. With the lessons we learned from the economic crisis, now we have to think as a country. We can’t just think as political parties. I would like to tell the whole country that political parties may have different policies, but if they say things to just get political power, that’s wrong. The head of the International Monetary Fund’s mission in Sri Lanka Peter Brewer has said it is witnessing the beginning of a virtuous cycle in Sri Lanka which must be sustained rather than reverting to a ‘vicious cycle’ as the country is on a ‘knife edge’ path. That is why we need to act wisely. Now we don’t print money or make unnecessary expenditures to maintain fiscal discipline. If the country needs to shift from the current course, then the people need to be told how it would be done and its impact on the people. Otherwise the people would plunge into a more difficult place than they were in 2022.”

“Fortunately, a positive reaction came from the IMF in 2022 when we plunged into the crisis. Today the debt restructuring has been successful to some extent. The international community is watching us. If we engage in fiscal indiscipline again, if we lose our current consolidation path altogether, don’t think anyone will come and bail us out next time. This is the fragile situation we are in and we need to understand that very well.”

“A lot of pain had to be taken in the process of achieving current level of stability which was done under the guidance of the President. Now we all need to get together and move the country forward on the current track and sustain the reform momentum. Otherwise we will have to pay a heavier price in the future than in 2022 as a consequence,” he said.