With known net debt service payments of USD 6.6 bn this year and current fully usable official reserves of less than USD 1 bn (2-3 weeks of imports), Sri Lanka is confronted with both a cash flow problem and a debt problem. The liquidity problem is compounded by the fact that the only known additional external financing, at this point, are lines of credit from India (USD 1.5bn) and Pakistan (USD 200 mn). These will certainly contain the depletion of reserves. They will not have a very material impact on the existing external financing gap, which is likely to be at least USD 7 bn this year, even with very optimistic assumptions about receipts from tourism, asset sales, remittances and FDI.
With each passing day, the dollar illiquidity will worsen unless there are large inflows. These are currently not on the horizon. Some businesses are being scarred; others are having to close down. There will be some temporary reduction in the hardships being experienced by the people due to the Indian SWAP, the deferral of the Asian Clearing Union settlement and the lines of credit obtained in recent weeks. The intention of the Indian government to provide humanitarian support in this time of great need is very laudable. However, these generous initiatives will not serve to buy more than two or three months’ time. We need to do much more to help ourselves rather than relying on the goodwill of friendly neighbours, such as Bangladesh, India and Pakistan, whose per capita incomes are below ours.
Thanks to the high level of external debt, the country also has a solvency problem. This formidable challenge will not be resolved by a few bilateral sources temporary financing. They do not alter the debt burden. The problem has been compounded as inflows have been less than anticipated. In its previous articles (see last paragraph), the Pathfinder Foundation has advocated: (1) an immediate announcement of a preemptive restructuring of external debt, (2) a very early and urgent approach to the IMF; and (3) bridging finance from friendly bilateral partners pending completion of the negotiations with creditors and the IMF which can take at least six months.
Debt restructuring, excluding multilateral debt, can save over USD 3 bn, during the first year. These dollars can be used to finance imports that meet the essential needs of the people and urgent requirements of businesses. An IMF programme can trigger a combination of balance of payments financing and direct budgetary support from the World Bank and Asian Development Bank to the tune of USD 1.5- 2.0 bn in the first year. The combined increases in USD availability during the first 12 months will have a huge positive impact in resolving the problems currently being caused by dollar illiquidity.
However, there can be no gain without pain. The painful consequences of many years of indiscipline, resulting in the country living well beyond its means, cannot be wished away. An austerity programme is inevitable. Its depth and duration can be mitigated by robust structural reforms that increase productivity/competitiveness and thereby strengthen the growth framework of the economy. This would increase output, employment and incomes. The policies adopted should also prioritise inclusiveness and sustainability.
A home-grown programme needs to be developed to meet these objectives. It should also be credible enough to negotiate with the IMF and creditors. Such a programme may include, inter alia, the following.
A realistic exchange rate that contributes to building reserves; and ends the current multiple exchange rates that incentivise the expansion of the black economy.
Continuation of the CBSL’s shift to a more market-oriented monetary policy.
A medium-term fiscal consolidation programme which sets out a clear path to debt sustainability, including by improving the primary balance through a widening of the tax base, improving tax administration, rationalising public expenditure in accordance with a clear set of national priorities, and adopting transparent fiscal rules by strengthening the Fiscal Management Responsibility Act.
Reform of the present highly inefficient subsidies, which disproportionately benefit the non-poor, with a well-designed and targeted system of cash transfers supported by a digital Identity Card.
Full-cost pricing of fuel and energy based on transparent and predictable formulas.
Further progress in commercialising SOEs, including implementation of the Statements of Intent prepared by the large ones.
Consider all options to reverse the burden Sri Lankan Airlines inflicts on state bank balance sheets and the government budget.
Strengthen the operational independence of key institutions, including the CBSL.
The above could, inter alia, be key elements of a home-grown reform programme that can be the basis of negotiations with the IMF. It can also be credible enough to generate confidence among creditors. However, it is also important to accelerate the long over-due structural reforms to ensure that the above programme, which is primarily focused on stabilisation, does not lead to a growth deficit. This has been a repeated problem with reform efforts in the past decades. The structural reforms to generate growth are very well known and relate to: factor markets (land, labour and capital); the investment climate; investment promotion; trade policy, including trade agreements; trade facilitation; education, training and skills development; and digitalisation.
There is much to be done, and done quickly, to avoid falling into the abyss.
Previous Pathfinder articles in this series include:; Lest we forget remembering the ‘Pathfinder Beyond the Box: A New Economic Vision for Post; The Nightmare Scenario: A Default on Sovereign Debt; Sri Lanka has no choice but to Restructure External Debt: A Pathfinder Perspective; Pulling back from the precipice: A Pathfinder perspective.
This is A Pathfinder Perspective issued by the Pathfinder Foundation can view on https://pathfinderfoundation.org Readers’ comments via email to firstname.lastname@example.org are welcome.
Speculations about origin of placename, ‘Negombo’ (Meegamuwa)
By Chandre Dharmawardana,
A writer using the pseudonym GADS, replying to a previous article regarding Negombo, states (The Island 17 Sept. 2023), “It is also historically recorded that the name Negombo is the Portuguese corruption of its Tamil name Neerakolombu and the Sinhala name Meegamuwa which means and comes from old Tamil Naval terminology Meegamam Pattnam. Meegamam denotes a naval captain”.
Unfortunately, the author does not give the reference to this “historical record” or elaborate on the details available from any early sources, Portuguese and Dutch maps etc. Furthermore, he asserts that “Meegamam” denotes a naval captain. Here again, this is certainly not so in any of the Dravidian languages, or Indic languages. No such usage exists even in Arabic and other languages of the Hebrew family, as far as we can ascertain.
A “naval captain” in Arabic would be Kabtin Bahriun, while the Tamil usage would be Katarpatai Kaptain in modern usage. In old Tamil words like Nakutawere used . However, “gama, gamuwa, gammam, kamam, etc., are all refer “village”.
I have collected what is known about the place name Negombo in the website listed at the end of this note . I quote from it below:
The name Meegamuva is believed to refer to a village (gamuwa) which was reputed for its honey (mee). Thus, the Mahavamsa-based tradition has it that honey was procured from this region for Queen Vihara Maha Devi, (2 century BCE), initially from a honeycomb found in a boat turned upside down. It could also refer to a forest of Mee trees, Madhuca Longifolia (Koenig). It is well known that placenames have been based on vegetation and prominent land marks; in our view, this is the most likely source of the name.
Another interesting legend is that the name is related to “Nihumbala, the nephew of the Yakka king Raavana. The Tamil form, Neerkozimpu may mean water, and ‘kozimpu’ is sometimes claimed to mean ‘village’, but such a meaning is not recognised in standard Tamil Lexicons. Also, the Tamil name originally applied only to the lagoon-like area and not to the whole of Meegamuwa. Given the ancient histoofthe village, kozimpu may have comefrom the sinhala kalapuva adorned with the Tamil “nir”.
Maya Oya flows north of Negombo and falls into the ocean near Kochchikade. This was an early center of the cinnamon trade, set up by the Moors in medieval times. The Portuguese ousted them in the 16th century and built a fort, and established a strong Catholic religious centre here. The Dutch ousted the Portuguese in the 1644 CE. The ruins of the fort, with its fine archway marked ‘1672’ can still be seen. In 1796 the British took over Negombo, by which time the cinnamon trade had declined. The town has remained strongly Roman catholic to this day.
Frivolous folk-lore etymology attriutes the name ‘Negambo’ to nikam biruva. That is, a dog ‘just barked’ is said to be the response given by a non-comprehending bystander to a colonial who asked ‘what is the name of this town? While GADS recognizes such frivolities for what they are, the claim that Meegamuwa or Neer-kozimpu comes from the Tamil words for “sea captain” can be very intriguing if anyone takes it seriously; one cannot find a source for substantiating such a claim in any reputed Tamil lexicon or Tamil literary source.
Madras Tamil Lexicon.
 Mahawamsa, XXII, verse 48.
How to conserve electricity at home and workplace
Going through my old paper clippings, I came across the following news item which is more applicable today when the country is facing a severe energy crisis on how to conserve or restrict the use of electricity at Offices and other working places.
There are several ways of conserving electricity at home, offices and other workplaces. It is absolutely necessary to do so because electricity is harmful for our environment and the planet we live in.
Here is how
(a) Unplug all electrical appliances in the kitchen when not in use, except the refrigerator. This includes coffee pots, sandwich toasters, blenders and ovens. These appliances use small amounts of electricity when they are left in standby mode.
(b) When it comes to washing, soap them first and then open the tap halfway to wash them.
(c) Use the washing machine once a week. Try washing some of your lighter clothes by hand and save jeans and other heavy clothing for the washing machine
(d) When drying your clothes, do not use the dryer unless very necessary. Hang wet clothes on a line in the backyard which is an easy way of drying them and clothes dry so easily during the day in this intensely hot weather.
(e) Change the traditional light bulbs for energy saving bulbs. The garden lights can be replaced with solar powered lights. In the kitchen, the refrigerator is out of direct sunlight and not next to the oven. Avoid putting hot dishes in the refrigerator as it will have to work harder to cool the dish, therefore wait for a while for the dish to cool and then put it in the refrigerator.
(f) Unplug any phone or laptop chargers when they are not in use.
(g) Unplug the computer when it is not in use. This is very important because it can get very badly damaged if it is plugged in during a thunderstorm. You may not even be at home during the storm, so it is advisable to unplug the computer when it is not being used. Do not leave the computer switched on for long hours.
(h) Unplug the television set and gaming consoles too, as they can get damaged if they are on standby mode during a thunderstorm.
(i) Keep DVD players, TVs and other audio and stereo equipment plugged into a multi-port which can be turned off with one switch. This saves electricity.
(j) Turn off the lights, fans and air-conditioner when you leave the room. Remember that you do not need the lights switched on during the day.
(k) Do not use electric appliances such as vacuum cleaners and use the broom instead.
Some lesser known historical facts
The Greek women in ancient Greece realised to their utter dismay that their husbands were always fighting wars overseas. One brave Greek woman, Lysistrata, organised a women’s front with the sole purpose of denying their husbands the marital pleasures unless they remained at home to fulfill their marital duties
Socrates, known for his wisdom, was invited by the King of Sparta, which had waged war against Greece, to be an honorary citizen of Sparta. He gracefully turned down the offer as he valued the democratic way of life in Athens. As he was always arguing with fellow Athenians neglecting household work his wife used abusive language on him in the presence of his companions. Socrates continued with his arguments when his wife in utter exasperation treated him with a plate full of dish water. Socrates merely said to his companions that after thunder comes the rain.
In the Olympic games held during the peaceful times the athletes ran the races naked. Women were not permitted to attend them. The penalty was death if a woman was discovered breaking the law. On one occasion a middle-aged woman was caught breaking the law. As she happened to be the mother of a celebrated athlete she was forgiven.
Julius Caesar was caught dressed as a woman in a women only club in Rome. He was not punished since he had gone there only to meet his lover who saved him. On another occasion he had to offer a bribe to the ship’s captain, a pirate, who threatened to throw him overboard into the Mediterranean Sea.
Isaac Newton was accused by Robert Hooke for plagiarizing when the former introduced the gravitational constant in his book Principia Mathematica. Hooke was the Secretary of the Royal Society of which Newton was the President. Hooke was the person who encouraged Robert Knox to write the book “Historical Relations…” Newton was accused by the German philosopher Leibniz of plagiarism as the latter had published the calculations of infinitesimal calculus before Newton. There was a rule in the Universities that dons should take holy orders. The king exempted Newton from this obligation. Newton’s denial of the divinity of Jesus and the trinity did not earn any punishment from the ecclesiastical authorities. The complementary part of calculus, integral calculus, had been discovered by Archimedes in the second century BC. After the conquest of Greece by Rome the intellectual supremacy and the culture of Greece saw a gradual decline. It was known that the burial place of Archimedes was a much-venerated place visited by Greeks. The Romans did not show such veneration and the burial place got neglected. However, when Cicero, a Roman intellectual, lawyer and writer became the governor of Athens in the second half of the first century BC, he visited the burial site and had the monument restored to its former state. He noticed the epitaph wherein the symbol of a sphere within a cylinder had been inscribed.
A century later Rome conquered England, killing the English queen Boudica. There stands the figure of this queen on a horse (close to the underground tube station Westminster) with words emblazoned on the flanks in poetic language indicating that while England was colonised by Rome, England had conquered half of the world.
Guy Fawkes was the man who made an attempt to set fire to the Parliament building. This incident is known as the “Gunpowder plot”. He failed in his attempt and was executed. This incident may be compared to the attempt by a JVP member who threw a hand grenade when a Cabinet meeting was taking place in the Parliament building with the President JRJ presiding. The culprit got away.
When a German prince from Hanover became George the First of England, he found life in England very dull as he could not speak English. So, he invited his old German friend Handel, the musician, to be his companion. It was during this time that Handel composed his famous “Water music” and many operas.
Dr. Leo Fernando
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