And miles to go …
Tuesday 16th November, 2021
Being in print for four long decades is no mean achievement for any newspaper. The Island passes that milestone, today. Ours has been an arduous journey amidst numerous obstacles, and future challenges are unnervingly daunting, but our long walk shall continue. It is time for reflection and not glorying in achievements. We, however, do not intend to reminisce, in this space, of what we have done during the past eventful 40 years. Instead, we wish to discuss some contemporary issues that warrant serious discussion, given their potential to have a devastating impact on the country.
Parliament is currently debating Budget 2022, whose focus is basically on medium to long term plans to revive the ailing economy. The success of these plans, however, hinges on the government’s ability to solve the current problems the public is beset with. Independent economists have warned that unless some major foreign exchange inflows occur within the next few weeks, it will be well-nigh impossible for Sri Lanka to service its external debt come January, and there will not be enough forex for essential imports such as petroleum, food and medicine. The Sapugaskanda refinery has already stopped operations for want of crude oil. The government insists that the country has enough oil stocks, but how does it propose to replenish supplies vis-a-vis the current forex crunch?
Unless the government tackles the burning problems such as the shortage of essential goods, the foreign exchange crisis and the soaring cost of living, social unrest is bound to find expression in widespread protests, and even political upheavals. Economic recovery and political instability never go hand in hand. It will not be possible for the government to implement even the good proposals in Budget 2022 in such an eventuality.
Public debt has passed the tipping point thanks to ever widening budget deficits, and Sri Lanka finds itself in a catch-22 situation. All governments have contributed to this sorry state of affairs generously during the past several decades, and the present dispensation’s contribution thereto has been significant. The current budget deficit (8.8 percent of GDP), will worsen the situation, independent economists have said, pointing out that Budget 2022 has not proposed a realistic solution to the public debt issue, and one-off taxes and the leasing of state assets will not help manage the problem in a sustainable manner.
It never rains but it pours, as they say. There are clear signs of coronavirus making a comeback, after a tactical retreat. Covid-19 infections are on the rise, and a similar trend is discernible where the pandemic death toll is concerned. The people are behaving as if the pandemic were a thing of the past; they seem to have left the fight against the pandemic entirely to the government and health workers.
Finance Minister Basil Rajapaksa did not try to paint a rosy picture of the economic situation when he presented Budget 2022, the other day––and rightly so. But the public does not seem to have got the message. They must be told in no uncertain terms that fist bumps or hongi with the virus will only accelerate the country’s slide into bankruptcy, the threat of which is looming.
One can only hope that the government will stop duping itself, wise up to reality and do what needs to be done urgently; it has to realise that there are no political solutions to economic problems, and papering over the cracks cannot go on indefinitely. It has to grasp the nettle instead of restoring to money printing, which will lead to further increases in the cost of living and exacerbate the foreign exchange crisis.
There is not much time left for the incumbent administration, those who consider themselves the government in waiting, and the public to make a concerted effort to prevent the country from facing the same fate as Lebanon.
Justice and duplicity
Monday 20th March, 2023
The US and its allies are in seventh heaven over the International Criminal Court (ICC) arrest warrant for their bete noire, Russian President Vladimir Putin, for the alleged deportation of Ukrainian children. The US lost no time in welcoming the ICC warrant, and so did Ukraine. Russia has sought to pooh-pooh the ICC move and called it ‘outrageous and unacceptable’. The ICC action and the reactions of the US-led western bloc, Russia and Ukraine thereto reek of partiality and duplicity.
There are allegations that thousands of Ukrainian children are being unlawfully sent to Russia, and such despicable acts no doubt amount to war crimes, which must not go unpunished. So, there is no way Russia could make light of them. But these allegations must be properly probed and the veracity thereof established before arrest warrants are issued. The ICC seems to have been in a mighty hurry to initiate action against the Russian leader, presumably at the behest of the western bloc; it has thereby left itself wide open to criticism.
Ukrainian President Volodymyr Zelensky has welcomed the ICC warrant as ‘historic’ and called upon the world to take action against the Russian leader. He ought to realise that he has also blundered by antagonising Russia, and providing Putin with a casus belli. He should have known better than to allow the US and other NATO members to use him as a cat’s paw to further their geostrategic interests vis-à-vis Russia, at the expense of Ukraine. True, Russia’s military response to the ‘Ukrainian threat’ has been disproportionate, but the blame for what has befallen Ukraine should be apportioned to Zelensky, the US and its NATO allies as well.
There have been numerous instances where the US also reacted, just like Russia, to threats to its security; it has invaded countries and killed thousands of people besides engineering military coups to dislodge democratically-elected foreign governments and install dictatorships.
Zelensky is receiving military assistance from the US, the UK, etc., and they also make him feel important by inviting him to address their parliaments, but he should not lose sight of the fact that it is his people who are dying and his country runs the risk of being left in the lurch like other nations that sided with the US in the past. It requires vision and experience for a leader to navigate the so-called big power rivalry, which has become the order of the day.
Interestingly, ICC Chief Prosecutor Karim Khan has said, in a media interview, that the message from Friday’s warrant “must be that basic principles of humanity bind everybody. Nobody should feel they have a free pass. Nobody should feel they can enact with abandon. And definitely nobody should feel they can act and commit genocide or crimes against humanity or war crimes with impunity.” Really? Has the ICC acted in a similar manner in respect of the US and its allies? Will it explain why it did not issue arrest warrants for US President George W. Bush and British Prime Minister Tony Blair over hundreds of thousands of civilian deaths in Iraq due to an illegal war waged on the basis of falsified intelligence reports?
There has been irrefutable evidence that the Iraq war and sanctions caused many deaths. Madeleine Albright, who became the Secretary of State, herself admitted this fact. When the CBS channel, in an interview with her, pointed out that half a million Iraqi children had died due to the war and sanctions and asked her whether the price was worth it, she promptly said, “I think that is a very hard choice, but the price, we think, is worth it.” Strangely, no action was taken against either President George H. W. Bush or his son, President George W. Bush, for the war crimes in Iraq. And, President Joe Biden has welcomed the ICC arrest warrant for Putin, and taken moral high ground!
The ICC took no action against Tony Blair as well despite the Chilcot report on the Iraq war. It trotted out some lame excuses. The report, which is a damning indictment of Blair, has basically said, among other things, that there was no imminent threat from Saddam Hussein; the UK intelligence furnished ‘flawed information’ and Blair exaggerated the case for the war.
Sadly, the ICC has failed to resist pressure from some western powers and remain impartial. This, however, does not mean that what Russia is accused of doing in Ukraine should go uninvestigated. Allegations against it must be probed but in a credible manner. However, the so-called world order is governed by Rafferty’s rules or no rules at all, and the big powers do not have to worry about the consequences of their actions. There’s the rub.
Banking on IMF bailout
All indications are that the executive board of the International Monetary Fund will sign off tomorrow on the $2.9 billion bailout package its staff worked out with Sri Lanka in September. President Ranil Wickremesinghe can no doubt claim credit for clinching a deal on which work began at the height of the island’s economic crisis.
Ministers and government politicians are already trumpeting the impending success. They see it as a way out of the unprecedented financial crisis precipitated by their own SLPP administration. There is no argument that the country was pushed into bankruptcy following the foolish tax and agricultural policies of Gotabaya Rajapaksa who, together with the country, paid a high price for his folly.
With all that murky water under the Kelani bridge, the real question is whether nine tranches of $300 million spread over 48 months can revive Sri Lanka’s economy and deliver the reliefs promised by Ranil Wickremesinghe.
No sooner the Executive board signs off on the bail out, the IMF is likely to release its first tranche. That may appear like loose change in the scheme of international finance – the bailout of Credit Suisse last week was reportedly $53.7 billion, about two thirds of Sri Lanka’s GDP.
Media Minister Bandula Gunawardana is on record saying that it is not the amount of the bailout, but the signal that Sri Lanka’s economy is now under IMF supervision that will give confidence to lenders and potential investors. Some of the currently frozen bilateral funding, especially from Japan, could be made available, but will any private capital rush in where prudent investors fear to tread? Will creditors who bought into Sri Lanka’s oft repeated boast that it had never defaulted on its foreign obligations think of putting their money in Sri Lanka after the unprecedented sovereign default of April 2022? At the time, Sri Lanka’s external debt was $46 billion according to revised government figures.
The IMF deal was based on the strict understanding that Sri Lanka’s creditors agree to restructure the debt in such a way it will fit into the “Debt Substantiability Analysis” carried out by the Washington-based lender of last resort. What does this really mean? How much of a haircut will bilateral lenders agree to? Will the private creditors, also known as the International Sovereign Bond (ISB) holders, agree to the same terms? Out of Sri Lanka’s foreign debt, more than 50 percent is owned by private creditors.
It is common knowledge by now that getting the IMF bailout was held up for months mainly because of a delay in securing “financial assurances” from China which accounts for 52 percent of Sri Lanka’s bilateral credit. Whether one likes it or not, China can still make or break the deal.
Those who believe in a quick recovery after the expected good news from the IMF tomorrow would do well to realize that it’s a long way to Tipperary. The “financial assurances” must now be negotiated, and actual numbers established. How much Sri Lanka can pay back in the next four years? President Wickremesinghe in his candid statement to parliament on March 7 made it clear that Sri Lanka on its own does not have the capacity to payback 6.0 to 7.0 billion dollars annually till the end of 2029.
As a leader with little or no political base, except the fickle support of the SLPP, can Wickremesinghe steer the course? Sri Lanka has had 16 programs (aka bailouts) from the IMF since 1965. Sri Lanka’s track record with the Fund is not inspiring. Apart from being a repeat offender, Sri Lanka has completed only nine out of the 16 programs. In the early days, not drawing down the funds allocated to the island could have been taken as a good sign – an indication that the country was able to get out of the woods even ahead of schedule.
But the last program in 2016 clearly underlined the policy instability that has plagued the country. The program was almost on track when Gotabaya Rajapaksa jettisoned the IMF without completing it. Gotabaya Rajapaksa can also take credit for pushing the country to the abyss by spurning the concessionary credit of Japan and scuttling the multi-billion-dollar Light Rail Transit (LRT) project. A minimum $1.5 billion investment he spurned with another $480 million grant from the Millennium Challenge Corporation (MCC) of the United States.
By the end of next year, Sri Lanka will have to face a presidential election and the outcome of that will decide if the country has the courage to keep up the reforms. Even before that, trade union pressure will test the government’s resolve to remain with the IMF deal. Wickremesinghe can also call a parliamentary election anytime of his choosing if he wants to test the public mood which doesn’t appear to favour him or his governing partner the SLPP.
Austerity is never popular but demonstrating that the rulers are also leading frugal lifestyles is necessary to win public confidence. This is woefully lacking. Those who think that an IMF bailout alone will be a quick fix to all Sri Lanka’s economic woes must think again.
‘Shree Anna’ and Sri Lanka
Saturday 18th March, 2023
The Rajapaksa-Wickremesinghe government can allocate funds for anything other than elections. It claims to be too broke to spare any money for polls whenever the Election Commission makes requests to that effect. But it readily parts with huge amounts of public money to keep its politicians happy. One thing they put their hearts and souls into is junketing overseas. Never do they miss an opportunity to see the world at the expense of the public, who are struggling to dull the pangs of hunger.
Agriculture Minister Mahinda Amaraweera is reported to have left for India to attend the ‘Global Conference on International Year of Millets’ to be held in New Delhi, today and tomorrow. The UN has adopted India’s proposal that 2023 be declared the Year of Millets.
The importance of millet needs no elaboration. It is considered a wonder grain with the potential to help tackle global hunger so much so that Indian Finance Minister Nirmala Sitharaman has, in her Budget speech, aptly described it as ‘Shree Anna’ or ‘mother of all grains’. It has been reported that the global conference which gets underway, today, will focus on some important issues related to millets such as promotion and awareness of millets among producers, consumers and other stakeholders, value chain development, health and nutritional aspects of millets, market linkage, research and development. International scientists, nutritionists, health experts, start-up leaders and other stakeholders are expected to take part in the conference, according to media reports.
India has evinced a keen interest in millet production and set up the Indian Institute of Millets Research in Hyderabad. Finance Minister Sitharaman has said it will be converted into a centre of excellence to share best practices, research and technologies at the international level. Sri Lanka should promote millet production as part of its strategy to ensure food security and could enlist India’s help for that purpose.
Minister Amaraweera and his former political bosses, the Rajapaksas, who are controlling the incumbent government, come from an area—Hambantota—once known for producing finger millet or kurakkan, which is of ideological importance to the current regime. The Rajapaksa family has adopted the colour kurakkan for their trademark saataka, which they flaunt to hoodwink the ordinary public, especially the farming community. Sadly, the country has had to import even finger millet to meet a shortfall in the supply thereof. The same goes for mung, which is also imported in large quantities as its local production has dropped drastically over the decades. So much for the current rulers’ contribution to the development of agriculture!
It will be interesting to see how Minister Amaraweera proposes to promote millet production here. But rice being Sri Lanka’s Shree Anna, as it were, shouldn’t the Agriculture Minister, first of all, make a serious effort to sort out issues related to paddy cultivation? Rice growers are up in arms in all parts of the country, unable to bear the escalating cost of production and the shortage of fertiliser, etc. They also cannot sell their produce at reasonable prices. The government keeps making various pledges, which go largely unfulfilled. Powerful millers continue to exploit farmers and consumers alike by manipulating the paddy and rice markets with government politicians and officials doing nothing to rein them in for obvious reasons. Let Minister Amaraweera be urged to reveal how he proposes to tackle these problems after his return from the international millet conference.
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