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Can SL benefit from a recession?



by Kumar David

It is perverse to extract benefits for ourselves from the misery of others – the advanced (rich) economies; but actually, the suggestions I make in today’s column do no harm to anyone. They are passive benefits. The first question though is, will there be a global recession? The World Bank in a recent (15 Sept) press release entitled “Risk of Global Recession in 2023 Rises Amid Simultaneous Rate Hikes” says: “As central banks across the world simultaneously hike interest rates in response to inflation, the world is edging toward a global recession in 2023 and a string of financial crises in emerging and developing economies that will do lasting harm. Central banks are raising interest rates with a synchronicity not seen for five decades—a trend that will continue next year. But this and other policy actions are insufficient to bring global inflation down. Investors expect 4% interest rate increases; 2% over 2021. Unless supply disruptions and labour-market pressures subside, this leaves global core inflation (excluding energy) at 5% in 2023— double the five-year average before the pandemic. To cut global inflation to a rate consistent with their targets, central banks need to raise interest rates by an additional 2%. If this is accompanied by financial-market stress, global GDP growth will slow to 0.5% in 2023 — a 0.4% contraction per capita which meets the technical definition of a global recession.

“Global growth is slowing sharply, with further slowing likely as more countries fall into recession. These trends will persist, with long-lasting consequences that are devastating for developing economies. To achieve low inflation, currency stability and faster growth, policymakers should shift their focus from reducing consumption to boosting production. Policies should generate more investment, improve productivity and raise capital allocation, which are all critical for growth and poverty reduction.

“The United States, China, and the Euro Area have been slowing sharply. Even a moderate hit could tip the global economy into recession. Experience of the 1970s, responses to the 1975 recession, subsequent stagflation, and the global recession of 1982 illustrate the risk of allowing inflation to remain elevated. Fiscal authorities need to calibrate the withdrawal of fiscal support measures while ensuring consistency with monetary-policy, but policymakers should put in place medium-term fiscal plans to provide targeted relief to vulnerable households”.

These extracts from the World Bank (WB) press-release are heavily abbreviated. Many other studies and reports too suggest that a recession is likely in 2023-24. Since I cannot quote a large number, I have limited myself to this WB source that carries credibility. For the purposes of this essay take it that interest rates and inflation will remain high, stock markets depressed, bond yields high and growth retarded for say five years. After that? Hard to say; the options are many.

What I have said so far is not new to those who track economic trends. It is background data for today’s column. A significant point however is that the strategy that is being adopted across the rich world to handle the problems that it creates are contradictory; it is a Janus-Faced strategy of loose fiscal policy side by side with tight monetary policy. A mutually contradictory problematic but unavoidable in the present global political, financial-economic, strategic and paradoxical energy related circumstances. Let me elaborate in a few words.

It’s easiest to use the US as a focal point. The Biden Administration finds it a matter of existential necessity to take stand against extremism (a lurch to racism, “election deniers”, reinvigorated Trumpism, electoral gerrymandering, a fundamentalist abortion surge in Republican controlled states and feminist outrage elsewhere, and a primitivist majority in the Supreme Court). Biden is seeking to survive by enhancing feel-good among the population. So the Administration is pumping money into pockets; fiscal stimulation a $1.9 trillion “American Rescue Plan” () and $370 billion “The Inflation Reduction Act” including tax credits and rebates for energy-efficient appliances, plug-in vehicles and renewable electricity. (Another part of this measure for Climate Change initiatives is bogged down for now by reactionary Democrats in Congress).

These Biden initiatives are inflationary and blatant fiscal stimulus. Fiscal stimulus is starkly in conflict with the tight monetary policy (high interest rates) that the FED is bent on in its attempt to bring US inflation down from a feared 8% to nearer the target rate of 2% per annum. The US dollar is rising across the world because of high FED rates and for other reasons such as the Ukraine war and political uncertainties, e.g. victory of neo-fascists in the Italian elections and strengthening of the far-right in France, Poland Hungary, Denmark and elsewhere in Europe. Both the FED’s actions and the said political factors should motivate tighter financial discipline. Instead we observe a crucial conflict between the fiscal and the monetary, further aggravated by West Germany’s imperative to pour money into consumer pockets to cope with energy bills during winter 2022 and 2023. Other EU countries will have to follow suit.

I have expended a few paragraphs on the trends circumscribing the global economy as it is essential background. The recent fashion in the writings of Lanka’s old left, broad left, Maoist and Fidel-loyalist left is to pour scorn on Ranil’s inadequacies which are legion. But Ranil is small change; what is needed is to understand the processes maturing in the innards of global capitalism and flesh it with analytical and empirical content. For example, the likelihood or otherwise of a decade of global capitalist durability, or alternatively, recession, deep-depression or depression. My few paragraphs are intended to alert readers to important issues in fiscal, monetary, financial and equity markets. (I have not even touched on one important issue, Lanka’s indebtedness to international capital markets). It is inattention to empirical data and detail among leftists that is undesirable. If empirical detail is disregarded and objectivity lost, all is lost. I will come back to these concerns again and again in future columns.

What is directly relevant to my topic today is how Sri Lanka can find spaces, crevices and loop-holes that it can to exploit to its benefit in midst of these stresses force upon the rich world. Since there will be money in the pockets of rich country middle, upper class and older consumers (a few hundred billion dollars) an obvious beneficiary can be our tourism sector. Ecotourism, cultural tourism and climate change related tourists are the sectors to watch for. The downside of reckless tourism – drugs and harmful sex tourism -are dangers to be alert to. We are familiar with employment generated remittances but SL expatriates too are (were) keen to inject funds into families to upgrade homes and open small businesses. A rush was visible in Jaffna soon after 2009 but choked on unbridled political corruption and rampant government racism.

These earnings have to be supplemented with a drive to expand the use of English in education. One has to be careful to encourage only UK English, not the American dialect to avoid snarl ups and to exploit the benefits of Lanka’s membership of the Commonwealth, one of the largest, and a still expanding association of nations. Other options such as permitting small property purchases by non-citizen individuals and non-resident expatriate families has also got to be examined.

Let me now comment on the big-capital picture. The world is awash with excess capital and now is a crucial opportunity to exploit access to large investment. It would be wise to channel investment into avenues that will be amenable to compliance with the role of the state in long term economic directions. This is tricky and a separate topic best left to another day. The point is that rising interest rates in the rich countries encourages money to move out of stocks, and there is some reluctance in the rich-world to invest in sovereign bonds and private equity, so there is a pool of big capital searching for investment openings overseas. To attract some of this as FDI requires tinkering with the exchange control mechanism and the exchange rate. Both the SL Central Bank and the government are well aware of the opportunities and perils; I mention it here only to slake the curiosity of my laymen readers. Everybody, government and CBSL are very cagey about flexibility in the exchange rate or reducing foreign currency restrictions!

Turning to the corruption theme, to attract large manufacturing investors and moderate sized investment in commercial farming (orchards for example) the biggest single disincentive is state protected corruption. Now allow me a politically incorrect remark: Retroactive capital punishment for the biggest crooks, the billion-dollar types, will be salutary. But sigh! It will never happen; who will touch the Rajapaksas or rogue Ministers and MPs? A minimum that can be done is to cultivate Lee Kwan Yew type morality in the public service – ruthless punishment of corrupt officials – and to install a Hong Kong style Independent Commission Against Corruption (ICAC) which in its best days prosecuted and imprisoned a Chief Executive the moment he stepped out of office and lost immunity.

One last point before I sign off is a briefing in the Economist of October 15 entitled ‘Mothering Invention’ about the role of the state in directing long-term economic policy. Dirigisme is a doctrine where the state plays a key policy role in setting long term economic policy. It is canvassed by the left internationally and in Sri Lanka. This Economist article provides considerable insight.

For access to the quoted World Bank text, Google (verb): “Will there be global economic crisis?” And click on the ‘Risk of Global Recession’ site that appears]. The compete

URL is:,lasting%20harm%2C%20according%20to%20a

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Sri Lanka reaching critical level in terms of water stress



By Eng. Thushara Dissanayake

Water stress occurs when the water resources, in a region, or country, are insufficient for human and ecological demands. Although the planet has got 1.386 billion km³ of water, only 2.5% is available as fresh water. According to the United Nations, 2.3 billion people live in water-stressed countries, of which 733 million live in high and critically water-stressed countries.

The level of water stress is calculated by taking into account all the freshwater withdrawals by all major sectors. The important thing, in this regard, is that environmental water requirements are also considered. The main sectors include agriculture, fisheries, industries, and services. Total freshwater withdrawal is the volume of freshwater extracted from rivers, reservoirs, and groundwater sources for the aforementioned sectors. These sources are renewable water sources as they are replenished or recharged from rain. If water is used solely for power generation, that requirement is also used for the calculation. However, in our country that is not the case, as we use the water for agriculture, after power generation.

Sri Lanka is receiving about 2,500 mm average annual rainfall and is blessed with 103 rivers radially flowing to the sea from the central hills. Further, the country has a net surface water storage capacity of about 6 billion cubic meters, with the help of all the major dams and minor tanks of varying capacities. Despite all that, according to the Food and Agriculture Organization of the United Nations, Sri Lanka’s level of water stress is 90.8%, indicating a high level of water stress. In other words, the country is consuming 90.8% percentage of its total available renewable freshwater resources, at present, apart from environmental needs, which are estimated to be 52.8 billion cubic meters. Accordingly, the renewable water withdrawal is equivalent to 12.95 billion cubic meters for all sectors, except the environmental requirement. When the water stress level reaches 100% it would be a critical situation, as meeting further demands for water, from renewable sources, would not be possible. However, at the river basin level, there can be significant differences in water stress levels.

In contrast, water stress, in Kuwait, is 3,850% indicating that the country has got a very little amount of renewable freshwater, when compared to its requirement. Hence, the freshwater requirement of Kuwait is met with seawater desalination, treated wastewater, and brackish groundwater. In India, the figure is 66.5%, which is much better than in Sri Lanka. In the meantime, the average water stress in south Asia is 78%.

According to the level of water stress, we are gradually reaching a critical level, as far as our available freshwater resources are concerned. Given that only 90% of households have access to safe drinking water, and the population is increasing, more and more renewable water resources will be utilized in the near future. If water stress is reached a critical level, it would be a challenge for economic development as water is an essential requirement for many industries.

Like in many other countries, agriculture is the main user of water in Sri Lanka, which consumes nearly 85% of freshwater, while total consumption, for both industrial and domestic sectors ,is close to 12%. Notably, the contribution to the GDP, from the agriculture sector, is just 14.6%, while that of the service sector is 59.2%. However, climatic and field soil conditions affect water use in agriculture, significantly. Being a country, located in the tropics, crop evapotranspiration is comparatively high in Sri Lanka, especially in the dry zone. Still, behavioural changes, with regard to water use, and the availability of sound water infrastructure, can play an important role in water demand management. Therefore, we have to considerably improve our water productivity, especially in the agriculture sector, by increasing the water use efficiency being the main water user. However, a considerable investment is necessary for such infrastructure improvements, in the form of irrigation modernization, to increase water use efficiency.

Another challenge to fresh water is its pollution, due to human and natural phenomena. Water pollution, due to agrochemicals, sewage runoff, and waste disposal, is a high concern at the moment. Natural disasters, like floods, droughts, and landslides, also lead to water degradation. Floods contaminate freshwater sources with hazardous chemicals and debris. Droughts, on the other hand, increase the concentration of hazardous constituents in water as the amount of water available, in freshwater sources, is rapidly abated during droughts. On the other hand, the growing population, and economy, intensify these negative impacts on water quality.

The garment and textile industries account for 40% of Sri Lanka’s total exports. The industry is water-intensive, and therefore, it is important to guarantee that it meets the required water supply. Tourism is the third largest foreign exchange earning industry in the county, with a GDP share of 4.5%. The industry needs a considerable amount of water for hotel operations. Hence, future water policies should, among other things, focus on each sector’s contribution to the country’s GDP as well. This is more important than ever, given that we have to uplift the country again, at least to the previous GDP level that prevailed before the recent economic crisis.

Therefore, The sustainability of our freshwater use has become a challenge, and effective demand and supply management policies are essential. Unless we succeed in such endeavors, we will have to think of costly solutions such as water recycling, seawater desalinisation to meet the essential freshwater demands of the country. If we fail to do so, freshwater will be extracted at the expense of environmental water demand and it may end up in an ecological disaster.

(Eng. Thushara Dissanayake is a Chartered Engineer specializing in water resources engineering with over 20 years of experience)

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President picks up the gauntlet



by Jehan Perera

By proroguing parliament President Ranil Wickremesinghe has given the parliamentarians, and the country at large, a reminder of the power of the presidency. There was no evident reason for the president to suddenly decide to prorogue parliament. More than 40 parliamentary committees, including important ones concerning public finances, enterprises and accounts have ceased to function. The president’s office has said that when parliament reconvenes on February 8, after the celebration of the country’s 75th Independence Day on February 4, the president will announce new policies and laws, which will be implemented until the centenary celebrations of Sri Lanka’s independence in 2048. Prime Minister Lee Kwan Yew transformed Singapore from a relatively underdeveloped and impoverished agrarian society into one of the world’s most developed countries in the same 25 years that the president has set for Sri Lanka.

President Wickremesinghe has been getting increasingly assertive regarding his position on issues. Recently he attended a large gathering of Muslim clerics, where he was firm in saying that society needs to modernise, and so do religious practices. He has also held fast to his positions on reviving the economy and resolving the economy. There have been widespread protests against the tax hikes being implemented which have eroded the purchasing power of taxpayers. First they had to absorb the impact of inflation that rose to a rate of 80 percent at the time the country reneged on its foreign debt repayments and declared bankruptcy. Now they find their much diminished real incomes being further reduced by a tax rate that reaches 36 percent.

But the government is not relenting. President Wickremesinghe, who holds the finance minister’s portfolio, is going against popular sentiment in being unyielding on the matter of taxes. He appears determined to force the country away from decades of government policies that took the easy route of offering subsidies rather than imposing taxes to use for government expenses and development purposes. In Sri Lanka, the government’s tax revenue is less than 8 percent, whereas in comparable countries the tax revenue is around 20 to 25 percent. The long term cost of living off foreign borrowings rather than generating resources domestically through taxation has been evident for a long while in the slow growth of the economy even prior to the economic collapse.


Another area in which the president appears to have taken the decision to stand firm is the issue of finding a solution to the ethnic conflict. This problem has proven to be unresolvable by governments and political leaders who give deference to ethnic nationalism. Being an ethnic nationalist in the context of Sri Lanka’s ethnic and religious divisions has been a sure way of gaining votes and securing election victories. No leader in Sri Lanka has to date been able to implement the compromise solutions that they periodically arrived at, the last being the 13th Amendment. Earlier ones included the Bandaranaike-Chelvanayakam Pact of 1957 and the Dudley Senanayake-Chelvanayakam Pact of 1965 which could not even be started to be implemented.

At the All Party meeting that he summoned to discuss the ethnic conflict and national reconciliation, President Wickremesinghe took the bull by the horns. He exchanged words with ethnic nationalist parliamentarians who sought to challenge his legitimacy to be making changes. He said, “It is my responsibility as the Executive to carry out the current law. For approximately 37 years, the 13th Amendment has been a part of the constitution. I must implement or someone has to abolish it by way of a 22nd amendment to the constitution by moving a private member’s bill. If the bill was voted against by the majority in the House, then the 13th amendment would have to be implemented. We can’t remain in a middle position saying that either we don’t implement the 13th amendment or abolish it.”

The 13th Amendment has not been fully implemented since it was passed by parliament with a 2/3 majority in 1987. Successive governments, including ones the president has been a member of variously as a minister or prime minister, have failed to implement it in a significant manner, especially as regards the devolution of police and land powers. When parliament reconvenes on February 8 after prorogation, President Wickremesinghe will be provided the opportunity to address both the parliament and the country on the way forward. Having demonstrated the power of the presidency to prorogue parliament at his discretion, he will be able to set forth his vision of the solution to the ethnic conflict and the roadmap that needs to be followed to get to national reconciliation.


It is significant that on February 20, the president will also acquire the power to dissolve parliament at his discretion. By proroguing parliament, the president has sent a message to both parliamentarians and the larger society that he will soon have the power to dissolve parliament with the same suddenness that he prorogued parliament. On February 20, the parliament would have been in existence for two and a half years. The 21st Amendment empowers the president to dissolve parliament after two and a half years. Most of the parliamentarians belonging to the ruling party are no longer in a position to go to their electorates let alone canvass for votes among the people. Under these fraught circumstances, they would not wish to challenge the president or his commitment to implementing the 13th Amendment in full.

On the other hand, the taming of parliament by the president does not guarantee the success of an accommodation on the ethnic conflict and a sustainable political solution. The ethnic conflict evokes the primordial sentiments of the different ethnic and religious communities. Political parties and politicians are often portrayed as the villains who led the country to decades of ethnic conflict and to war. However, the conflict in the country predates the political parties. In 1928, in response to demands from community leaders in Ceylon as it was then known, the British colonial rulers sent a commission to the country to ascertain whether it was ready for self-rule. The assessment was negative—the Donoughmore commission wrote that the representatives of the biggest community held to the position that their interest was the national interest. All the representatives of the smaller communities who were divided one against the other were united against the biggest.

An important role therefore devolves upon civil society not to fall prey to the divisions that come down the years. There is a need for enlightened leaders of civil society to work with commitment to explain to the people the need for a political solution and inter-ethnic power sharing that the 13th Amendment makes possible. There were signs of this during the height of the Aragalaya when the youth leading the protests called publicly for equal citizenship and non-discrimination on the basis of ethnicity, religion and caste. They pledged not to be divided by ethnic nationalist politicians for their narrow electoral purposes. It is ironic that the government led by President Wickremesinghe has made these enlightened youth leaders the target of a campaign of persecution instead of making them a part of the solution by constructively engaging with them and issuing a general amnesty.

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Privatisation of education and demonising of students of Lanka



Student union leader Wasantha Mudalige with prison guards

by Anushka Kahandagamage

Sri Lanka is trapped in debt due to decades of corruption and short-sighted economic policies. To come out of the trap or, I would say, escape the moment, the government is seeking loans from the IMF, or anybody else who is willing to lend, no matter the conditions. To this end, under the IMF’s tutelage, the government is seeking to privatise education, aware that it will face the wrath of the people. In this setting, to suppress the protests, the government has adopted a strategy of demonising students, in the public education system.

School children as “drug addicts”

A media empire, which has strong ties with the current Lankan regime, recently sent shockwaves through schools, and their communities, by reporting cases of school children hooked on harmful narcotics. Following these reports, there were many write ups, social media content and stories published on the menace of drug addiction, among Sri Lankan students. That media network even released a video, interviewing two schoolgirls who claimed to be addicted to harmful substances. In the midst of the media frenzy, the police carried out surprise checks in schools, searching students’ bags. The state humiliated and terrified school children by using the police to conduct surprise checks in the schools and peek into the students’ backpacks, instead of investigating the avenues through which dangerous drugs enter the country. After a week, the Minister of Education claimed he was unaware that the police were conducting surprise checks in schools, with sniffer dogs, adding that there was no need to deploy the police force for this purpose. If the Minister was not aware that the police raided schools, it is not surprising that the state would also turn a blind eye to how narcotics enter the country. While there is a risk of students addicting to dangerous drugs, the state cannot place all the blame on students. Instead of taking responsibility for the state of affairs, and acting to keep harmful substances off the island, the state places the burden on schoolchildren and simply refers to them as “drug addicts.”

Bhikku students as “alcoholics”

The next example is from the Buddhist and Pali University, in Homagama. Similar to the first story, the same media network reported some irregularities occurring in the University. Those irregularities included the student monks forcing incoming students, also monks, to consume weed, liquor and party. Following this news report, some investigations were conducted in the University and empty liquor bottles were found in an abandoned well. Then we witnessed several press conferences where University authorities questioned the student monk leaders. While one cannot and should not disregard students’ violence upon another student, it is interesting to note the way the government is taking up the particular incident, at this particular point of time. There was a massive social media campaign to show that the student-monks are immoral and unworthy of education. It cannot be a coincidence that the student monks, at this University, were actively involved in the Aragalaya. In other words, the government was trying to defame the University, and the students, by labelling them as oppressors and alcoholics.

The Rajapaksa regime continuously used Buddhist monks, in their political operations, especially to incite conflict and win elections. The state has frequently deployed Buddhist monks to further its nationalist agendas. When the state used monks for their agendas, including to instigate violence, the monks were not framed as ‘immoral.’ The higher Buddhist authorities did not take action against groups, like Bodu Bala Sena, or Ravana Balaya, or their violent activities. It is ironic that the Government seems to be concerned about the ‘morality’ or ‘discipline’ of Bhikkus at this moment when many student Bhikkus have joined hands with the people to protest against the state.

University students as “terrorists”

The last example is the most pressing at this moment. On 18th of August, 2022, the police arrested Wasantha Mudalige, the Convenor of the Inter-University Students Federation, under the Prevention of Terrorism Act (PTA). Along with him, the authorities detained Hashan Jeewantha and the convener of the Inter University Bhikku Federation (IUBF), Galwewa Siridhamma Thera. The state labelled the politically active university students as “terrorists”. Again, this cannot have happened by chance; we all know the Aragalaya against the Rajapaksa dictatorship was heavily influenced by the Inter-University Students Federation and the Inter University Bhikku Federation. The student unions were the muscle of the people’s protests against the oppressive and corrupt regime. The Ranil-Rajapaksa regime labelled the student leaders’ terrorists and started arresting them.

The state’s stamping of University students as terrorists is a folly. If the state labels its own youth as “terrorists,” it means that the state has failed miserably because it is its own actions that have pushed them toward what is labelled as “terrorism.” The state should take a step back and reconsider its decisions.

Privatization of Education

The government and the government-validating media demonize students, labelling them as drug addicts, alcoholics and terrorists. The government undermines and defames the country’s student body. By doing so, the government is strategically isolating the students from the larger society and eroding public faith in them. Ironically, drug addicts, alcoholics, and terrorists are all confined to the public school and state university system, not private educational institutions. The media propagates the idea that students enrolled in the state education system are ‘immoral’ and ‘disobedient’. Meanwhile, Ranil Wickremesinghe, the puppet President of the Rajapaksa allies, proposes a new economic system which he thinks will counter the current balance of payment crisis. The proposal includes establishing an educational hub in Sri Lanka, which promises to privatise higher education in the long-term.

The state agenda of privatizing education is not a recent one, but it has been reenergized by the Ranil-Rajapaksa government in the context of crisis. Well before demonising the students, in the public education system, in June 2022 the government, national education commission, came up with an education policy framework.

Biased towards Rajapaksa ideologies, the national education commission that developed the policy, proposed to expand the privatization of higher education. In their report, the committee presents a table demonstrating how Sri Lanka allocates less money on higher education compared with the other middle-income countries. The next section outlines the way Sri Lanka relies more on government grants for higher education than other middle-income countries, which is confusing and contradictory, perhaps reflecting the grossly inadequate overall investment in higher education in the country. Then the report goes on to analyse how the poor school education system creates an unskillful student who is unable to think critically. It finally recommends promoting private participation in higher education, not only through funding but also by matching the curricula to fit the market and increase the “employability” of students. While on the one hand government pushes for privatising higher education, on the other, it demonizes the students in the public educational system. The State has seized the problem by its tail. The government is unable to perceive its own flaws in short-sighted policymaking, law enforcement, and corruption, and instead accuses and defames students, to distract them from its concerted effort to privatise education.

Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies.

(Anushka Kahandagamage is reading for her PhD in the School of Social Sciences, University of Otago)

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