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Editorial

Economics vs. Politics

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Thursday 15th August, 2024

All signs are that the upcoming presidential poll and the next general election, which is expected to follow in quick succession, will take their toll on the country’s economic recovery process. The main presidential candidates are ready to do things that are fraught with the danger of not only inhibiting economic recovery but also sending the economy back into a tailspin.

The government, controlled by President Ranil Wickremesinghe, who is also the Finance Minister, is playing Santa. It is throwing money around in a desperate bid to recover lost ground. It has promised a pay hike for the public sector workers while claiming that the IMF-prescribed revenue targets have to be met. The President himself has indicated that vehicle imports will resume soon. Predicting that the country’s foreign currency reserves will suffer a temporary setback as a result, he has claimed that they will improve with the passage of time. However, there is no guarantee that they will. Tensions between Israel and Iran are reaching a boiling point, and if war erupts in the Middle East, oil prices will shoot up and workers remittances will drop; the prices of imports are bound to increase exponentially in such an eventuality. We peddle no argument against the resumption of vehicle imports, but the government must tread cautiously without allowing its political goals to take precedence over the country’s economic recovery strategy.

Until the announcement of the presidential election, the government had been rejecting requests for a downward revision of painfully high personal taxes. It has now made an about-turn. President Wickremesinghe is reported to have told a group of university administrators that government is ‘looking at adjustments to the personal tax structure to provide some relief to the taxpayers’; he says he has received two proposals in this regard––one from the Treasury, which is under him, and the other from the IMF.

There is no gainsaying that people are reeling from direct and indirect taxes, and the news about possible tax revisions will certainly gladden their hearts, but the question is whether the factors that led to sharp tax increases have been tackled for tax cuts to be considered. The IMF has stressed the need for Sri Lanka to raise its state revenue to the region of 15% of GDP by 2025, and pointed out that the revenues in other middle-income countries average 26% of GDP. The SJB and the JVP/NPP have also promised to ease the tax burden on the public. Their argument that if the tax net is cast wide, and tax collection is streamlined with corruption being tackled, it will be possible to grant relief to the public, is not without some merit, but will that goal be attainable in the foreseeable future? It will be interesting to see the tax adjustment proposals by the Treasury and the IMF.

Curiously, all contestants in the presidential race have chosen to remain silent on the imputed rental income tax on the cards. What do they propose to do with it?

There is hardly anything that Sri Lankan politicians baulk at doing to further their political interests and win elections. Never do they hesitate to subjugate the country’s long-term economic interests to their short-term political goals. The current economic crisis is multifactorial, but it is mainly attributable to politically-motivated tax cuts and ill-conceived welfare measures under the Gotabaya Rajapaksa government. Having won the 2019 presidential election, the SLPP slashed taxes, causing a sharp drop in state revenue, and embarked on a relief programme aimed to win the 2020 general election. It resorted to excessive money printing, which led to an increase in inflation, and the depreciation of the rupee, aggravating the country’s forex woes.

Having ruined the economy, the SLPP had to upend its own economic strategy by way of crisis management at the behest of the IMF. But there are signs of the blunders that led to the current economic crisis being repeated.

Given what the government has undertaken to do at the expense of the economy to garner votes, and the attractive promises its rivals are making to woo the public, the upcoming presidential election can be considered a contest between economics and politics. One can only hope that the economy will survive the coming elections.



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Editorial

Bloodied roads

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The Grim Reaper apparently rides shotgun in many vehicles on Sri Lankan roads, where chaos is the norm, with drivers and riders moving like bats out of hell and jaywalkers darting across arterial roads and busy streets in a suicidal rush. The situation takes a turn for the worse during festive seasons, when road users behave as if they had a death wish. This may explain why as many as 44 lives were lost in 42 fatal accidents across the country between April 10 to 15 this year.

Road fatalities average seven to eight a day in Sri Lanka, and an increase therein is to be expected during a festive season. We can only hope that there won’t be any more tragedies like the ones we witnessed at Kotmale and on the Ella-Wellawaya road, in 2025.

Last year, as many as 2,562 lives were lost in fatal road accidents, according to media reports. On 7 April 2026, Director of the Police Traffic Control and Road Safety Division, SSP Manoj Ranagala, told the media that 676 fatal road accidents had occurred by the beginning of the current month. When the aforesaid 42 accidents and 44 fatalities are added to the official statistics, the picture becomes even gloomier.

Road fatalities jolt the police, politicians, road safety officials and the public into expressing concern and finding ways and means of reducing them only when they receive intense media attention. They sadly end up as mere statistics afterwards, making one wonder whether Sri Lankans have become desensitised to the lives lost in road accidents or adopted a fatalistic attitude towards them. There is no other way one can explain the absence of a well-coordinated national effort to make roads safe. Not that the authorities tasked with ensuring road safety have not done anything all these years. They have worked hard, and their good work is to be appreciated, but why they have failed to achieve their goal needs to be examined, and remedial action taken to save lives.

Road fatality statistics are shocking, but they shed light on only a part of the grave problem, which is far more complex than it looks. A World Bank report, Delivering Road Safety in Sri Lanka; Leadership Priorities and Initiatives to 2030, which we have discussed in a previous editorial comment, has revealed that ‘the high road crash fatality and injury rates on Sri Lanka’s roads undermine the economic growth and progress made over the past decade on reducing poverty and boosting prosperity’. The report says the annual crash deaths per capita in Sri Lanka are twice the average rate in high-income countries and five times that of the best performing countries in the world! Sri Lanka reportedly has the worst road fatality rate among its immediate neighbours in the South Asia region.

Last year, Director of the Colombo National Hospital Orthopaedic Services Department, Dr. Indika Jagoda, rightly called road fatalities a ‘silent epidemic’, which had not received the same public attention as dengue and other such diseases. Road accidents also exert a severe strain on the state-run hospitals, besides claiming lives, and their economic and social costs are enormous. In some cases, the victims of fatal road accidents happen to be the breadwinners of their families. Most of the road accident victims are young, as President of the Sri Lanka Medical Association Dr. Manilka Sumanatilleke has revealed at a recent media briefing.

SSP Ranagala has identified the primary causes of road accidents as poor road conditions, reckless driving, excessive speeding, and driving under the influence of alcohol. He is spot on. There are other causative factors, such as distractions, fatigue, inclement weather conditions, tailgating, improper lane changes, inexperience of drivers, poor eyesight of drivers, unroadworthy vehicles, lack of proper road markings, and time pressure. Much is being spoken these days about poor-quality coal consignments, and rightly so, but not much attention has been paid to the sham training courses conducted by the so-called driving schools and corruption in the process of issuing driving licences. These corrupt practices are also responsible for road accidents.

It is clear from the sheer number of lives lost in traffic accidents and the increasing vulnerability of all road users that we have been only scratching the surface of the problem of road fatalities all these years. The time has come for us to make an all-out effort to make roads safe for everyone.

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Editorial

Curiouser and curiouser

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Saturday 18th April, 2026

Never a dull day in Sri Lanka. CEO of HSBC Georges Elhedery has caused quite a stir here by claiming that Sri Lanka paid as much as USD 286 per barrel of oil, far above the global benchmark prices. He said so during a recent investment forum in Hong Kong. “What worries me is not the headlines,” he is reported to have said, adding that buyers sourcing oil from the Middle East are currently paying between USD 140 and USD 150 per barrel, and the highest amount for oil he has come across is a staggering USD 286 per barrel paid by Sri Lanka.

Elhedery’s remarks galvanised the Opposition into action here, with its propagandists going into overdrive, blaming the government for paying so much for oil, and hinting at a corrupt deal. Chairman of the Ceylon Petroleum Corporation (CPC) D. J. Rajakaruna has denied buying crude oil at USD 286 per barrel.

Addressing the media yesterday, Rajakaruna produced documentary evidence to support his claim, asserting that the HSBC CEO’s statement had been distorted to mislead the public into believing that the CPC had purchased crude oil at USD 286 per barrel. Asked by a journalist whether any kind of oil had been purchased at that price, Rajakaruna answered in the affirmative. He said refined oil was sold on the basis of five-day price averages, and the CPC had no alternative but to pay the amounts determined accordingly. If a shipment of refined oil had arrived between the end of March and early April, the prices would have risen steeply to the levels at issue, and nobody would have been able to do anything about it, Rajakaruna said.

True, the HSBC CEO did not specify that the oil he was referring to was crude. Therefore, it is not fair to compare the prices of crude with those of refined oil purchased at the height of the Iran war. However, the fact remains that according to the HSBC CEO Sri Lanka paid the highest amount for (say refined) oil, and the question is why it opted to pay that much while other countries were paying less.

Rajakaruna says the CPC was desperate to replenish the country’s oil stocks to prevent an energy crisis and had to buy oil at higher prices. His argument sounds tenable. However, other developing countries faced the same problem, and why didn’t they pay as much as USD 286 per barrel of refined oil? Did the supplier set a higher price for the oil arbitrarily, earned unconscionable profits at the expense of the Sri Lankan public, and shared the ill-gotten gains with someone in authority? Anything is possible in this country. What would be the situation if the JVP/NPP were in the Opposition today?

The CPC has passed its legacy debts on to the public in the form of a loss-recovery levy on fuel, amounting to Rs. 50 a litre, and therefore the public has a right to know why the CPC paid as much as USD 238 for refined oil per barrel while other countries were paying less for oil.

An investigation must be conducted to ascertain whether the CPC paid more for some oil shipments that could have been obtained at lower prices, and whether anyone cut a corrupt deal and lined his pockets. It must also be found out what the global prices of refined oil were when the CPC opted to pay USD 238 per barrel.

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Editorial

Sailing between Scylla and Charybdis

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Friday 17th April, 2026

Chinese Foreign Minister Wang Yi is reported to have told his Iranian counterpart, Abbas Araghchi, in a telephone conversation, that reopening the Strait of Hormuz is a unanimous demand from the international community. He has stressed that Iran’s sovereignty, security, and legitimate rights should be respected as a littoral state of the Strait of Hormuz, but the freedom of navigation and safety through the strait should be ensured. One cannot but agree with the Chinese Foreign Minister.

A prolonged closure of the Hormuz Strait will only aggravate global economic woes and therefore be counterproductive. Tehran has a lot to gain on the diplomatic front; even some staunch allies of the US have taken exception to US-Israeli military aggression against Iran. It ought to take the shifting dynamics of the conflict into consideration and change its strategy accordingly.

The Chinese Foreign Minister has rightly noted that the current situation has reached a critical juncture between war and peace and the window of peace is opening. Iran must seize this opportunity. Araghchi has informed Wang Yi that his country is willing to continue to seek a rational and realistic solution through peaceful negotiations. It is hoped that the fragile ceasefire will be extended, and Pakistan will be able to bring the warring sides to the negotiating table again and help work out a compromise formula.

The US has imposed a naval blockade on Iran, targeting ships that enter or leave the Iranian ports, especially though the Hormuz Strait, through which about 20% of world oil supply passes. It has already turned back several ships that sought to enter Iran. Ironically, the US is doing what it has condemned Iran for—restricting international navigation through the Hormuz Strait. With its naval blockade, Washington is likely to incur more international opprobrium. It still has no way of forcing Iran to allow all ships to sail through the strategic chokepoint freely. However, the US naval blockade is likely to have a crippling impact on Iranian oil exports. With both Iran and the US using the Strait of Hormuz as a strategic lever, the countries that have nothing to do with the conflict have to sail between Scylla and Charybdis in the Gulf region.

Some experts are of the view that the China-Iran railway will help mitigate the impact of the US naval blockade and counter Washington’s efforts to isolate China and Iran, but this option could give rise to unforeseen logical and geopolitical issues.

About one-third of global seaborne trade in fertiliser reportedly passes through the Strait of Hormuz. The Gulf countries are key producers of nitrogen fertilisers. They also manufacture about 20% of phosphate fertilisers and 25% of global Sulphur. Urea prices have increased by 25% in the US, and the American Farm Bureau Federation has written to President Donald Trump, warning that production shocks will threaten national food security. The situation is far worse in the developing world. Sri Lanka is running out of its fertiliser stocks, and farmers are up in arms. Máximo Torero, the Chief Economist of the Food and Agriculture Organization of the United Nations, has warned that the ongoing disruption to the Strait of Hormuz trade corridor has triggered “one of the most severe shocks to global commodity flows in recent years, with significant implications for food security, agricultural production, and global markets”.

Meanwhile, Sri Lanka is playing politics with its national energy conservation strategy amidst a global crisis while all other countries are strictly enforcing regulations in place to curtail fuel consumption. The suspension of the QR-based fuel quota system on account of the traditional New Year celebrations must have led to a huge increase in fuel consumption for non-essential purposes, as evident from the record revenue from the expressways. What should have been done was to increase the fuel quota instead of suspending the rationing system so that the public would be compelled to consume fuel sparingly during the festive season. The West Asian conflict is far from over, and the crisis management strategies must not be compromised.

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