Features
Further on Budget Speech: Cost of living, public debt and collective responsibility
By Dr Laksiri Fernando
Minister of Finance Basil Rajapaksa is correct in identifying ‘international drug mafia,’ and ‘fraudulent business operations’ as challenges to the country, whether it should be stated in a Budget Speech or not. However, just after that and on the same breadth he is castigating ‘social activists’ and ‘civil society’ organisations as forces detrimental to the country, saying the following.
“Similarly, agents of foreign powers disguised as social activists are exerting a considerable pressure on our society to the extent that, today, such so called activism can overthrow strong and populist governments. It is not possible for a government alone to manage. Therefore, I invite all citizens of this country as responsible citizens to be vigilant about this situation.” (p.10).
While he characterises the social activists and civil society organisations as ‘agents of foreign powers,’ most worrying is the call for government supporters to act as ‘vigilante groups.’ That is the meaning of the last sentence. It is rather funny this is stated by an American citizen! Of course, no one should agitate to overthrow an elected government by force or violence. But call for harmful policies to be terminated, ineffective Ministers to resign, or for an early election to be held is within democratic parameters.
Cost of Living
The Budget speech has taken the price inflation, affecting the cost of living, as a major challenge. That is commendable. The answer given however is the following.
“We believe that matters, such as, changes in consumption patterns, inadequate increase in production yield, inability to adapt to modern technology, issues with transportation and storage, the impact of intermediaries, and the asymmetry of information, within the production chain have all contributed to rising commodity prices.” (Para 4.5).
“We have to accept that the increase in prices is due to a shortage of goods, the imposition of import restrictions, the overreliance on imports, the depreciation of the rupee together with the failure to adequately encourage manufacturers.” (Para 4.6).
It is simple economics to consider inflation in any country a function of demand (pull factor) and supply (push factor). If the first paragraph gives reasons in the domestic context, the second is primarily relates to external factors. However, it is wrong to begin with or blame ‘changes in consumption patterns’ for the ‘rising commodity prices.’
The author (whoever) should have made a distinction between the (luxury) demands of the rich, and the essential needs of the poor or the ordinary. The country’s problem at present is particularly the latter. Of course, there is a rising demand even on the part of the poor and middle classes because of population expansion and people’s desire to have healthy and quality foods and goods. Leisure and entertainment also are their needs.

It is not wrong to identify ‘inadequate increase in production, inability to adapt modern technology, issues of transportation and storage, interference (not impact) of intermediaries and asymmetry of information’ as contributory factors for the shortages of supplies. If we particularly refer to the agricultural sector (rice, grains, vegetables, fruits etc.), the Minister should have frankly admitted to ‘organic fertilizer’ blunder more than anything else for the present inflation and food crisis. That is not done. It was a blunder because of its unplanned and haphazard nature.
On the external side, there is nothing wrong in identifying ‘overreliance on imports, depreciation of the rupee, imposition of import restrictions’ as reasons for shortages and increase in prices. However, restrictions on the importation of luxury items not only necessary to soften the balance of payments, but also to ease the rupee deprecation under the present circumstances. These have not been in the horizon of the Budget Speech at all.
When we take the Consumer Price Index (CPI) even as a conservative reflection of people’s cost of living, the present conditions are appalling. From January to November this year, the CPI has increased from 138.7 points to 150.7 points, by 12 points.
Consumer Price Index, January-November 2021
In a budget speech when problems are identified, clear solutions also should be proposed or offered. Otherwise, there is no purpose of a speech. Unfortunately, this is not the case.
Public Debt and Foreign Exchange
It is partly understandable that public debt (foreign and domestic) going over 100 percent of the GDP during the civil war even though some of the loans and procurements were excessive and harmful to the country. This is something that had to be resolved thereafter. This was not done and in addition many new loans were procured mainly from China and others in the name of ports, airports, and roads. Benefits of these are long term.
There was no five-year plan or similar although this was requested by coalition partners of the UPFA (United People’s Freedom Alliance). Production, entrepreneurship, and businesses should have been promoted through public-private partnership, and through the private sector, before going into particularly largescale ports and roads. Promotion of production and infrastructure should go hand in hand, not one after the other. The partner parties, particularly the Left, also should be blamed for their lethargy or not taking necessary action to pressure or breakaway. Constructive independence is extremely important to the Left.
Of course, there are some developed or high capitalist countries who allow debt to go over the GDP. The US (128 percent) and Japan (235 percent) are two such countries. This is like big businesses taking loans even exceeding their assets and doing their rollovers. However small businesses cannot do so, or not allowed to do so, because their basic capacities are limited.
Likewise, the poor or just developing countries cannot afford to take major stakes in respect of loans and debt. They can easily get into a debt trap, to mean taking more and more loans to pay back the interests and loans. Sri Lanka at present is within this trap.
How has the Finance Minister explained the present debt question to the people? The following was his explanation:
“In 2014, when President Mahinda Rajapaksa handed over the country to the previous government, the total debt of the country stood at Rs. 7,487 billion. It was 72.3 percent of the Gross Domestic Product.
When the present President came to power at the end of 2019, public debt had increased to Rs. 13,032 billion. That is how the government of good governance had created debt.” (p. 14).
Is this correct or not? This is something that the Opposition should explain to the people frankly. Champika Ranawaka, a perennial political jumper, has at least tried an explanation (Colombo Telegraph, ‘Development and Loans,’ 2 December 2021). After arguing that Sri Lanka’s debt trap is mainly due to the high interest commercial borrowings with no concessions over repay period, he says the following.
“Accordingly, the 8% borrowings which were rigid and high interest at the start of Mahinda Rajapaksha regime became 47% by the end of 2015. As a result the country went in to a vicious cycle from 2016 to borrow from commercial lenders for a high interest without any concessional period to repay. by the end of 2019 the percentage became 58%. further, a sizable proportion of those borrowings were to repay previous debts.”
Collective Responsibility
When Ranawaka blames the Rajapaksa regime for taking high commercial loans during 2005-2015 period and increasing it from 8 percent of the GDP to 47 percent, he also should take the collective responsibility as mainly the Minister of Power and Energy during the period at the end.
Again, when he says the country went into a vicious cycle of commercial debt from 2016 onwards and it became 58 percent of the GDP in 2019 (excluding other and rupee loans), he again should take the responsibility as the Minister of Megapolis and Western Development. This is not to mention the Bond Scam.
I use the term ‘collective responsibility’ in this article not only in the traditional cabinet sense. On the question of debt trap, forex bankruptcy, high cost of living, balance of trade, balance of payments etc. both main parties of the so-called political divide are ‘collectively responsible’ to the country and the people. No one should or could escape from that responsibility.
At present, Sri Lanka’s external debt trap is mainly due to the commercial loans primarily obtained through International Sovereign Bonds (ISB) from international capital markets with high interest rates (around 6-8 percent) and without concessionary periods. The stubborn refusal to go before the IMF is another reason for the present debt crisis.
It was in 2007, during the Yahapalana regime, that the first ISBs worth $ 500 million was raised and then continued during the same period and by the present Rajapaksa regime to cover foreign expenses and previous loans. These commercial loans which was only 2.5 percent of all foreign loans in 2004, became 56 percent by the end of 2019 (See Umesh Moramudali, ‘Sri Lanka’s Foreign Debt Crisis Could Get Critical in 2021,’ 9 February 2021, The Diplomat).
Even in covering the day-to-day internal government expenses, both regimes had to rely on Treasury Bills and Bonds in auctions and allowing direct participation. Because the Treasury is always running out of funds, without a proper tax system in the country and almost all state enterprises are lost making entities. Since January 2020, over 150 auctions/issuances have been conducted for Treasury Bills and Bonds the final obligations running into billions and billions until 2015 and beyond. As a result, the government at present is bankrupt both externally and internally. This has been the fault of not one regime, but both regimes with ‘collective responsibility’ to this pathetic situation.
(Author a retired Professor of Political Science and Public Policy, University of Colombo, also served as Assistant Director of Commerce, Ministry of Commerce (1969), and a Director (academic) of the Colombo Stock Exchange (2010-2011).
Features
The challenge of being positive about SAARC
It was a few years back that a former President of Sri Lanka took it on himself to pronounce SAARC ‘dead’. Since then there have been other sections of Sri Lankan opinion that have joined the critics of SAARC and taken the solemn stance that SAARC has indeed died what may be called a natural death.
Their fatalism is understandable. SAARC has failed to meet at heads of government or state level for the past several years to take the SAARC process notably forward. Regional cooperation has more or less been only an appealing idea. No substantive concrete projects have taken off to make the idea a hard reality. ‘Inner paralysis’ seems to be SAARC’s lot. Hence the fatalism in these circles.
However, being one of the worst cash-strapped regions of the world and a teemingly populated one with people virtually left to their devices, what choices do the ‘SAARC Eight’ have other than to try their best to band together and continue with their cooperation efforts, however small they may be?
There is no escaping the mounting debt trap for many of these countries and bankrupt Sri Lanka is a glaring example, but ‘throwing in the towel’ and abandoning themselves entirely to the diktats of the strongest economies and their agencies will prove a ‘living death’ for many countries in the SAARC fold.
The gains may be meagre but giving-up on SAARC cooperation in full would prove self-defeating for the organization and South Asia. Right now, the collective intention ought to be to salvage what the region could from the tenuous cooperative efforts. Moreover, such initiatives could go some distance to generate a degree of goodwill among the Eight and help in sustaining a dialogue process.
Given this backdrop it proved ‘a stich in time’ for the Regional Centre for Strategic Studies (RCSS), Colombo, to recently host the SAARC Secretary General Ambassador Md. Golam Sarwar to a round table discussion on the unifying potential of SAARC and its future possibilities, besides other related issue areas.
Held on June 24th and moderated by RCSS Executive Director and former ambassador Ravinatha Aryasinha, the forum brought together a vibrant, wide ranging audience comprising academicians, diplomats, senior public servants, civil society activists and many others. Following the presentation by Ambassador Golam Sarwar titled, ‘Reigniting SAARC: Achievements, Challenges and the Way Ahead’, a lively Q&A followed.
The above forum could be described as an act of lighting the proverbial ‘candle’ rather than ‘cursing the darkness.’ It surely is a ‘darkness’ that could be seen as daunting considering that the region’s pivotal powers, India and Pakistan, are failing to act in a spirit of accord but are engaged in bitter finger-pointing on a number of questions of vital importance to SAARC.
On the other hand, what is the rest of the region doing to bring the above sides together? It is disappointing that to date the rest of SAARC has failed to launch a major diplomatic drive to bring peace between the feuding regional heavyweights. It needs to act without delay and establish its earnestness and this effort would need to prove SAARC’s staying power in the unfolding months and even years.
In assessing SAARC’s seeming failure local opinion in particular has failed to factor in what could be described as weak leadership. Since Sheikh Mujibur Rahman of Bangladesh, the founding father of SAARC, the region has failed to produce a visionary leader who could advance the SAARC cause with charisma and drive.
Among other reasons, weak leadership accounts considerably for the faltering and stuttering status, as it were, of SAARC. Badly needed are leaders who could go the extra mile, think less of narrow national interests and work diligently towards the collective well being of the region but SAARC’s millions of ordinary people have been made to wait in vain for leaders of such stature. Instead, they have been burdened with politicians who seem to be relishing the apparently moribund state of SAARC.
Looking back, it could be said that it was the dynamic leadership factor that led to the launching of the Non-Aligned Movement and for its sustenance for a few decades. True, it could be seen in some quarters that NAM is no more, but as in the case of SAARC, the former too has been unfortunate to be burdened over the years with politicians who lack the vision and drive to unflaggingly advance the fortunes of the South. NAM and SAARC lack the dynamism and vision of leaders of the stature of Jawaharlal Nehru, for example, to give them the required guidance and intellectual depth.
The reasons are complex for there not being among us currently political leaders with the vision and the steadfast commitment to advance the legitimate interests of the South. However, it could be stated with conviction that the majority of Southern leaders have too easily caved in to the demands of the global North and its financial agencies.
These leaders have failed to see, for instance, that the largely market economy oriented Northern governments would not view with favour a centrist economic model that attaches priority to the interests of the dis-empowered publics of the South. This realization ought to have dawned on the current government in Sri Lanka, for instance, some while ago but it has no choice but to abide by IMF dictates since economic survival at present is unthinkable without the latter’s succour.
Accordingly for SAARC this should be the time for some soul-searching. Priority needs to be attached to ending the feuding between India and Pakistan since at present the material fortunes of the region hinge largely on these regional giants giving peaceful relations among them a try. This is no easy challenge to meet but some daring, visionary diplomacy needs to take hold among the rest of SAARC.
There is some sense in SAARC bringing the peoples of the region together through programs that address their best collective interests. A meeting of minds among SAARC nations could enable SAARC and its agencies to build a region-wide people’s movement for progressive political and economic change that could in turn lead to the region’s political leaders sensitizing themselves more to the neglected needs of their publics.
However, the time is ‘now’ for the initiation of these progressive changes and the voice of SAARC well wishers would need to drown out those of their critics.
Features
OPA seminar examines Sri Lanka’s economic recovery, resilience and growth pathways
A seminar, “Sri Lanka’s Economic Crossroads: Navigating Recovery, Resilience and Growth” was recently held by the Organisation of Professional Associations of Sri Lanka (OPA) at the OPA Auditorium, bringing together economists, OPA members, and professionals from diverse fields for an insightful discussion on Sri Lanka’s economic recovery and future growth prospects.
The event was held under the patronage of Jayantha Gallehewa, President of the OPA, and was jointly organised by the National Issues Committee (NIC) and the Seminars, Workshops and Programmes Committee of the OPA. The event reaffirmed the organisation’s commitment to advancing professional excellence, fostering insightful intellectual engagement, facilitating interdisciplinary knowledge exchange and creating a constructive platform for informed dialogue on issues of national importance.
The panel of speakers comprised Dr. Harsha Aturupane, Lead Economist and Programme Leader for Human Development at the World Bank for Sri Lanka and the Maldives; Dr. Achinthya Koswatta, Senior Lecturer in Economics at the Open University of Sri Lanka, and Anushan Kapilan, Lead Economist at Verité Research.
In his welcome address, the President of the OPA emphasised that Sri Lanka was at a critical juncture in its economic recovery journey where sustained reforms, effective implementation, and collective national commitment are essential to achieving long-term stability, resilience and inclusive growth. He noted that the country had experienced one of the most severe economic crises in its history with the economy contracting by 7.8 percent in 2022 and a further 11.5 percent in 2023, resulting in significant economic and social challenges.
Delivering his introductory remarks Bhanu Wijeyaratne, Vice President of the OPA and Chairman of the National Issues Committee, underscored the need to move beyond short-term economic stabilisation towards a comprehensive agenda of structural transformation. He observed that the economic crisis had revealed deep-rooted weaknesses within the economy, including persistent fiscal pressures, rising public debt, foreign exchange limitations, and insufficient diversification of the export base. He stressed that addressing these challenges through strategic reforms, institutional strengthening and long-term economic planning would be essential to establishing a more resilient and competitive economy.
While acknowledging recent positive developments, including improved inflation management, tourism recovery and signs of economic stabilisation, Wijeyaratne stressed the need to advance reforms aimed at strengthening fiscal discipline, enhancing productivity, improving competitiveness, developing human capital and reinforcing governance and institutional effectiveness.
He further highlighted the important role of professionals, businesses, academia and other stakeholders in contributing to evidence-based dialogue and supporting Sri Lanka’s journey towards a resilient, inclusive and sustainable economic future.
Delivering the keynote presentation, Dr. Harsha Aturupane provided a comprehensive assessment of Sri Lanka’s economic prospects within the broader context of global economic transformation. He argued that Sri Lanka functioned as a small open economy whose performance is significantly influenced by developments in the global marketplace. External factors could not be controlled, and the country must strengthen its domestic capacity and resilience to respond effectively to international economic shifts, he noted.
Tracing the evolution of global economic systems, Dr. Aturupane highlighted the transition from ideological divisions between state-controlled and market-oriented economies towards increasingly pragmatic approaches focused on growth, competitiveness and development. He noted that Sri Lanka’s own economic journey reflects a similar evolution, with contemporary policy debates now centred on practical solutions for sustainable economic progress.
The presentation also examined the transformative impact of globalisation. Dr. Aturupane observed that global economic integration had enabled several East Asian economies, including South Korea, Singapore, Taiwan and Hong Kong, to achieve remarkable economic advancement through export-led growth strategies. Sri Lanka similarly benefited from this process through the expansion of its apparel industry and increased integration into global value chains.
Turning to Sri Lanka’s recovery programme, Dr. Aturupane emphasised that the ongoing stabilisation process should be viewed as a national programme supported by the International Monetary Fund rather than solely as an IMF initiative. He observed that strong worker remittances, improved tourism earnings, enhanced government revenue mobilisation and prudent import management have contributed significantly to economic stabilisation.
Despite this progress, he cautioned that rebuilding foreign exchange reserves and meeting future debt obligations remain major challenges. He underscored the need to strengthen export performance, attract investment and generate sustainable foreign exchange earnings to ensure long-term economic resilience.
The discussion also focused on monetary stability, inflation management and exchange-rate policy. Dr. Aturupane stressed that maintaining price stability was fundamental to sustainable growth and household welfare, while sound monetary policy remains essential for preserving economic confidence.
Looking beyond stabilisation, he argued that Sri Lanka must transition towards a broader economic transformation agenda. Sustainable growth, he noted, will depend on expanding productive capacity through investment, technological advancement, innovation, skills development and structural reforms.
Among the key constraints identified was the high cost of energy, which continues to affect competitiveness and investment attractiveness. Dr. Aturupane emphasised the importance of improving efficiency and affordability within the energy sector to enhance Sri Lanka’s business environment.
He further highlighted the social dimensions of the crisis, noting the rise in poverty and economic vulnerability among households. Strengthening social protection systems and ensuring inclusive growth, he argued, must remain central components of the national development agenda.
Another critical challenge identified was Sri Lanka’s demographic transition. With an ageing population, outward migration and evolving labour market dynamics, the country is increasingly confronting labour shortages in several sectors. Dr. Aturupane suggested that greater automation, increased labour-force participation and strategic workforce planning would be necessary to address these emerging realities.
Concluding his presentation, he emphasised the need to improve governance, strengthen institutions, enhance competitiveness and create an enabling environment for private sector investment. Sri Lanka’s future success, he noted, will depend on its ability to move decisively beyond crisis management towards a development model founded on resilience, innovation, productivity and inclusive growth.
Dr. Achinthya Koswatta reiterated the importance of policy consistency and predictability in fostering investment and industrial development. She observed that frequent policy changes create uncertainty and discourage long-term investment decisions, whereas stable and coherent policy frameworks build confidence and support sustainable economic transformation.
Meanwhile, Anushan Kapilan highlighted the substantial progress achieved in restoring macroeconomic stability following the recent crisis. He noted significant improvements in fiscal performance, including increased government revenue, reduced reliance on debt financing and a historically low fiscal deficit.
He further observed that public debt levels are declining faster than anticipated, economic growth has exceeded expectations and inflation has been brought under control more rapidly than forecast. Nevertheless, he cautioned that the recovery remains uneven, particularly within the industrial sector and that many households have yet to experience a meaningful improvement in living standards.
The seminar was expertly coordinated by Eng. Chamil Edirimuni, Vice President of the OPA and Chairman of the Seminars, Workshops and Programmes Committee, while the technical moderation and interactive discussion session were facilitated by Bhanu Wijeyaratne, Vice President of the OPA and Chairman of the National Issues Committee.
The event was attended by Tisara De Silva, President-Elect of the OPA, Eng. Ravi Rupasinghe, General Secretary, Past Presidents, members of the Executive Council, representatives of the General Forum and professionals representing a wide range of disciplines.
The seminar concluded with a vibrant exchange of ideas and perspectives, reaffirming the importance of evidence-based policy dialogue, institutional collaboration and collective national commitment in advancing Sri Lanka’s economic recovery, resilience and sustainable growth.
Features
Her roots run deep in Sri Lanka
Yes, for UK-based presenter and artiste Samantha Kay, home is where the heart – and the roots – are. And her roots run deep in Sri Lanka.
In an exclusive interview with The Island, Samantha says “I’m proud to be Sri Lankan. My mum is from Kandy and my dad is from Colombo, so Sri Lanka has always held a very special place in my heart.
“Whenever I visit Sri Lanka, I love spending time on the beautiful south coast, especially Hikkaduwa and Mirissa. It’s somewhere I always feel connected to my roots and completely at peace.”
Now living in Bournemouth, on the south coast of England, where, she says, she is lucky to be close to some of the UK’s most beautiful beaches, including the iconic Sandbanks, Samantha has built a career that refuses to fit into one box.
She is a radio presenter, podcast host, singer-songwriter, personal trainer and life coach.
“I genuinely love the variety because every role allows me to connect with people and, hopefully, make a positive difference in someone’s day.”
Of course, music has taken her far.
One of her proudest achievements, she says, was releasing a song with 90s music icon Angie Brown, which reached No. 9 in the UK Club Charts.
She also reached the final stages of The X Factor and performed at Wembley Stadium in front of thousands.
Beyond music, Samantha competed in bikini bodybuilding across the UK, winning several titles. “It taught me discipline, resilience and self-belief,” she recalls.
Today, her focus is on radio, podcasting and coaching women. Her podcast encourages people to live life on their own terms rather than feeling pressured to follow society’s expectations.
Says Samantha: “Whether someone is single, changing careers, travelling solo or simply trying to find their purpose, I want them to know that it’s never too late to create a life that feels authentic. If you’ve ever felt like you don’t fit into the box, maybe you were never meant to.”
Samantha Kay also spent a year in Dubai, performing at five-star hotels, including FIVE, and coaching at the iconic outdoor gym on Palm Jumeirah.
“I taught strength and conditioning classes, and hosted wellness retreats, combining my passion for music, health and inspiring others.”
However, with family matters calling her back to the UK, she made the choice to return. “Family comes first,” she says.
Looking ahead, Samantha plans to grow her radio and podcast work, release more music, and expand her wellness retreats.
“My biggest passion is helping people, especially women, build confidence and believe in themselves,” she says.
“Wherever my career takes me, I hope to continue inspiring others to live with courage, kindness and authenticity, while never forgetting my Sri Lankan roots.”
-
News6 days agoHerath warns prospective migrant workers not to get fleeced by racketeers
-
Features4 days agoPrison riots and politics: NPP’s biggest challenge and Sri Lanka’s biggest opportunity
-
Editorial5 days agoWhat’s the world coming to?
-
Foreign News6 days agoTensions erupt in Indian state after 11-year-old raped and murdered
-
Features6 days agoDevanesan Annan – in Memoriam
-
Editorial6 days agoPunishment in hellholes
-
News6 days agoRepresentatives of the Organization of Professional Associations (OPA) of Sri Lanka meet the Prime Minister
-
Features1 day agoDirty Money
