Connect with us

Opinion

Has Sri Lanka become a poor country?

Published

on

By Dr Laksiri Fernando

After artificially fixing the exchange rate in Sri Lanka for so many years (since 2001), whether the sudden floating of the rupee rate to dollar is a wise decision is altogether a different matter. However, because of this decision the dollar rate has jumped from Rs. 197/203 to 321/328 since this decision was taken on 9 March, just a month ago.

Has Sri Lanka become a ‘low income’ country because of this decision, and other circumstances, is the first question that this short article raises? In 2019, as a mouthpiece of the government, the Central Bank announced that “Sri Lanka graduated to the upper middle income country status as per the World Bank classification of countries published in July 2019.” On the other hand, the World Bank downgraded Sri Lanka to a ‘lower middle income’ country considering the currency crisis and inflation, in July 2020, much to the disappointment of the government and economic bureaucrats.

Inaccurate Classifications

It is the World Bank that classifies countries as ‘low income,’ ‘lower middle income,’ ‘upper middle income,’ and ‘high income’ countries whether those criteria are reasonable or accurate. The following are the measures that they use, simply said, based on the per capita GDP.

Group GDP Range(per capita)
Low Income 0 – 1036
Lower Middle Income 1036- 4,045
Upper Middle Income 4,045 – 12,535
High Income 12, 535 –

As I have raised this question previously, the income range for ‘low income’ or poor countries is arbitrary and excludes many countries who need international support from institutions and countries. The range could be up to $ 3,000 and not $ 1,036. Sri Lanka is only one country among them. There can be a tendency on the part of international organizations, including the World Bank and the IMF to avoid responsibility to help poor countries as those organizations are dominated by Western or rich countries.

Right to Seek Assistance

To seek assistance from international organisations and rich countries, however, is a right of poor and developing countries. On behalf of the people living in those countries, this right is absolutely a human right.

Strangely enough or ironically, the behaviour and attitudes of many elite politicians in poor and low-income countries go hand in glove with these elite politicians and bureaucrats in rich countries and international institutions. Sri Lanka is a very good examples, and most of the arguments in this direction come from the ‘nationalists’ and ‘leftists.’

Before going into details of this matter, let me first answer the question whether Sri Lanka has now fallen into the pit of low-income or poor countries. Sri Lanka’s GDP or per capita GDP is calculated first based on rupees. Let us take an example.

According to the Department of Census and Statistics, Sri Lanka’s GDP on market prices in 2021 was Rs. (million) 16,809,309. Sri Lanka’s population is 22 million. Therefore, Sri Lanka’s per capita income was Rs. 764,059 million.

As of today, the dollar value of this per capita GDP is just $ 2,380, based on the floating rupee (1 Dollar = Rs. 321), irrespective of the government’s ‘vision for prosperity’! The reasons are bad financial management, wishful thinking and power politics. The reasons apply not only to the present government but to all past governments.

IMF Assistance?

The second question that I want to raise is what is wrong in going to the IMF and seeking assistance? Sri Lanka joined the IMF in 1950 even before joining the UN (1955). One advantage the country has at present is ironically not seeking much assistance previously from this organisation meant to assist member countries (190 members now).

It was in 1965 that Sri Lanka first sought IMF ‘assistance’ and continued to do so until 2002 as a formality even without drawing the full amounts owed to the country under ‘Standby Arrangements.’ It was under J.R. Jayewardene that the country sought ‘Extended Fund Facility’ in 1979 due to the foreign exchange difficulties. But that amount had to be paid back in three years which raised much criticism. In 1988, the same administration sought ‘Structural Adjustment Facility’ again to be paid back in three years.

I happened to meet the IMF representative to South Asia/Sri Lanka in 1990 at a Norwegian friend’s place in Geneva (Inger Nordback). He was one who appeared in picture with JR during a famous ‘Vap Magul’ festival. Our casual meeting led to some talk about ‘IMF conditions’ and he told me that the problem with Sri Lankan representatives was that ‘they don’t bargain but leave with dissatisfaction after meetings.’ I hope this is not and should not be the case today.

Sri Lanka has received the last ‘Extended Fund Facility’ from IMF in 2016 to the amount of $ 952,230,000 to be paid in 2020 and still 892,283,000 is outstanding. Perhaps this is understandable, given the Covid pandemic and other circumstances. Otherwise, Sri Lanka has a ‘clean slate’ thanks to the ‘nationalist and leftist’ antipathy against the IMF!

Debt Restructuring

Let me touch on some other IMF matters. When Rajan Philips wrote ‘Mayhem in Mirihana; Shaken Gota is Home Under Curfew’ (Colombo Telegraph, 3 April), I posted the following comment and there were scathing attacks on me as usual!

“The declaration of curfew is acceptable to prevent further anarchy and violence today based on the experience at Mirihana and other places. However, this should not continue. The immediate root cause should soon be addressed. The government (whatever) should immediately negotiate with the IMF to obtain $ 10 billion to end the fuel crisis, energy shortages, essential imports, and loan repayments of this year. Then the unrest might subside. Debt restructuring can be done from next year. If the government is multi-partisan, it is very much better in negotiating with the IMF. There is no point in obtaining ad hoc loans from countries although those could be utilized later. It is already too late. IMF officials completed discussions with the government officials in December although the Report came out in February. This is April. Whatever the weaknesses or biases of the IMF, it is the main international mechanism to rescue countries under international monetary constraints. Undoubtedly, Sri Lanka must agree for strict conditions which could be negotiated. When you fall into a pit, you must escape from the same pit.”

I was looking at the economic side of the crisis and still maintain the same positions except the fifth sentence of the above quote: ‘Debt restructuring can be done from next year.’

Obviously, debt restructuring should start forthwith. Past governments, including the present, have irresponsibly depended on international sovereign bonds at higher rates of interest and purely on commercial conditions even with China. A poor country like Sri Lanka cannot afford that. The present debt obligations for this year appear to exceed $ 7 billion. Forex reserves at present however do not exceed 2 billion, necessary for even essential imports.

The government has appointed a good three-member expert panel to advice and negotiate with the IMF. The appointment of the present Central Bank Governor is also commendable. While negotiating with the countries, like India and China, or institutions like the Asian Development Bank and the World Bank to postpone the dept repayments, if Sri Lanka could obtain around $ 10 billion from the IMF, some of the economic reasons for the present crisis can be ameliorated.

Political Crisis

The present political mobilisations with the slogan ‘Gota, go home’ are mainly political, of course based on economic and social reasons. However, to seek IMF assistance to resolve the economic crisis there should be some political stability. This is something Sri Lanka is lacking not only under the present government, but it was there even under the last government.

The spontaneous protests from non-political sources at least have understood this calamity without supporting any political party. The question however is what are the alternatives?

During the debates on the IMF report in Parliament, no MP on the government side or in the Opposition never came up with a constructive proposal. Even Sajith Premadasa’s argument was to resolve the Forex crisis acquiring money laundering revealed in the Pandora Papers. The gravity of the crisis was undermined. The debates were focused on personal attacks and trivial political matters.

The Opposition is now proposing a ‘no confidence motion’ on the government and an impeachment against the President if the former is successful. On the other hand, the so-called ‘independents’ who broke away from the government are proposing an ‘interim government’ until the economic crisis is resolved, and the country can hold elections. That kind of a government could include Ranil Wickremesinghe, M. A. Sumanthiran, and Harsha de Silva if not Sajith Premadasa. No Rajapaksa should be included except the President who should promise to leave politics within two years. Under such an interim government the President’s power should be curtailed. This could be the opening for changing the presidential system among other things.



Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Opinion

Recent political violence and its consequences

Published

on

A house of an SLPP politician on fire after a mob attack

By Dr Laksiri Fernando

The government was directly involved in instigating political violence against peaceful protestors on 9 May, consequences of which had to be reaped within hours even those who are not directly involved in such action from the government side. Given the economic crisis and foreign exchange difficulties the country is facing at present, the consequences of these violent events that would badly affect the image of the country and the people. Sri Lanka has emerged as a violent country among foreign observers and critiques.

There were instances in the past that some ministers were involved particularly in attacks on ethnic minorities (1983). There was election violence where almost all parties were involved. The country is also notorious for a longstanding separatist movement with political violence as the main mode of operation. In 1971, there was a youth insurrection which reemerged in the late 1980s in a more sectarian manner. In April 2019, Sri Lanka became a target of Islamic State, with both local and international roots.

Reasons for Increasing Violence

During the initial years of independence, Sri Lanka was a peaceful country. Even the independence movement was characteristically peaceful without going into extremes. Except some incidents, related to worker’s strikes, the country was by and large peaceful and appreciated by many observers and commentators overseas. The situation dramatically changed in late 1960s giving rise to a strong leftwing organisation, the JVP. Even if the old-left parties were advocating ‘class struggle,’ no organisation had any military wing or anything like that.

Then, what went wrong since the 1970s? ‘Frustration-aggression’ theory could be one explanation. This is also the case in recent events beginning with farmers’ protests opposing the fertiliser ban. There were more broader reasons than ‘frustration’ or ‘relative deprivation.’ When it came to long queues and shortages in cooking gas, petrol, kerosene, diesel, medicine, and other basic amenties, the ‘relative deprivation’ turned into a ‘absolute deprivation.’ Most devastating was power cuts. All these happened within a context of high inflation where the value of people’s salaries and income became absolutely depreciated.

There were broader social reasons. Population explosion with young people becoming large both in numbers and as a proportion, widespread graduate and educated unemployment, dysfunctional education, the gap between rural and urban areas widening both in economic and social terms are some of them. Constitutional instability with amendments like 18A, 19A, 20A, back and forth, also contributed immensely for the youth to join militant political organisations and trade/student unions.

Can any of the reasons, however, justify political violence that became unleashed in the country in the recent past or before? Perhaps it is a common dilemma in many countries that human beings have a propensity to violence, ranging from mild verbal aggression to physical violence and vicious murder and everything in between. Aggression patterns, however, vary from country to country, age to age, and male to female. It is a fact that women are less violent than their male counterparts.

From PM’s Office

It was a Monday. Background was for the Prime Minister Mahinda Rajapaksa to resign, given the increasing protests and because of obvious failures. With the organization of MP Johnston Fernando and others, hundreds of people were rallied around the PMs official residence, the Temple Trees. Soon the PM asked the people to come in and addressed them in an aggressive manner.

The PM asked whether he should resign, and the crowed shouted ‘No.’ They were shouting, ‘Whose power, Mahinda’s power.’ ‘That means I don’t need to resign,’ he replied. He has further said “You know in politics I have always been on the side of the country. On the side of the people … I am willing to make any sacrifice for the people’s benefit.”

Johnston Fernando, the government’s whip, was more aggressive and violent. “Let’s start the fight. If the President can’t handle the situation, he should hand over power to us. We will clear Galle Face.” The crowd cheered. Another person who was closely involved was Namal Rajapaksa, Mahinda Rajapaksa’s eldest son.

Some of the people who were prominently involved in organising the meeting were Johnston Fernando, Sanath Nishantha, Milan Jayathilake, Pavithra Wanniarachchi, Sanjeeva Edirimanna, Saman Lal Fernando, Mahinda Kahandagama, Dan Priyasad, and their supporters. Western Province DIG Deshabandu Tennakoon was clearly involved as an accomplice.

The objectives of the gathering were extremely clear. It is difficult to believe that Mahinda Rajapaksa was unaware. During the apparent lack of interference of the police at Galle Face, his intervention was very clear on the side of the attackers.

SLPP goons wreaking havoc on the Galle Face protest site

Attacks and Counter Attacks

There were two sites that were particularly attacked. While there are different names, the most popular being ‘Gota-Go-Gama’ and ‘Mina-Go-Gama.’ Apart from around 200 people who were brutally attacked, their platforms, tents, placards, and flags were destroyed. Some people were thrown into the Beira-lake. Whatever the extremes of their slogans and demands, the above protest sites were prominent as peaceful protests.

It is strange to see, however, within hours of the above incidents, over 40 houses of the government supporters, including MPs, were attacked, and burnt down destroying some of the personal valuables. Ten people were killed in the incidents. Below is one incident that Al Jazeera reported.

“Earlier in the day, legislator Amarakeerthi Athukorala from the ruling party shot two people – killing a 27-year-old man – after being surrounded by a mob in Nittambuwa, about 40 km (25 miles) from Colombo, police said. CCTV footage showed the MP and his security officer fleeing into a nearby building. They were later found dead.”i

Of course, there are contradictory and different interpretations of the incidents. However, it is difficult to deny the involvement of some form of political activists. Who are they? Geetha Kumarasinghe narrated her ordeal in the following manner in Parliament.

“When they were attacking my home, I was trembling in fear and was hiding in a corner of a room. What wrong have I done? I have never hurt anyone. I have sacrificed everything to engage in politics and serve my people. I slogged and slaved in cinema and won many awards through sheer dedication and hard work. They destroyed all my trophies and awards. Why? Why did these young people do this to me? I can never get my awards and trophies back. You all have mothers, I am also a mother, why did you do this to me?” she sobbed.

Who Indulged in Violence?

One side is very clear. Mahinda Rajapaksa, Johnstone Fernando, and Namal Rajapaksa were clearly on one side. But who were on the other side?

The JVP General Secretary, Tilvin Silva, recently admitted or claimed that “Our party has been there right from the beginning. We have our youth, cultural, student and women wings, at the Galle Face.” Of course, there were other groups and more independent ones. Silva’s attitude towards politics and other parties also became clear when he referred to heckling of the Leader of the Opposition, Sajith Premadasa, when he visited the Galle Face protest site. Silva said the following.

“Everybody should be careful. People hate to see politicians travelling in luxury cars with security contingents. People detested the politicians’ attitude of trying to stay above them. The Opposition Leader went there in his luxury vehicles with his security guards and henchmen. So, he had to face the wrath of the people.”

Anura Kumara Dissanayake, in Parliament, denied any involvement of the JVP in house attacks and counter violence. He may be true to his conscience. There is a possibility that within the JVP itself that there are two wings operating. Tilvin Silva’s words remind us of the JVPs aggressive and violent past.

Dilemma of Violence

Violence appears to continue. There was a recent incident of people or groups attacking and burning a house of an owner of a fuel station. Undoubtedly there are extreme grievances on the part of the people due to fuel shortages and high prices of consumer items, including essential medicine. However, none of these reasons could justify political violence unleashed by the government or the opposition politicians.

There may be deep seated reasons why people in the country are extremely violent. Some of the reasons may go to the educational system and the way students are taught in schools and universities. Some reasons may be rooted in the family institution or even religion. Political culture in the country does appear to be extremely distorted or lopsided and change of which should come from all sectors of the political society. What might be important in the meanwhile are:

Deplore strongly political violence of all forms.

Request the new national government to ameliorate people’s economic grievances.

Punish those who have involved or instigated violence without discrimination.

Establish rule of law and impartiality of the public and security services.

Continue Reading

Opinion

21A and Ranil

Published

on

It is no secret that Prime Minister Ranil Wickramasinghe is adept at “buying time” when confronted with any important issue. He appoints committees for that purpose. Unlike most politicians, he treads very cautiously until the time is conducive for an apparent solution.

Hence one should not be surprised if the draft 21A Amendment receives the same response at the first meeting of the new Cabinet scheduled for T24 May. Already the foremost item vis-a-vis stripping the President of executive authority has been put on the shelf. And taking into consideration that among those to be discussed is the provision for dual citizenship, one could see that the need for a committee to study deeper into it is a foregone conclusion.

Sri Lanka has a reputation of putting off for tomorrow what should be done today.

WILLIAM OPP

Continue Reading

Opinion

No business as usual for interim government

Published

on

By Jehan Perera

The government’s intention to appoint a full complement of Ministers and State Ministers, and the jostling for positions amongst them, seems to suggest an attitude of business as usual.  This is quite astonishing as it was just two weeks ago that no government member felt safe from the wrath of mobs that formed themselves very swiftly and, apparently, spontaneously, to attack their homes and properties.  Last week they overrode the Opposition’s demand for time to debate the motion of censure against President Gotabaya Rajapaksa for having led the country to disaster.  They also scuttled efforts to nominate a female legislator to the post of Deputy Speaker, disregarding the request of Prime Minister Ranil Wickremesinghe, which could have sown the seeds for consensual governance. They gave priority to their own personal concerns of getting compensation from the State for their losses.

It is unsurprising, in this context, that anger against the government continues to boil within the country.  There are roadblocks and demonstrations by the members of the public in places where petrol is either not being provided or has been pumped to private vehicles by officials and politicians.  The lines for petrol and diesel, and for cooking gas, are longer than ever before, despite announcements that ships have begun unloading these fuels.  The lines stretch for over a kilometer in the case of petrol and diesel meant for vehicles. Videos circulate on social media providing vivid images of the frustration of those who have waited in line for hours and hours only to find out that stocks have run out before they could get access to the fuel.

The three-wheel taxi, that took me to the Aragalaya protest site, opposite the Presidential Secretariat, charged me nearly three times the regular fare that prevailed before the economy collapsed.  He justified his high rate on the basis that he had spent the whole of the previous day trying to fill his vehicle tank with petrol.  The Aragalaya site, on Saturday evening, was not as busy as it had been the previous week and nowhere near as crowded as it was two weeks ago.  But the spirit of the Aragalaya lives in the hearts and minds of people everywhere. The physical presence of protestors may be only a fraction of the turnouts that made the government want to put an end to it, through thuggery, a fortnight ago. Even those who are protestors have to live their daily lives and earn their daily bread.  But special occasions will bring them back in large numbers.

ABOLISH KINGSHIP

Galle Face is the site of the passion and commitment of a younger generation of Sri Lankans to the eradication of corruption and mis-governance foisted on them by the old. The young people know they are being monitored by state CCTV systems and are vulnerable to being picked up on a later date to be done away with, as happened in the past.  Hundreds are currently being arrested for the attacks that took place against the homes and properties of government members on May 9.  But only a few of those government members, who streamed out of the Prime Minister’s residence, with iron rods and other improvised weapons, after being instigated by the Prime Minister’s men, are being arrested.

Those who are powerful because they are in the government are glibly denying what is plain to be seen on social media.  This is a continuation of past practices which gives impunity to the powerful, whatever they do, which needs to end.  At the Aragalaya site, on Saturday, l listened to speakers who described the hardships of the economic crisis, of the mother whose gas cylinder exploded, due to inappropriate mixing of gases by the government, and of the parents who saw their infant die because they could not get petrol for their vehicle to take their child to the hospital in time.  These were educated young people who spoke and there were many who listened to them to become message-bearers to the larger population that was not present at the site.  They were all brave or had lost their sense of fear. I was also given a private lecture by a regular visitor to the Aragalaya site.  He explained to me why the diminished numbers that day did not mean that support for the cause was diminishing.  He had a vision for what the Aragalaya should achieve, which he summarized in four short points.

 First, he said, an all-party interim government needed to be appointed for a temporary period to provide the cohesion needed for political stability that would give the government the credibility to raise the necessary economic resources from abroad. Second was the need to repeal the 20th Amendment and to replace it with the 21st Amendment that would reduce the power of the presidency.  Third was to conduct general elections in a new system that would depart from the present 100 percent proportional representation to one in which first-past-the-post constituency system would account for at least 70 percent of the seats to make the parliamentarians accountable to their electorates. Fourth was to abolish the presidency that catered to the traditional ethos of relying on the saviour king rather than on the empowerment of people exemplified by the Aragalaya youth.

ARAGALAYA

PROMISE

Prior to the appointment of Prime Minister Ranil Wickremesinghe, when the power of the Aragalaya protest caused the entire Cabinet to step down, President Gotabaya Rajapaksa pledged to set up an all-party interim government for a temporary period.  This has now taken on a distorted form in the wooing and horse-trading of members of other political parties, without the consent of their party leaderships.  Both the SJP, which is the largest opposition party, and the SLFP, which is the government’s largest coalition partner, have suffered defections to the new government.  This display of power play is not a positive sign of stability which is necessary if the government is to deal with the difficult economic issues the country confronts. It is not possible to justify how those who resigned from office due to a failure of government can be part of a new Cabinet, as if the failure had nothing to do with them.

Prime Minister Wickremesinghe has made a comparison of the predicament he is currently facing in the government by comparing his situation to the famous play by Bertolt Brecht, the Caucasian Chalk Circle.  The Prime Minister has brought credibility to the government through his ability to deal with the international community and his understanding of the macro economic situation of the country in relation to the world.  The 21st Amendment to the Constitution that will be brought to Parliament this week, if passed, will strengthen the Prime Minister’s powers still more. Unless circumstances, and the balance of political forces, within Parliament, permit him to chart a new course of governance that is consensual and transparent, the present government will also fail.

Much is at stake. Unless the economy improves fast the possibility of violence that can suddenly erupt, as it did on May 9, cannot be ruled out.  As Sri Lanka’s closest neighbour, India has been extremely generous now with its latest gift of Rs 2 billion worth of essential commodities, gifted by the Tamil Nadu state.  The challenge will be to persuade the more distant, but wealthier Western countries, Japan and China, to be equally generous.  The stability of the government that is brought about by the willing participation of the opposition political parties will be extremely important in demonstrating to the world, and to the Sri Lankan people, that the government, led by President Gotabaya Rajapaksa, and Prime Minister Ranil Wickremesinghe, really intend to chart a new path.  The holding of elections, within six months, and a new leadership, can be an example to other countries with similar broken down systems and government leaders who step aside as statesmen for the new generations to take over.

Continue Reading

Trending