Economic crisis:

By Shamindra Ferdinando

SLPP MP Dr. Nalaka Godahewa has said that some of those members of Parliament, with expertise in financial matter, recently reached, what he called, an initial consensus on an economic recovery plan.The Gampaha District MP declared that a range of proposals, made by interested parties, outside the Parliament, too, had been taken into consideration.Dr. Godahewa, who served the Cabinet as the Media Minister for a brief period, following the resignation of Prime Minister Mahinda Rajapaksa, on May 09, said so addressing a group of professionals, at Ragama, recently.

Asserting that the economy was in such a precarious state and that recovery was almost impossible, MP Godahewa said that perhaps the proposed initiative could be implemented in three phases – namely one, two and seven years.If national elections were held as scheduled, there would be at least two governments during a seven year period, and the economic recovery could suffer a debilitating setback, said Godahewa, if future governments deviate from agreed course of action.

Governor of the Central Bank Dr. Nandalal Weerasinghe recently warned that the country would be in deeper trouble if consensus reached with the International Monetary Fund (IMF) by Gotabaya Rajapaksa administration was not honoured.Dr. Godahewa said that the situation could be further worsened if the suffering population toppled governments as it happened in other countries, troubled by economic difficulties.

Therefore, the daunting economic challenges couldn’t be overcome unless consensus was reached on a genuine all-party-government without further delay, Dr. Godahewa said, stressing the pivotal importance of a common agenda to address economy and other key issues at hand.

The one-time prominent Viyathmaga activist said that those who toppled the government should be given an opportunity to contest the next general election. The electorate could vote out of Parliament those viewed as unfit to continue as members, the MP said. The lawmaker declared that unless MPs with expertise in economic matters got together to lead the country out of this mess, the consequences would be disastrous.

Discussing the developments leading to Sri Lanka having to enter into talks with the IMF, after accepting bankruptcy, Dr. Godahewa said that finally the country had been overwhelmed by the widening gap in income and expenditure. Declaring that the Budget deficit in 2021 had been over Rs. 2,000 bn, MP Godahewa said that successive governments raised loans through the Central Bank which printed money to meet the requirement.

Dr. Godahewa said that Sri Lanka rapidly increased taking of foreign loans, mostly short-term commercial borrowings at high interest rates. Quoting from official records, Dr. Godahewa said that foreign loans stood at USD 13.5 bn in 2009 but by 2019 such debt rose to USD 34.7 bn. The former minister said that the country would require as much as USD 4 bn a year to pay back those loans and in some years it could be more.Referring to gradual deterioration due to ill-fated policies, Dr. Godahewa said that over the past decade annually foreign loans amounting to USD 2 bn had been taken to manage the economy. There had been instances, reserves had to be spent to meet the shortfall, Dr. Godahewa said. As Sri Lanka’s rating rapidly deteriorated, the country lost opportunity to raise loans overseas, the lawmaker said, adding that by the first quarter of 2022 the country no longer had foreign reserves.

Pointing out that the Indian credit line available for the import of fuel had been expended, the MP said that the government was in a dilemma as to how to raise funds to procure required fuel. The former minister said that approximately USD 500 mn was required for procurement of fuel in addition to other essential supplies such as LP gas, fertilizer and medicine.

Sri Lanka should regain international confidence. As long as the country lacked credible government no one would be willing to provide financial assistance at any level, the lawmaker said.