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Opposition’s take on economic crisis and Surcharge Tax Bill

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Speech made by Oppisition leader Sajith Premadasa in Parliament on 08 Feb 2022.

Hon. Deputy Speaker, 

It is an inescapable fact that the Sri Lankan economy is in a deep recession and it is the ordinary people of our country who have to bear the brunt of this economic collapse. The government has always blamed the Covid-19 pandemic as the primary driver of this recession.

Institutions responsible for macroeconomic management are long-established and have the necessary authority to intervene in the event of externalities that may risk our nation’s financial stability.

However, the Sri Lankan economy and its people have been disproportionately affected by the pandemic, especially when compared to peer group nations and I submit to you that this is a direct result of the failure of those in charge of key institutions, specifically, consecutive Ministers of Finance, the Monetary Board and the Central Bank as well as its Governor.

Accordingly, considering that this as an issue of urgent national importance, I expect specific answers and explanations from the Government to the following questions.

Headline inflation, as measured by Colombo Consumer Price Index increased to 14.2% in January 2022 from 3% in January 2021.  Food inflation increased to 25% from 6.8%.

Under Section 64 (2) of the Monetary Law Act No. 58 of 1949 if the amount of the money supply has changed by more than 15 per centum (15%), or the cost of living index has changed by more than 10 per centum (10%), of its level at the end of the corresponding month in the preceding year the Monetary Board should submit to the Minister in charge of the subject of Finance and, if not prejudicial to the public interest, make public, a detailed report which includes an analysis of:

* the causes of the anticipated economic disturbances, or of the actual abnormal movements of the money supply or the price level;

* the probable effects of such disturbances or movements on the level of production, employment, and real income in Sri Lanka; and

* the measures which have been already taken, and the further monetary, fiscal, or administrative measures recommended to be adopted by the Government.

If so,

1.

Has the Monetary Board submitted this report to the Finance Minister? If not, has the Finance Minister asked for this report under Section 64(2)?  If he has asked for such a report, will steps be taken to table it in Parliament?

2.

If the Monetary Board has submitted a report, what measures has the Monetary Board taken to address the increase in money supply and prices?  

3.

What measures have they recommended to the government to address this situation? 

4.

What were the main reasons for the rapid increase in inflation? And particularly the increase in food inflation?

5.

How has the increase in reserve money by 37.5% and the quantitative increase in Central Bank of Sri Lanka’s holdings of Treasury Bills contributed to the rise in prices?

Hon. Chairman, Gross official reserves had fallen to US $ 1.6 billion at the end of November 2021 from US $ 5.7 billion at the end of 2020 and US $ 7.7 billion at the end of 2019. The decline signifies a reduction from 4.2 months of import cover to one month within a year.

Under Section 68 (1) of the Monetary Law Act No. 58 of 1949, whenever the Monetary Board anticipates that there may develop a deficit in the international balance of payments of such magnitude as to cause a serious decline in the International Reserve, or whenever there is an imminent threat of a serious decline in the International Reserve, or a potential threat to such stability or are prejudicial to the national welfare, it is the duty of the Board to prepare policies to keep such conditions under control and submit to the Minister in charge of the subject of Finance a detailed report to adopt appropriate remedial measures. That report should contain,

*the nature, causes, and magnitude of the actual or potential threat to the international stability of the Sri Lanka rupee; and

*the measures which the board has already taken, and the further monetary, fiscal or administrative measures which it recommends for adoption by the Government. If so,

1.

Has the Monetary Board submitted this report to the Finance Minister? If not, has the Finance Minister asked for this report under Section 68(1)? If such a report has been asked for, will steps be taken to table it in Parliament?

2.

If the Monetary Board has submitted a report, what measures has the Monetary Board taken to address this decline in foreign reserves?  

3.

What measures have they recommended to government to address this situation? 

Mr. Chairman, I would like to offer a brief explanation. At this juncture, the Central Bank is officially stating that our reserves stand at $ 2.3 billion at the end of January, down from 3.1 in late December.

While this certainly signals a critical situation, it is made infinitely worse by the fact that this figure of 2.3 billion is misleading, since it also includes an amount of 10 billion Yuan, approx. $1.6 billion, that was received.

Therefore, the reality, Mr. Chairman, is that the foreign exchange reserves of our country at present is approximately US$ 700-800 million. The IMF has stated unequivocally that only assets usable as dollars should be included as reserves. Thus, the actual level of usable reserves – usable capital – within this 2.3 billion they speak of, is only US$ 700-800 million.

In fact, as of today, our reserves are limited to three weeks’ worth of imports. Never in our history have our reserves collapsed to such an extent. Therefore, I would especially like to ask the Minister why such lies are being presented to the country.

Hon. Speaker, the Rs/US $ exchange rate depreciated sharply from Rs.185 in September, 2020 to Rs. 200 by May, 2021. Since May 2021, the rate remained relatively stable until it hit Rs. 210 in September 2021. From September 2021, the Central Bank has “fixed” the rate at Rs. 203. However, the blackmarket price remains somewhere around Rs. 240.

Under Section 65 of the Monetary Law Act No. 58 of 1949, the Monetary Board should endeavour to maintain the par value of the Sri Lanka rupee, or where no determination of such par value has been made, maintain the exchange arrangements and so relate its exchange with other currencies as to assure its free use for current international transactions.

At present, migrants no longer transmit their earnings through the country’s official banks. Accordingly, official migration remittances began to decline from June 2021. This is a drop of more than US $ 1 billion compared to the previous year. Therefore, I would like to ask the following:

1.

Is the Finance Minister satisfied that the Monetary Board is not in violation of Section 65 of the Monetary Law Act? 

2.

If so, can the Finance Minister justify the decline in migrant remittances thus far in 2021? Will the Minister of Finance submit a report on the amount of remittances received by this country over the last several months?

3.

If not, has the Finance Minister asked for justification of the exchange arrangements?

Further, Mr. Chairman, I must bring your attention to the bill presented yesterday by this government, which introduces a surcharge tax which will target the working people of Sri Lanka, the backbone of our nation.

You are aware that the largest fund in our country is the Provident Fund, it has approx. Rs. 3 trillion. The profit of this Provident Fund for the year 2020 will be approximately Rs. 250 billion which, according to the provisions of this bill will levy a Rs. 65 bn tax on this profit, thereby siphoning off the working people’s hard-earned savings, only to redistribute said funds to their political patrons and minions.

I request the Minister of Finance, please do not implement this unscrupulous process. Do not steal the money of the hard-working people of Sri Lanka. Please withdraw this Bill / Gazette – with immediate effect. Please do not deprive the people of their hard-earned funds in the Provident Fund.

We know that today, the country is ruled by those who have tapped into provident funds in various ways throughout history. This is the true story. Therefore, I request the Minister of Finance to please answer my question at this juncture – we demand an answer today, the people of this country deserve an answer TODAY. Make that answer clear and unambiguous. I would like to take this opportunity to ask you to remove the provident funds as well as the pension funds from this 25% tax which is a tax on the working people of our nation.

Hon. Chairman, I draw your respectful attention to the comments made by the Minister stating that the rising rate of inflation in the country is merely gossip! This is not gossip, these are facts, these are official figures. How can the Minister refer to these as gossip?

Are the increases in the cost of living and the increases in the price of goods simply rumours? Is the fact that we only possess three weeks’ worth of foreign exchange reserves a rumour as well?

Hon. Chairman, when we ask such an important question related to the remittances of our working people who go abroad and shed blood, sweat and tears, is it acceptable there is no Minister of Finance, and no State Minister of Finance in the House to respond?

Let me try to explain to you in English. At least you can listen. Hon. Chairman – I am trying to explain to you in English. There is a convention when the Opposition Leader is on his feet – on his or her feet – there is a convention, there is a custom that you are allowed to speak and your microphone is not abruptly switched off. Why are you all engaging in such unparliamentary practices? What is this nonsense? Are you unable, from that so-called august chair, to control the microphone? Why are you all abruptly switching the microphone off? As a tradition – there is a convention, there is a custom – that is practiced. Are you aware of Parliamentary practice?

Mr. Chairman, there is no problem if the Minister of Finance is too busy to answer an important question of this nature. Neither a State Minister nor a Deputy Minister is present to answer such a question and that in my view is not only a travesty in regard to Parliamentary tradition but it is also a grave injustice to the People of the Country. Please take necessary steps to include this in the Hansard.



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Opinion

A change of economic policies for Sri Lanka

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Millions of Sri Lankans are anxiously waiting to see what actions will be taken to make life bearable again.If we follow the example of successful countries we see them exploit their opportunities, and use the wealth created, not to import cars and go on luxury trips abroad, but to re-invest the money proceeds in further projects to bring in even more money. They proceed in this way until their citizens have good standard of living. Probably, the best example of that compounding of wealth is Singapore.

Singapore exploited its geographic advantages. It provided cruise ships with bunkering services and repair, later they provided airlines with refueling and expanded that to one night free stop- overs for passengers to buy luxury goods at their glamorous, tax-free shopping malls. The Japanese were making wonderful new gadgets: cameras, music players, portable radio cassette players, binoculars, all available in the malls and sold tax free!! Lee Kuan Yu forbade the ladies to wear denim jeans, and to wear dresses with hem lines coming down two inches below the knee! He even instructed the ladies to smile! No man could have long hair for fear of arrest. Littering was prohibited, so was chewing gum and smoking butts on the roads and pavements. The place was kept clean!

They used the proceeds arising from all this commercial activity to build housing blocks, develop new roads and other beneficial projects. (Individuals were not allowed to walk away with the profits, just to fritter them away.) Sentosa Island had installed a communications dish antenna connecting it with New York and the financial markets. This was an example of intelligent seizing of opportunities. I account for this intelligent development as due to the high educational and knowledge of Singapore’s progressive management. The result is a firm currency, holding its value.

Something similar has happened to Russia. Russia is rich. It is under progressive intelligent management. Stalin had developed the railway network across the full eleven time zones. But many areas remained to be connected. Putin found the finances to develop coal mines, develop oil and gas deposits and build railway bridges and tunnels for better access to markets and their demand for Russian products. Even as you read this, trains of 70 plus trucks, each with 70 tons of coal are grinding their way to China, day and night. Gas is flowing through an extensive network of pipelines, both east to China and west to friendly countries in Southern Europe. Mr. Putin and his men have succeeded in getting Russia fully functional. And the more Russians there are to spend money, so the more demand for goods and services: shops, etc., providing multiplying employment in Russia.

Mr. Putin wants to build a road and rail link south through Iran to India. A design plan is in the works. It is being discussed with Iran and India. Putin is displaying initiative for the benefit of Russia and its citizens. Putin cares for the citizens of Russia and is creating both wealth and jobs too. Architects are designing attractive living spaces and buildings which provide a better environment for Russians and contractors are building it. Education of Russian citizens is playing a big part in Mr. Putin’s thinking, too. Russia needs a talented workforce.

The result is that the currency, the Ruble is strong and does not devalue. It keeps its value.Belarus, Russia’s neighbour, can also be praised for outstanding development. The population in the big towns is cossetted with amenities and facilities which provides a luxurious way of life for townspeople especially those with industrial jobs. However, it must be admitted, the standard of life for the minority 30% population living in the countryside has yet to catch up. The administration is strict and everyone is law abiding. For example, you can leave your hand phone at your seat while you visit the toilet conveniences and it will remain undisturbed until you return.

Belarus, being a mostly agricultural country has a big tractor manufacturing plant, it has a fertiliser mining and producing plant, it has a commercial vehicle plant, DK MAZ which produces industrial trucks such as fire extinguishing trucks and also produces the most comfortable, bright, low step buses and so on, and of course, Belarus makes its own industrial vehicle tyres. The towns are prosperous and clean and Minsk, the capital is a beautifully laid out city. Town apartment blocks are multi-storied living spaces, but are so well designed and fitted as to provide pleasant living spaces for its people. These reduce urban sprawl across the wooded countryside.

What are Sri Lanka’s strengths? It is a small island thus making communications short and sweet. Its location in the Indian Ocean is a plus, its scenic beauty is a plus allowing a thriving tourist trade for people from colder climates, and its soil and climate allows almost anything to be grown. Therefore its agriculture is a great strength. Its long coastline can provide fish if the fisherised. It has deposits of graphite and phosphates which can be exploited to produce profits for further investment in development projects. It has its illiminite sands which are an extremely valuable asset but need to be controlled and exploitation expanded. It has a whole gem mining industry which need to be managed in way beneficial to the government. It has several government owned businesses which need to be overhauled and modernized to convert losses to profits. The rupee in 1948 was equal to the English pound, now it is around 450 rupees to the Pound. That gives a good description of Sri Lankan past governance.

Profits from projects need to be ploughed back into further projects to bring about a higher standard of living for all its inhabitants. Then the Lankan reputation of being a paradise island with happy people will be restored.

Priyantha Hettige

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Opinion

Sapugaskanda: A huge challenge for RW

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It will be interesting to see if anything fruitful will come of the so-called “investigation” announced by the Minister-in-charge, about what seemed like an outrageous overtime payment to the petroleum refinery workers.While waiting for the outcome of that investigation, I thought of highlighting again the real and central issue that cuts across all loss-making government undertakings in Sri Lanka, such as the CPC, CEB, SriLankan Airlines, etc. that have been mercilessly sucking off tax-payer’s money into them like “blackholes”.

These organisations have been typically sustaining a mutual understanding with corrupt or inept politicians. “Sahana milata sewaya” (service at a concessionary price) was the catchphrase used by them to cover up all their numerous irregularities, wanton wastage, gravy trains, jobs for the boys and massive corruption, mostly with direct and indirect blessings of the politicians.

Here, I’d like to bring out just one example to help readers to get an idea of the enormity of this crisis built up over the past few decades. You’ll only have to look at what seemed like gross over-staffing levels of the CPC’s Sapugaskanda refinery, compared to international standards as shown below:

* Sapugaskanda Refinery – 50,000 Barrels Per Day (BPD); 1,100 employees Superior Refinery, Wisconsin, USA – 40,000 BPD; 180 employees

* Louisiana Refinery (including a fairly complex petrochemicals section), USA – 180,000 BPD; 600 employees

* Hovensa Refinery (now closed) – US Virgin Islands; 500,000 BPD; 2,100 employees.

These are hard facts available on the Internet for anyone to see, but I’m open to being corrected. I doubt if any sensible private investor would even dream of allowing such a level of gross over-staffing in their businesses.

As everyone knows, this is the position in all government business undertakings, as well as in most other government agencies in Sri Lanka. One can say that Sri Lankans have been willingly maintaining a crop of GOWUs (Govt Owned Welfare Undertakings), primarily for the benefit of the “hard-working” employees of these organisations, but at an unconscionably enormous cost to the rest. Obviously, this “party” couldn’t have gone forever!

Will Ranil be up to this challenge? I doubt very much.

UPULl P Auckland

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Opinion

Edward Gunawardena: ‘The IGP the country never had’

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On a seemingly fine Friday afternoon, day two of the England v India second Test of the LV Insurance Series (that turned out to be a day five thriller), oblivious to how his day would tragically pan out, our dad, retired Senior Deputy Inspector General (DIG) of Police, Edward Gunawardena, was glued to his television enjoying the contest between the two cricket giants. As time passed by that afternoon, he felt uncomfortable, weak and had minor discomfort in breathing. Our family doctor, Dr Lakshan Fernando, swiftly visited home and on strict instructions to bed rest, our dad enjoyed his chicken soup for dinner that was prepared by his beloved wife, our mum.

Later that night tragically he took the last breath of his life, and he completed the last heartbeat of his life in the presence of two of his most trusted people, our mum and our family doctor.

This day was that dreaded “Friday the Thirteenth” – in the month of August last year. Our tragedy was upon us.A year has passed, by but the loss is still deep rooted, although it was comforting that his passing was peaceful knowing that he had the assurance of having Dr Lakshan beside him, who in fact rushed him from our home to Central Hospital in Colombo that night in his own vehicle in the midst of the Covid-19 pandemic, ever so determined to save our dad’s life. It was a blessing to know that our dad had our mum and Dr Lakshan beside him as much as it was possible.

Edward Gunawardena had a successful journey starting his early years through St Joseph’s College, Colombo, Peradeniya University, Michigan State University, USA through sheer determination to succeed, despite him and his three brothers losing their mum when he was at a tender age of just four years. He served our country for nearly three decades in the Police Service in various capacities, including as the Director of Intelligence, Director of Presidential Security, DIG Metropolitan and Senior DIG Administration; and continued his services as the Special Advisor to the Chancellor at the University Grants Commission, Chairman of the National Lotteries Board and in the Board of Directors at the Lake House Newspapers Corporation.

Most would consider retirement in the ripe old age of sixties, but our dad was blessed to have joined JF&I Printing and Packaging Company, an international company with the head office close to our home. This enterprise was owned and led by renowned late Dr Neville Fernando and his son Neomal Fernando. Edward Gunawardena found his renewed passion and purpose of working with such a talented and committed group of colleagues, where he thrived in making a significant difference to a spectrum of many individuals with a common goal. There was a family atmosphere with abundance of gratitude whilst professionalism was being maintained. The feelings were mutual, and this was evident at a time when our dad was unwell and required a blood transfusion – seven of the junior colleagues at JF&I showed their willingness and donated their blood with heartfelt love and gratitude towards him. Knowing that such generosity and love existed in a working environment was a sincerely humble attitude. This is a true reflection of our dad’s character and personality of giving where reciprocation was demonstrated.

Patriotism and loyalty were two of his strengths. His dedication and professionalism in the Police Service were commendable. This was once clearly expressed by the late Professor Carlo Fonseka at the launch of our dad’s second novel “.. Edward was the IGP (Inspector General of Police) that the country never had”. A truly inspiring and a remarkable Officer and a Gentleman.

His generosity and care extended way beyond his professional arena. One of his many philanthropic contributions was the resurrection of the village Buddhist temple’s school ‘Daham Pasala’ with the support from the late Deshamanya H K Dharmadasa well known as ‘Nawaloka Mudalali’, the founder of the Nawaloka Group. Our extended family and many thousands of youth in the Battaramulla area have benefited and continue to imbibe the doctrine of Buddhism, thanks to the dedicated committee led by it’s Chief Monk, Jinarathana Himi.

As an enthusiastic writer and a passionate citizen, he wrote many thought provoking and fearless articles to the newspapers, which were very well received by the readers. He was not afraid to speak the truth and to stand up for those who did not have a voice, and he became a respected contributor maintaining honesty and integrity. One of his most poignant articles we recall was days after the tragic Easter Sunday bombings, titled “The Unpardonable Blunder” bravely challenging the chain of command and with deep sorrow on the devastating destruction, loss of lives and many innocent people maimed and scarred for their entire lives.

Today, we are relieved that he didn’t have to witness the dismal state of affairs our country is going through as a consequence of decades of poor leadership, mismanagement, and most of all, unprecedented levels of corruption in the recent era of respective governments.

As our dad, we are immensely proud of who he was, his achievements and most of all for how he has bettered many lives throughout his life, with his generosity, professionalism and willingness to help, advise, guide, nurture and mentor all with a selfless attitude. We believe that his legacy has been passed on through many who he has had close connections with. We are thankful that his writing legacy would also continue through his creations of the two novels “Blood and Cyanide” and “Memorable Tidbits…”.

Even until his last days and hours he was sharing his experience and wisdom with everyone around him, that was the calibre of the gentleman. His humble stories of meeting President Nixon at the Fulbright Scholar Dinner at the White House, meeting the 124th Emperor of Japan, Emperor Hirohito at the Akasaka Palace, and his conversations with the great Arthur C Clarke, will always be fondly remembered by us. One of the famous quotes that our dad hilariously shared was the quote from Benjamin Disraeli, 1st Earl of Beaconsfield, the former Prime Minister of the United Kingdom about his political nemesis, the former and the predecessor Prime Minister, William Ewart Gladstone. “The difference between a misfortune and a calamity is this: if Gladstone fell into the Thames it would be a misfortune, but if someone dragged him out again that would be a calamity.”

Our dad was and will continue to be our hero and mentor. Today, we wish to extend our utmost appreciation to each and every one of you who had a close bond with him and made his life purposeful, joyful and complete. We thank them sincerely.

His last day of life was instrumental to the creation of the Edward Gunawardena Memorial Trust that is being organically grown, currently sponsoring medical students at the Rajarata University who are striving to become medical professionals, and as with Dr Lakshan, who was taking care of our dad, these students will have the opportunity to potentially treat and care for many deserving people and make their lives better, and also save many lives.

Whilst we take this opportunity to once again thank all those who were in his life,we would love to hear and treasure all the memories they shared with him. We welcome your recollections, your thoughts and your appreciations of Edward Gunawardena and please do send them via the email

My sister and I would value and appreciate the stories that you have had the pleasure of experiencing with him and of him.

With gratitude,
ERANGA

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