“An all- party economic model, if ever, will take 20 years to achieve prosperity’

by Sanath Nanayakkare

People of Sri Lanka have to face the effects of strenuous economic conditions as the country has virtually exhausted its foreign currency reserves that were there when the present government came to office, MP and former prime minister Ranil Wickremasinghe said during an interview with an Indian multinational English language news channel (WION) recently.

“The country was caught unawares in the Covid pandemic at a time the government was pursuing a non-fiscal consolidating budgetary stance providing tax subsidies to the corporate sector depriving the country of its revenue, and dropping several infrastructure investment opportunities with countries such as India, Japan and the USA,” he said.

“The government cancelled most of the agreements we had with other countries to boost investment in critical infrastructure; the Trincomalee Oil Tank farm deal – which they have now restored – two LNG plants with Japan and India, East Container Terminal project with India, the Central Highway Phase 3 and 4 with Japan and India, MCC compact with the United States that would have brought Sri Lanka investments worth about USD 4 billion which would have helped us mitigate the present economic crisis,” he said.

Responding to a question on Sri Lanka’s economic diplomacy and whether Sri Lanka was favouring China than other countries, he said that at the end of the day, Sri Lanka is not really friendly with any country.

“China, Sri Lanka relations were under strain following the fertiliser issue and I am told that there are issues in other projects as well. At least now we are talking to the Chinese government. Then there is the strained relationship with India, Japan, USA and the EU. These countries are donor countries and we need to be mindful of the fact that with the West we have a great trade balance in our favour.”

“Then there was the IMF stand-by facility of USD 400 million which I think we didn’t take. At that time, we were completing an IMF programme and we could have renewed it. I don’t know where the government thought the foreign currency would come from. Seemingly they thought countries would willingly offer foreign currency to Sri Lanka.”

When asked whether the current crisis had been in the making since the time he was prime minister, he said, “No, it was not in the making at that time. We had problems from time to time, but an economic crisis was not in the making. I don’t want to delve too much into the past. In 2015, We did have a problem in terms of debt repayment. But by 2017, we were able to build a surplus in the primary account for the first time after about 60 years. And we were building upon it. Then again, despite problems in 2019, the economy was doing fine. There was a setback, but we picked up in the six months that followed. So, it wasn’t the period of time when the problems began. Problems began when the present government reduced the value added tax (VAT). During our time, the budgetary position improved because we increased the VAT. By reducing the VAT, the government deprived the national coffers of the revenue that was required to maintain a surplus. Secondly, Sri Lanka was quite unprepared for an external shock like Covid-!9 pandemic. Our economy should have been prepared for external shocks. We should have gone to the IMF and spoken with them to put the IMF facility back on track as we were finishing up the one we had been given at the time. We didn’t do that. The government just carried on. If we had spoken with the IMF, we wouldn’t have ended up here.”

When asked why the government was so hesitant or even adamant about not going to the IMF, he said,” I don’t really know. It seems that they have some misconceptions about the IMF; that the IMF would ask the government to reduce employees in the public sector. From the experience I have had with the IMF and the World Bank. I don’t think that they would have asked us to reduce employees in the public sector. Today they have formed a consortium and Sri Lanka is not part of it.”

“Maybe the government is not going to the IMF because the people who formed Viyathmaga and other groups are against economic reforms, restructuring, opening out, dealing with India, obtaining MCC funds etc. It appears that they didn’t want to get something done when it was opportune to do so. And now we are paying the price for it.”

When asked if the government was doing the right thing by taking ‘extreme’ moves such as selling more than half of the Central Bank’s gold holdings, enforcing US dollar conversion rules etc, he said,” No, They are not. There are some fundamental issues in the economy. We have to address them. If you don’t address them, the current moves will not be sufficient. We have the issue of our dwindling foreign exchange reserves and the decline in revenue against expenditure. There is about a trillion rupee gap there. Then there are other issues as we go along. One of them is, by 2035 we may not have money to pay pensions of our government employees. You have to deal with such scenarios starting right now. This is one reason that we have to put the economy back in order so that we will have the capacity to face such challenges in the future. Then what about expenditure needed to tackle issues arising from Climate Change? Now all these have culminated in a crisis which can’t be resolved in a day or two. We have to go deep into these issues and make policies for long term solutions.”

“If all major political parties in Sri Lanka can come to an agreement on the economic fundamentals to be pursued with consistency, the country and its people can achieve growth and prosperity in 20 years. There is no short-term solution to the current economic crisis,” he said.

When asked about reasons for the UNP’s worst-ever defeat in history and its future direction, he said “The UNP wasn’t prepared for the 2019 presidential election.

As far as I was concerned, I wanted to contest the parliamentary polls as a united team because then we would have had a chance to make our presence felt in parliament and prevent the government from getting a two-thirds majority. But there was a different feeling in the party and Sajith Premadasa and others wanted to depart from the UNP and contest. When you look at the election results analytically, both SJB and UNP got some 2 million votes. We came down to some two million votes from about 5.4 million votes. And now, post-Covid, I think that the major parties’ vote bases have disappeared – both of the government as well as ours. The UNP also has to build up a new vote base. We have done a survey and found what the people want. We are re-organising the party in a more professional way. We are making an effort to bring in young professionals to the party. Most of our senior leaders have retired, so we have the opportunity to open our doors to the young people. We will expose them to the right kind of training and there will be new faces in the UNP in the coming few months.”

Asked when he would hand over the reins of the party, he said,”Whenever they are ready. They are just coming in. They can have it when they want it.”

When asked about the government’s wish to restructure its Chinese debt and whether he thought it could be done, he said, “I read that Sri Lanka has raised this concern about restructuring its Chinese debt. In such a context, China could be urged to restructure debt on many countries on the Belt and Road initiative. You can’t restructure debt of one country and not of others. I can’t see that taking place. And I don’t think there was enough time during the Chinese foreign minister’s recent visit to Sri Lanka to discuss matters of that nature.”

Asked about his potential candidacy at the next presidential election, “Earlier you asked when I was going to hand over the reins to young members of the party and now you ask whether I would be contesting the next presidential election,” he quipped.

“Frankly speaking, I have only given my views on how the economy should be handled. I feel that we have to have a common economic plan. All major parties must agree on its fundamentals. The major parties in India despite their differences over the farmers’ issue, won’t move away from their core economic model, no matter whatever their differences. We also have to agree on a common economic model like that and how we are going to come out of this crisis, regain stability and achieve growth. That is what I have always advocated for. If such a common model is pursued for 20 years, we can achieve real growth. The current crisis can’t be sorted out in a day or two.”

Asked what should be the government’s plan at this juncture, the UNP leader said that the government would have to make up their mind to have a plan in the first place and talk to everyone.

Asked if the Opposition would support such a plan, he said, “They should present a plan. If there is a solid plan, I think the Opposition will support it. Today even the cabinet ministers are saying that there is no plan,” he said.

When asked if Sri Lanka should convene the BIMSTEC member states – Bangladesh, Bhutan, India, Myanmar, Nepal and Thailand as its current Chair to discuss the matter of Myanmar’s ousted civilian leader Aung San Suu Kyi jailed for four more years, the UNP leader said,” I raised this matter in parliament and asked if we could discuss it privately and not in public, but I didn’t get a reply. The predominant concern that remains is whether Sri Lanka would go to the IMF let alone BIMSTEC,” he said.