Opinion
Surviving the World economic crisis

The outbreak of the Covid-19 pandemic precipitated a world economic crisis. Many commentators suggest that the pandemic caused the crisis. In actual fact, several economists, such as Sri Lanka-born Howard Nicholas, have predicted this economic downturn for several years.
The roots of the crisis go much deeper than the Coronavirus. The economies of the world are mired in debt. Because of the hegemony of the financial elite, companies in the advanced industrial nations have not, for years, invested in new plants and machinery but have, instead, used government subsidies to buy back their shares from shareholders. Investors have used this mechanism to increase the apparent value of their assets, enabling them to borrow more from banks.
This is because investors expect to make money, not from the dividends enabled by company profits, but by speculating in company shares. Many of the so-called “unicorn” companies (new, fast growing companies valued at over US$ 1 billion) make no profit, but grow because investors believe they will grow in value.
Economic stagnation
For the same reason, many big companies, such as Apple, Facebook and Google, instead of increasing their own value by investing in production, or research and development, buy other companies. Profitability is increased by reducing staff numbers, or hiring temporary staff at much lower remuneration, often on a “gig” (for-the-job employment) basis. This in turn has an effect on workers’ purchasing power, which affects the growth of markets negatively.
This kind of economic stagnation occurs from time to time. It used to be solved by more “inefficient” companies (that is, companies that do not make a profit, even if they happen to be more efficient by other criteria) going bankrupt, and more profitable companies expanding into the space they create. This has changed now. For example, the old hiring-car-based company Hertz, which made a profit of US$ 168 million in the last quarter of 2019, went bankrupt, while Uber, which made a loss of US$ 1.1 billion in the quarter, is doing famously. Companies able to attract capital prosper, while those seen as not expanding, fail.
The economy recovers from such crises by investing heavily in new technological methods to increase productivity. In the last two decades, however, companies in the West, especially in the USA, have invested in technologies that enable them to extract the greatest profit from “gig” labour, and essentially in sales, delivery and other services, rather than production.
On the other hand, East Asian countries have invested heavily in high-tech manufacturing industries. China, Japan and South Korea, together, account for two thirds of all new industrial robot installations, while Europe and North America only account for 30%. In the context of the current crisis, such countries will probably lead the recovery, with brand new technologies. Other up-and-coming industrial powers, notably Vietnam, Iran and India, will also accelerate their technological capabilities.
The continued economic stagnation, in the USA, has several corollaries. In the first place, as the world’s biggest consumer of imports, the exports of export-based economies will suffer. In the second place, investors are fleeing the US Dollar for gold, the price of which has risen from US$ 48,000 per kg in March to over US$ 65,000 per kg today. The consequent fall in the value of the US dollar (from € 0.94 in March to € 0.85 today) means that exporters will be even more disadvantaged.
The USA is also the world’s biggest consumer of petroleum – using more than the combined consumption of the next two countries, China and India. The price of crude petroleum in Dubai fell from US$ 64 in January to US$ 23 in April. Although the price rose again, to US$ 43 in July, the lower value of the US Dollar means that the real increase is less than this. This means the income of the Middle East and Russia will be affected severely.
Different approaches
How have other countries coped with the economic downturn? The USA, China and Germany represent three different approaches to the problem.
Apparent economic growth, in the USA, before the pandemic, was based on short-term, low wage jobs. Once Covid-19 hit, the country experienced its fastest unemployment growth in history. In reaction, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which budgeted US$ 2 trillion (10% of GDP) to boost the economy. More than half of this went to companies, while less than a quarter went as compensation to poor people losing their jobs or otherwise affected by the crisis.
This stimulus package helped cushion the collapse of the US economy. However, the payments made to the affected poor people often went to pay immediate food and rent needs. Most of the consumer spending due to payments to individuals went to online delivery companies, such as Amazon and Uber, which employ workers on “gig” terms. They did not spend it in shops and supermarkets which employ permanent staff, so unemployment rates remain high.
Unfortunately, even this funding ended at the beginning of August. The government and the opposition (which controls the legislature) argued about a new stimulus package. President Trump wanted to spend only US$ 1 trillion, reducing payments to unemployed people. The opposition Democratic Party wants to spend US$ 3 trillion, mostly on benefits to the affected people and on government programmes, including schools. The two sides could not agree.
“The Democratic Party continues to insist on radical left-wing policies that have nothing to do with the China [sic] virus,” Trump said. On 9 August he signed four “executive actions” regarding payment of reduced unemployment benefit, a moratorium on income tax for poor people, relaxing rules on evicting tenants and action on student loans. Critics say the executive actions may not be workable.
“Six guarantees”
China, the world’s biggest manufacturing nation, the first to suffer from the Covid-19 pandemic, has seen its economy recover. According to “The Economist” magazine’s Intelligence Unit in Beijing, local government investment, in public medical facilities, city infrastructure, old community renovations, transport, power grids and telecommunications, drove construction growth. This, in turn, stimulated production of construction-related machinery and goods, driving up manufacturing output.
The Chinese government has revealed a “six guarantees” recovery plan, based on creating jobs, giving financial support to ensure livelihoods, protecting small and medium enterprises, food and energy security, stability of the industrial supply chain, and facilitating the path from lockdown to a vital social life.
The Standard Chartered Bank says that China’s government is prioritising social goals ahead of GDP growth by creating employment and indicating that fiscal policy will be its preferred way to stimulate the economy. Officials have suggested that they are willing to almost double the budget deficit to support gross domestic product growth, while allowing money supply and credit growth to reach higher levels. There also appears to be a clear shift in China’s strategy; moving from an export focus to paying greater attention to domestic demand, to releasing consumers’ potential, and investing in new and traditional infrastructure projects. It projects a growth rate of 2-3% this year, a surprisingly high outcome for an economy which shrank rapidly in the first quarter of this year.
“Green” recovery
Meanwhile, Germany, the biggest European economy, has put in place a radical “green” recovery plan. The € 130 billion plan consists of fifty measures designed to boost consumption and speed-up economic recovery. The Government of Germany’s actions will be structured on this recovery plan. It is based on three pillars: € 78 billion on short-term economic recovery (about), about €5,000 billion on investment in future-proof and green technologies, and, € 3 billion on European and international solidarity (in addition to the efforts of the European Commission’s recovery plan).
Reducing VAT by 3 percentage points (12 percentage points for the catering and restaurant sector) – to stimulate consumption and revive employment in businesses, particularly in the hard-hit food and beverage sector – will cost the government € 20 billion.
The short-term recovery plan includes a huge green effort: subsidies on consumption of renewable energies, together with a carbon tax, will move use to electricity from other modes. In the transport sector, subsidies for buying electric vehicles are doubled, and support is given to battery and charging infrastructure, modernising commercial vehicles, ships and aircraft, and to public transport and railways. The construction sector has € 2 billion allocated for energy efficient retrofitting to existing buildings.
A key point in the plan is the new green hydrogen (produced by electrolysis from renewable electricity) sector, for which the government is allocating € 3 billion to develop 10 GW of electrolysis units by 2040. Together with the budget for European and international solidarity, this will put Germany firmly in the lead in this technological area.
Lanka’s markets
In the second quarter of this year, the USA’s gross domestic product declined by 35%, and the government recorded 23 million people as unemployed, the highest rate in 80 years. In the European Union the GDP declined by 7%, and unemployment increased to 14 million. In Britain, GDP has declined by 9%, driving unemployment up to 2.5 million. In Russia, GDP dropped 8%, and unemployment rose to 1.7 million. Middle Eastern economies will slow by 5%, affecting migrant labour employment.
These are Sri Lanka’s biggest markets. This shrinkage will adversely affect Sri Lanka’s economy. Both exports, and foreign labour opportunities, will decline. With a collapsed tourism sector, this will allow the country little foreign exchange to buy the things it needs.
In this situation, what can countries like Sri Lanka do? There are a few simple answers to this question. First, reduce imports to match the reduction in foreign exchange sources. Second, find new foreign markets to replace the declining economies. Third, find new products to replace the ones currently being exported. Fourth, develop the domestic market for domestic products, to advance the economy.
Of course, walking the talk will be less simple. How can it be done? The path taken by the USA is the road to ruin, while Sri Lanka does not have the financial resources to emulate China or Germany – although it can emulate many of the measures they have put in place, on a far smaller scale. It remains for the state to create the policy parameters to drive recovery on new paths, using our existing resources, and developing indigenous knowledge. New technology will be a large part of this, but we must use it wisely. We have an educated population which can adapt itself rapidly to new skills. That is our biggest resource in this economic battle.
Vinod Moonesinghe
Opinion
Our rice crisis: A holistic solution – II

by Emeritus Professor Ranjith Senaratne
Department of Crop Science, University of Ruhuna (ransen.ru@gmail.com)
(Continued from 03 March, 2025)
Voiceless farmers and toothless farmer organisations
The hapless farmers, who render a yeoman service to the nation by ensuring food and nutritional security are often at the mercy of some large-scale rice traders and millers. They get a raw deal at the end of the day, and this vicious cycle has gone on for many years with no end in sight. Consequently, every year, several “nation’s feeders” take their own lives out of sheer frustration and hopelessness. There are farmers’ organisations in the country who speak on behalf of the hapless farmer, but their protests seldom make an impact on the politicians and policy makers to change the status quo. What is most ironic is that the millions of paddy farmers who feed the nation are voiceless and powerless, while even private bus drivers, three-wheeler drivers and railway guards, to name a few, are much more powerful and make themselves heard.
However, many countries have powerful farmer organisations that wield much influence at the national level. Hence, it is possible and important to strengthen and give muscle to local farmer organisations through awareness, professional training and capacity building so that they could evolve into a vibrant and powerful force that cannot be brushed aside, but must be reckoned with by the policy makers, planners and politicians. Opportunistic political elements with ulterior motives masquerading as farmer representatives should not be allowed to exploit these hapless “nation feeders” for their narrow political ends, something which is unfortunately evident in our country. The Faculties of Agriculture and professional bodies in allied fields have a responsibility and moral obligation to provide leadership and guidance to bona fide farmer organisations which will contribute not only to improving the socio-economic standard of the millions of farmers and their families, but also to enhancing food and nutritional security in the country.
Uncoordinated and unregulated crop production
There is a plethora of government institutions in the agricultural sector, yet no institution is mandated to coordinate and regulate the national crop production. Taking into account land capability, climatic potential, food demand, export potential etc. will minimise food surpluses and scarcities and overuse of fertilisers and pesticides while ensuring a fair price to both the farmer and consumer. Presently, anybody with land and the necessary resources and inputs can cultivate any crop anywhere on any scale at any time. However, in many countries, food production and food imports are carefully regulated to minimise food surplus and scarcity. Farmers are given incentives to produce less when a glut is anticipated and to produce more when a scarcity is likely. Such decisions are based on market surveys, meteorological forecasts and past experience, ensuring fairly stable prices throughout the year.
In each district, govt. support such as fertiliser subsidies, crop insurance, provision of water, bank loans, etc., should be provided only to farmers with a proven track record who cultivate paddy in productive areas adhering to the recommended cultural practices. If a field with high potential produces a low yield, it is likely to be associated with poor management. Cultivation of such paddy fields should be given to promising farmers in the area and benefits should be shared between the two parties in an equitable manner. This will help realise the potential yield from the field. Such intervention could be made with the support of the farmer organisations in the area.
Lack of robust anti-hoarding laws
Hoarding of agricultural produce and the consequences arising therefrom have posed formidable challenges to governments and caused untold hardships to the consumers in many parts of the world. As regard paddy production in Sri Lanka, it is reported that nearly 70% is purchased by the small and medium scale millers and the remaining 30% by a few large scale millers. While the veracity of those figures is yet to be established, the existing laws and regulations are not robust enough to effectively deal with the issues of hoarding and associated problems which have precipitated a prolonged crisis in the country. In this context, it is appropriate to see how the Philippines has dealt with a similar problem. The new law, Anti-Agricultural Economic Sabotage Act, enacted by the Dept. of Agriculture in the Philippines in September, 2024 has declared smuggling and hoarding of agricultural products as economic sabotage and has imposed stiff penalties against smugglers and hoarders of agricultural food products, including heavy fines, i.e. 5 times the value of smuggled and hoarded agricultural products and life imprisonment if found guilty. Such deterrent punishment would benefit the farmers and fisher folk whose livelihoods have been jeopardized by unscrupulous traders and smugglers (https://www.da.gov.ph/da-chief-new-law-declares-smuggling-hoarding-of-agricultural-products-as-economic-sabotage/). The Government in our country could introduce such laws to deal with undisclosed hoarding of agricultural produce and products by traders and millers. Through constructive engagement with traders and millers and deployment of electronic sensor based computational intelligence in storage bins or silos, the govt. will be able to ascertain the stock position on a real-time basis so that necessary interventions could be made to minimize shortages and price fluctuations in rice. This technology has many applications in smart inventory and stock management and such technological interventions can be facilitated by the newly established Ministry of Digital Technology.
In order to avoid making this article lengthy, I have not elaborated on some further factors contributing to the rice crisis. However, they have been dealt with in the book edited by the writer in 2021 titled “The Future of the Agriculture and the Agriculture of the Future: From Beaten Track to Untrodden Paths”.
Conclusions
Availability of rice and its price depend on the rice value chain which encompasses not only a multitude of actors and players, but also several sectors of the economy. Therefore, there are no simple, straight forward solutions to such a complex, multi-faceted and multi-dimensional problem, and tinkering with the system is to no avail and will only aggravate matters. This problem, developed over many years, demands a holistic systems approach through transsdisciplinary interventions. Here, the issue should be viewed in an integrated manner as a collection of interconnected and interdependent elements and people, taking into account the relationships and interactions between them. This calls for a paradigm shift and bold, proactive and pragmatic moves in order to bring about a sustainable solution to this complex, intractable and drawn-out problem, thereby ensuring year-round availability of rice at an affordable price to the ordinary citizen.
This would, among other things, include enactment of the requisite laws and regulations to deal with the oligopoly of rice trade and the lack of price regulation of key imported agricultural inputs such as pesticides, weedicides, fungicides etc. and services such as hiring of machinery for land preparation, harvesting, threshing etc. for which the farmers presently pay exorbitant prices. In addition, announcing the guaranteed price of paddy only after the harvest is an unkind cut. The price should be made known to the prospective farmers well ahead of the beginning of the cultivation season, thereby giving them an opportunity and the space to decide whether to cultivate paddy on a commercial scale and, if so, to what extent.
Needless to add that the hapless farmers are at the mercy of the large-scale rice millers and traders, including input and service providers. However, we must recognize the pivotal and crucial role they play in supporting the paddy production and providing quality rice to the consumer. However, the failures of the governments to date to enact and enforce the requisite laws and regulations have made the farmers extremely vulnerable and prone to exploitation in a fiercely competitive globalized environment where ethical and moral values are fast eroding.
Therefore what is needed in this decisive hour in not to continue finding fault with and flogging the large-scale millers and traders, or blaming the previous regimes, but to make proactive and constructive moves, hasten to enact pragmatic and actionable laws and regulations, and beef up the relevant law enforcement and regulatory authorities such as Consumer Affairs Authority, providing them with the much needed teeth and resources to address the said key issues as a matter of top priority and the utmost urgency. The government has received an overwhelming mandate with 159 members in the parliament. Hence, the above interventions will be only a walk in the park for the government to introduce. The earlier it happens, the better, since the next rice crisis, like the second wave of the tsunami in 2004, could be much worse and more disastrous not only in economic and social, but also in political terms.
(The writer appreciates the comments and observations made by Dr. W.M.W. Weerakoon, former Director General, Dept. of Agriculture, Dr. Sumith Abeysiriwardena, former Director, Rice Research and Development Institute, Bathalagoda and Mr. C.S. Kumarasinghe, Senior Lecturer, Department of Crop Science, University of Ruhuna on a draft of this article)
Opinion
Lessons from Ukrainian Debacle

Why Sri Lanka must continue to pursue a Non-Aligned, yet Multi-Aligned Foreign Policy:
by Ali Sabry, PC
In a world increasingly polarised by great-power rivalries, Sri Lanka must remain steadfast in its time-tested foreign policy doctrine: non-alignment. Our strategic location in the Indian Ocean, economic aspirations, and long-term stability demand that we engage with all global actors without becoming pawns in their geopolitical games.
The ongoing crisis in Ukraine offers a stark reminder of what happens when small and mid-sized nations get caught in the crossfire of major power struggles. For Sri Lanka, the lesson is clear: we must remain non-aligned yet multi-aligned, engaging with all, avoiding entanglements, and ensuring that our sovereignty is never compromised.
The Ukrainian Crisis: A Cautionary Tale for Small States
Ukraine’s tragedy is not just a distant war; it is a lesson in realpolitik for all small nations. Over the past two decades, Ukraine found itself on the fault line between NATO and Russia. By aligning too closely with one camp, it triggered existential fears in the other. When the crisis escalated, Ukraine was left to bear the full cost of war. its cities reduced to rubble, its economy in shambles, and millions of its people displaced.
Despite strong international support, Ukraine has suffered devastating consequences. The military and financial aid it has received has come at a tremendous cost, both in human lives and economic ruin. No amount of Western backing has spared Ukraine from becoming the battlefield of a larger geopolitical contest.
For Sri Lanka, the lesson is simple: never allow ourselves to become the battleground for someone else’s war. We must ensure that our sovereignty is non-negotiable and that our foreign policy choices are dictated solely by our national interests, not by the strategic ambitions of global powers.
Sri Lanka’s Foreign Policy: The Power of Equidistance
Sri Lanka has historically been a champion of non-alignment. From our role in the Non-Aligned Movement (NAM) to our principled stand at the 1951 San Francisco Peace Conference, we have long understood that small states wield the greatest power when they remain independent in their decision making.
Over the years, we have experienced the perils of veering too far in one direction. The late 1970s saw an excessive pro-Western tilt, leading to strained relations with India and regional instability. More recently, an over reliance on China in the early 2010s resulted in economic vulnerabilities and strategic imbalances. The anti-China rhetoric of 2015 cost us dearly, almost freezing Chinese investments and triggering a devastating economic slowdown that contributed to the financial crisis.
Every time Sri Lanka has moved too close to one power bloc, it has paid a price, whether in economic pressure, diplomatic isolation, or security threats. This is why our best path forward is non-alignment in politics but multi-alignment in economic and diplomatic engagement.
What Does a Non-Aligned Yet Multi-Aligned Foreign Policy Look Like?
1. No Military Alignments, No Foreign Bases
• Sri Lanka must firmly reject any attempt by external powers to establish military bases or exclusive defence arrangements on our soil. While we should engage in cooperative security dialogues, we must not allow ourselves to be drawn into power blocs that undermine our neutrality.
2. Economic Engagement with All, Dependency on None
• We should welcome investments from all corners, India, China, the U.S., the EU, Japan, and others, while ensuring that no single actor dominates our economic landscape. A diversified economic strategy will safeguard us from economic coercion and financial vulnerabilities.
3. Diplomatic Balancing
• Just as we engage with China on infrastructure, we must strengthen ties with India for regional security and trade, collaborate with the U.S. and Europe for technology and education, and maintain strong links with Japan and ASEAN for economic opportunities.
4. Leveraging Multilateralism
• Sri Lanka must remain active in regional and global organisations like the UN, NAM, SAARC, and BIMSTEC, using these platforms to promote dialogue, trade, and security cooperation without taking sides in major power conflicts.
5. Resisting Coercion and Protecting Sovereignty
• Major powers will always seek to exert influence over small nations, forcing to take sides, whether through economic pressure, diplomatic maneuvering, or security agreements. We must have the political will to resist undue pressure and assert our sovereign right to pursue an independent foreign policy.
A Realistic Assessment of Our Size, Strength, and Interests
Sri Lanka is not a superpower. We do not have the economic or military clout to take sides in great power conflicts. But we do have strategic importance, a vital geographic location, and a respected voice in international diplomacy. If we play our cards wisely, we can turn our neutrality into an advantage, positioning ourselves as a hub for global trade, an honest broker in international disputes, and a bridge between competing powers.
We must recognise that aligning with any single power bloc, whether Western, Chinese, or otherwise, will only expose us to greater risks. Instead, a pragmatic, balanced approach will allow us to benefit from global partnerships while avoiding the pitfalls of dependency.
The Middle Path is the Best Path
Sri Lanka does not need to pick sides. We need to pick strategies that work best for our long-term stability, security, and prosperity. The world today is as divided as it was during the Cold War, and the lessons from Ukraine prove that small nations that fail to remain neutral pay the heaviest price.
Our path is clear: a foreign policy rooted in non-alignment, strengthened by multi-alignment, and guided by the unwavering principle that Sri Lanka’s future must be shaped by Sri Lankans not by external pressures.
As we move forward, we must do so unapologetically and with confidence, embracing the world, engaging with all nations, and ensuring that Sri Lanka remains sovereign, secure, and successful in an increasingly uncertain global order.
Opinion
Gnana Moonesinghe

Gnana Moonesinghe, who passed away recently had a multi-faceted life although never a career. A woman of many interests – in literature, politics, diplomacy, journalism – she spanned these divides with great felicity and charm.
Gnana Coomaraswamy was born into a well-known Jaffna family. Her father was educated at Cambridge University in England and was a barrister. He pursued a career in education being principal of a leading Jaffna school. Gnana herself had an education in Colombo, and she entered the University of Ceylon at Peradeniya, from Ladies College, in 1955.
Her sister had married Dr. Kumaran Ratnam, who was once a Mayor of Colombo. Gnana married Mangala Moonesinghe, a lawyer and politician who was a descendent of Anagarika Dharmapala. Mangala Moonesinghe was MP for Bulathsinhala in 1965-1977. During that period, Gnana was heavily engaged in looking after that electorate and developed a close relationship with many of his constituents. She enjoyed being a politician’ s wife.
When Mangala was appointed High Commissioner in New Delhi in the 1980s, Gnana found another congenial and productive occupation. She was the perfect wife of a diplomat, and the couple enjoyed the diplomatic life in New Delhi and the high profile among the New Delhi circles. Mangala and Gnana developed a close relationship with Prime Minister, Gujaral of India. While in Delhi, Gnana produced a book – “Footprints of the Buddha”. After New Delhi, Mangala and Gnana had a couple of years in London as Sri Lanka’s High Commissioner. On return to Sri Lanka, Gnana was engaged in domestic, political and civil society issues. She and Mangala had a particular interest in the ethnic issue. She was a regular contributor to the newspapers and particularly concerned with the politics of the time. She edited a book on Sri Lankan government structures some time during this period. She was a member of the Disputes Resolution Council of the Press Complaints Commission of Sri Lanka.
It is 70 years since I first met Gnana. We both entered university at Peradeniya in 1955. From 1956-1959, Gnana and I read for a special degree in Economics. There were three young women and over 20 men reading for this course. Gnana specialised in political science. Only a very few of us are still around. It is a pleasure to have known Gnana all these long years. She leaves a son, Sanath who lives in the United States, and daughter Avanti ,who is married to Murtaza Esufally.
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