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The economy has collapsed

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by Kumar David

Polite commentators are bashful and write in the future tense. They avoid the present and prefer “on edge”, “critical” and “reeling”, but this is asinine. It has already happened; all that is pending are food riots. “The president (of Sri Lanka) appealed to visiting Chinese foreign minister Wang Yi that it would be a great relief if debt payments could be rescheduled in view of the economic crisis” reported the Guardian (UK) on January 10, 2022. When a country begs for debt rescheduling it means that it is up the gum-tree, broke, can’t pay up; rescheduling is defaulting, politely. A few in the opposition have appealed for default.

The Island of 31 January said “Sumanthiran leads an MPs’ call: Postpone debt repayment”. Well Abraham wake up; it has happened. The government has affirmed all but officially that it has declared bankruptcy; there is no other interpretation of a plea for rescheduling addressed to the creditor holding 10% ($3.4 billion) of our foreign debt. Nearly half (47%) of Lanka’s foreign debt is to commercial markets and default cum restructuring will entail increase in interest rates on the amounts outstanding and it will pile on future pain. Interest rates the world over are on the up, Central Banks are tightening money supply in response to inflation concerns. Therefore, restructuring equals higher interest rates; Sri Lanka is sinking into a financial quagmire; that’s the bitter pill the JVP-NPP, Sajith’s outfit and Champika’s 43-Brigade cannot get away from – more on that later.

Debt, default, shortages, inflation, power-cuts, exploding gas cylinders, fertiliser lunacy, who doesn’t know all this? It will be a waste of your time and mine to recapitulate. A reasonable summary inference is that president and government will be ousted in the next election cycle, provided elections are not annulled by an illegal or an illegitimate artifice. I have often made a song and dance about such illegitimate possibilities and complained that the main opposition JVP-NPP and SJB and lesser outfits with a presence in parliament like the TNA were sleepwalking, oblivious to dangers. I will give that grumble a rest today and limit myself to what may happen during the remainder of this president and government’s term if they stay on to the end (three-plus years) and I will talk about election manifestos.

If president and government serve out their terms it is easier to prognosticate economic trends than to predict the fallout from unavoidable socio-political conflicts if the government is brought to its knees before its fated expiry dates. Some things seem unavoidable in 2022 or 2023; the government will throw itself at the feet of commercial lenders and China and eventually the IMF, imploring mercy. Fresh monies and swap deals will entail higher costs, eventually the IMF will have its way and impose substantial structural reforms. Let’s stop fooling ourselves, price rises, and cuts in subsidies and welfare are unavoidable. You don’t believe me? Listen to the Finance Minister and government ministers and MPs. Citizens who have big money are moving it out and owners of properties are selling and finding ways of doing the same at inflated market exchange rates – others argue that these are the prevalent real-rates. In simple words the net effect will more economic hardship. This remark applies not only to fungible goods, commodities and fuel but also to services like electricity supply-reliability and healthcare.

What about the trade balance, remittances and tourism earnings? A sharp decrease in the LKR value will increase exports and discourage imports but the political costs will be high. Can a regime facing an electoral guillotine do it? But how otherwise can it circumvent the hangman’s noose? The IMF is sitting back and waiting for the beggar to come to the door on his knees; time is on its side and there is only that much alms that China and India will dole out. A fall of the LKR will strengthen remittance inflow; it will attract more tourists since a declining rupee is equivalent to reducing wages and making services cheaper. So-called fiscal reform (raising direct and indirect taxes), rebutting wage hikes and reducing expenditure on health, education and welfare will invite direct populist conflict and social tension. The government’s choice: “To be or not to be”.

Where, for example, will the strike in the health sector which started last week (temporarily paused) end? It dragged on in defiance of a court order and presidential emergency decrees. There will be other strikes, more defiance. Will the regime resort to direct action, will people defy it and will the multi-party governing alliance survive confrontation between the working class and the state? While one by one answers to these questions are not possible, collectively one can see that the regime is snowballing into an existential crisis. I am not using words carelessly; it’s not debt, fiscal crises or shortage conditions that are deteriorating, it is an overall existential crisis. I would have preferred it the other way where we could simply have voted the president and government out of office. Instead the way things are moving we have a threat of protest movements and the state responding with extra-legal machinations hanging over our head.

This is the background as the election cycle moves to centre stage in three-plus years. In the normal order of things, the presidential election comes first in mid-2024 and this may be one reason why three candidates are already on offer – Anura Kumara (AKD), Sajith Premadasa (SP) and Patali Champika Ranawaka (PCR). There is another reason why presidential aspirants are popping up first. Apart from the NPP’s Rapid Response Manifesto the other two hopefuls are committed to retaining the presidential system; let’s be frank, both SP and PCR want to be president, both want the powers and the pomp of the presidency, neither will abolish it. The public too is fixated on presidency not parliament. Though it understands and rejects the evils the JR Jayewardene instituted presidency has brought to the country, it is fixated on the devilish drama of electing a president. Much newsprint and electronic quanta are devoted to kowda raja (who’s the king) drama. Tubby SP is well set on the inside track while long limbed PCR is making a run on the outside track. It is hard to see how PCR can displace SP as anointed favourite of the SJB; its only grit and greed that keeps him going. The JVP-NPP strategy is to lay long-term groundwork for the future.

The dark and dirty horse is the SLPP-Rajapaksa offering. The natural choice would be to re-nominate Gotabaya but his half-time record is so soiled that that seems suicidal. Mahinda is ineligible and Namal hilarious. The next best is Basil, but that would be a bacillus to some, in particular the Dead-Left. In Vasu’s party Basil was spoken of as a pox inflicted by crooked businesses in cahoots with imperialism. “Ten-percent a day will keep development away” will become the nursery rhyme of the next generation. It will be difficult for the government therefore to avoid offering soiled-goods-Gota re-nomination. (Will he accept?). This strengthens my guess that president and government will be sent packing in the 2024-25 election cycle.

Is there time enough for a turn around and recovery? Well stranger things have happened . . . but! There are two interesting recent changes in government tactics. Under Basil’s influence there has been a shift in foreign policy from a god-speaks-in-Mandarin orientation to a middle position between China and the Quad. This is most noticeable in economic decision making. China’s response to this disloyalty is as yet unknown.

The other change is that the government seems to have swapped its cloak and dagger appearance for an electoral strategy. Maybe it could no longer ignore allegations all around that a military move was the concealed spanner in its tool-kit.

The hurdles that the next government will encounter are Herculean. No regime whatever its ideological complexion can avoid the imperative of both pruning the fiscal deficit by cutting expenditure and raising revenue; both unpleasant. The former entails reducing subsidies and welfare, the latter necessitates more taxes on the wealthy and increased indirect taxation such as VAT and sales-tax. This medicine will be as bitter for the JVP as it was for NM in the 1970s, but the comrades will have to partake of the poisoned chalice as did the Double Doctor. Whichever team goes out to bat it will find itself on a sticky wicket for the first innings; the second innings will permit discretionary policy choice. Development come only after that; growth is incumbent on economic and social stability.

I am formalising by sequencing but the concept remains correct. Economic intervention by emphasising state sponsored or capitalist-market options, industrialisation strategy, how to mobilise labour and resources, all this follows economic stabilisation. This is true whether the perspective emphasises the responsibility of the state (Vietnam-China style), Champika’s re-imaging of JR in his oddly named 43-Brigade (they are not highflyers, or it would have been 43-Squadron!) or Sajith’s presumed eclectic mish-mash.

The 43-Platoon says it will increase revenue and prune expenditure. The current balance sheet looks like this: If next year government revenue is one unit (1.0), then gross government commitment amounts to 3.2 units, of which a little more than half (say 1.7 units) will be actual budgeted expenditure and a little less than half (say 1.5 units) will be debt servicing unless there is substantial foreign debt forgiveness. As I said any team that goes out to bat cannot run away from this dilemma in its first innings. The second innings is discretionary; Champika intends to strengthen market forces, expand the role of private entrepreneurship, call in the IMF, emphasise productivity enhancement and launch a tech-based economy. His plan includes homilies about renewing democracy, eliminating corruption, improving governance etc. but it retains the presidential system by implication. Nor is he famous for enhancing devolution to minorities and nothing like that should be expected. The 43 (Ali Baba managed with 40!) is JR-economics and ideology in Twenty-first Century garb.

And you may have noticed that the TNA and the Catholic Church seem to be in vanguard of the campaign to repeal the Prevention of Terrorism Act and to stop the resurgence of state-led white-van abductions. Where are the JVP and the SJB? Maybe they are too busy preparing for elections in a reversal of roles. Hmm, what a topsy-turvy world! While we await the Sajith and Rajapaksa Brigade manifestos in the coming weeks there is a lot on our plates already to think over.



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Features

Glimmers of hope?

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The newly appointed Cabinet Ministers leaves Cass un-uplifted. She need not elaborate. She wishes fervently that Dr Harsha de Silva will leave party loyalty aside and consider the country. Usually, it’s asking politicians to cast aside self-interest, which very rarely is done in the political culture that came to be after the 1970s. Thus, it is very unusual, completely out of the ordinary to appeal to Dr Harsha to forego party loyalty and do the very needful for the country by accepting the still vacant post of Minister of Finance. We are very sorry Eran W too has kept himself away.

Some of Cassandra’s readers may ask whether she is out of her right mind to see glimmers of hope for the country. She assures them she is as sane as can be; she does cling onto these straws like the dying man does. How else exist? How else get through these dire times?

What are the straws she clings to? News items in The Island of Tuesday 24 May.

‘Sirisena leaves Paget Road mansion in accordance with SC interim injunction.’ And who was instrumental in righting this wrong? The CPA and its Executive Director Dr Pakiasothy Saravanamuttu. It is hoped that revisions to the system will come in such as giving luxury housing and other extravagant perks to ex-presidents and their widows. Sri Lanka has always lived far beyond its means in the golden handshakes to its ex- prezs and also perks given its MPs. At least luxury vehicles should not be given them. Pensions after five years in Parliament should be scrapped forthwith.

‘Letter of demand sent to IGP seeking legal action against DIG Nilantha Jayawardena.’ Here the mover is The Centre for Society and Religion and it is with regard to the Easter Sunday massacre which could have been prevented if DIG Jayawardena as Head of State Intelligence had taken necessary action once intelligence messages warned of attack on churches.

‘CIABOC to indict Johnston, Keheliya and Rohitha’. It is fervently hoped that this will not be another charge that blows away with the wind. They do not have their strongest supporter – Mahinda R to save them. We so fervently hope the two in power now will let things happened justly, according to the law of the land.

‘Foreign Secy Admiral Colombage replaced’. And by whom? A career diplomat who has every right and qualification for the post; namely Aruni Wijewardane. If this indicates a fading of the prominence given to retired armed forces personnel in public life and administration, it is an excellent sign. Admiral Colombage had tendered his resignation, noted Wednesday’s newspaper.

‘Crisis caused by decades of misuse public resources, corruption, kleptocracy – TISL’.

Everyone knew this, even the despicable thieves and kleptocrats. The glaring question is why no concerted effort was made to stop the thieving from a country drawn to bankruptcy by politicians and admin officers. There are many answers to that question. It was groups, mostly of the middle class who came out first in candle lit vigils and then at the Gotagogama Village. The aragalaya has to go down in history as the savior of our nation from a curse worse than war. The civil war was won against many odds. But trying to defeat deceit power-hunger and thieving was near impossible. These protestors stuck their necks out and managed to rid from power most of the Rajapaksa family. That was achievement enough.

Heartfelt hope of the many

The newly appointed Cabinet Ministers leaves Cass un-uplifted. She need not elaborate. She wishes fervently that Dr Harsha de Silva will leave party loyalty aside and consider the country. Usually, it’s asking politicians to cast aside self interest, which very rarely is done in the political culture that came to be after the 1970s. Thus, it is very unusual, completely out of the ordinary to appeal to Dr Harsha to forego party loyalty and do the very needful for the country by accepting the still vacant post of Minister of Finance. We are very sorry Eran W too has kept himself away. As Shamindra Ferdinando writes in the newspaper mentioned, “Well informed sources said that Premier Wickremesinghe was still making efforts to win over some more Opposition members. Sources speculated that vital finance portfolio remained vacant as the government still believed (hoped Cass says) Dr Harsha de Silva could somehow be convinced to accept that portfolio.”

Still utterly hopeless

Gas is still unavailable for people like Cass who cannot stand in queues, first to get a token and then a cylinder. Will life never return to no queues for bare essentials? A woman friend was in a petrol queue for a solid twelve hours – from 4 am to 4 pm. This is just one of million people all over the country in queues. Even a common pressure pill was not available in 20 mg per.

Cassandra considers a hope. We saw hundreds of Sri Lankans all across the globe peacefully protesting for departure of thieves from the government. The ex-PM, Mahinda Rajapaksa’s answer to this was to unleash absolute terror on all of the island. It seems to be that with Johnson a younger MP stood commandingly.

Returning from that horror thought to the protesters overseas, Cass wondered if each of them contributed one hundred dollars to their mother country, it would go a long way to soften the blows we are battered with. Of course, the absolute imperative is that of the money, not a cent goes into personal pockets. The donors must be assured it goes to safety. Is that still not possible: assuring that donations are used for the purpose they are sent for: to alleviate the situation of Sri Lankans? I suppose the memory of tsunami funds going into the Helping Hambantota Fund is still fresh in memory. So much for our beloved country.

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Ban on agrochemicals and fertilisers: Post-scenario analysis

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By Prof. Rohan Rajapakse

(Emeritus Professor of Agriculture Biology UNIVERSITY OF RUHUNA and Former Executive Director Sri Lanka Council of Agriculture Research Policy)

There are two aspects of the ban on agrochemicals. The first is the ban on chemical fertilisers, and the second is the ban on the use of pesticides. Several eminent scientists, Dr Parakrama Waidyanatha (formerly the Soil Scientist of RRI), Prof OA Ileperuma (Former Professor of Chemistry University of Peradeniya), Prof C. S. Weeraratne (former Professor of Agronomy University of Ruhuna), Prof D. M. de Costa University of Peradeniya, Prof. Buddhi Marambe (Professor in Weed Science University of Peradeniya) have effectively dealt with the repercussion of the ban on chemical fertilisers which appeared in The Island newspaper on recently.

The major points summarised by these authors are listed below.

FERTILISER ISSUE

1. These scientists, including the author, are of the view that the President’s decision to totally shift to organic agriculture from conventional could lead to widespread hunger and starvation in future, which has become a reality. Organic farming is a small phenomenon in global agriculture, comprising a mere 1.5% of total farmlands, of which 66% are pasture.

2. Conventional farming (CF) is blamed for environmental pollution; however, in organic farming, heavy metal pollution and the release of carbon dioxide and methane, two greenhouse gases from farmyard manure, are serious pollution issues with organic farming that have been identified.

3. On the other hand, the greatest benefit of organic fertilisers as against chemical fertilisers is the improvement of soil’s physical, chemical and biological properties by the former, which is important for sustained crop productivity. The best option is to use appropriate combinations of organic and chemical fertilisers, which can also provide exacting nutrient demands of crops and still is the best option!

4. Sri Lanka has achieved self-sufficiency in rice due to the efforts of the Research Officers of the Department of Agriculture, and all these efforts will be in vain if we abruptly ban the import of fertiliser. These varieties are bred primarily on their fertiliser response. While compost has some positive effects such as improving soil texture and providing some micronutrients, it cannot be used as a substitute for fertiliser needed by high yielding varieties of rice. Applying organic fertilisers alone will not help replenish the nutrients absorbed by a crop. Organic fertilisers have relatively small amounts of the nutrients that plants need. For example, compost has only 2% nitrogen (N), whereas urea has 46% N. Banning the import of inorganic fertilisers will be disastrous, as not applying adequate amounts of nutrients will cause yields to drop, making it essential to increase food imports. Sri Lankan farmers at present are at the mercy of five organizations, namely the Central Department of Agriculture, the Provincial Ministry of Agriculture, the Private sector Pesticide Companies, the Non-Government organizations and the leading farmers who are advising them. Instead, improved agricultural extension services to promote alternative non-chemical methods of pest control and especially the use of Integrated Pest Management.

Locally, pest control depends mostly on the use of synthetic pesticides; ready to use products that can be easily procured from local vendors are applied when and where required Abuse and misapplication of pesticides is a common phenomenon in Sri Lanka. Even though many farmers are aware of the detrimental aspects of pesticides they often use them due to economic gains

We will look at the post scenario of
what has happened

1. The importation of Chemical fertilisers and Pesticides was banned at the beginning of Maha season 1 on the advice of several organic manure (OM) promoters by the Ministry of agriculture.

2. The Ministry of Agriculture encouraged the farmers to use organic manure, and an island-wide programme of producing Organic manure were initiated. IT took some time for the government to realize that Sri Lanka does not have the capacity to produce such a massive amount of OM, running into 10 tons per hectare for 500000 hectares ear marked in ma ha season.

3. Hence the government approved the importation of OM from abroad, and a Company in China was given an initial contract to produce OM produced from Seaweed. However, the scientists from University of Peradeniya detected harmful microorganisms in this initial consignment, and the ship was forced to leave Sri Lankan waters at a cost of US dollar 6.7 million without unloading its poisonous cargo. No substitute fertiliser consignment was available.

4. A committee in the Ministry hastily recommended to import NANO RAJA an artificial compound from India to increase the yield by spraying on to leaves. Sri Lanka lost Rs 863 million as farmers threw all these Nano Raja bottles and can as it attracts dogs and wild boar.

Since there is no other option the Ministry promised to pay Rs 50000 per hectare for all the farmers who lost their livelihood. It is not known how much the country lost due to this illogical decision of banning fertilisers and pesticides.

Recommendations

1. Judicious use of pesticides is recommended.

2. The promotion and the use of integrated pest management techniques whenever possible

3. To minimize the usage of pesticides:

Pesticide traders would be permitted to sell pesticides only through specially trained Technical Assistants.

Issuing pesticides to the farmers for which they have to produce some kind of a written recommendation by a local authority.

Introduction of new mechanism to dispose or recycle empty pesticide and weedicide bottles in collaboration with the Environment Ministry.

Laboratory-testing of imported pesticides by the Registrar of Pesticides at the entry-point to ensure that banned chemicals were not brought into the country.

Implementation of trained core of people who can apply pesticides.

Education campaigns to train farmers, retailers, distributors, and public with the adverse effects of pesticides.

Maximum Residue Level (MRL) to reduce the consumer’s risk of exposure to unsafe levels.

Integrated pest Management and organic agriculture to be promoted.

1. To ensure the proper usage of agrochemicals by farmers

All those who advised the Minister of Agriculture and the President to shift to OM still wield authority in national food production effort. The genuine scientists who predicted the outcome are still harassed sacked from positions they held in MA and were labelled as private sector goons. The danger lies if the farmers decide not to cultivate in this Maha season due to non-availability of fertilisers and pesticides the result will be an imminent famine.

The country also should have a professional body like the Planning Commission of

India, with high calibre professionals in the Universities and the Departments and

There should be institutions and experts to advise the government on national policy matters.

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Thomians triumph in Sydney 

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Nothing is happening for us, at this end, other than queues, queues, and more queues! There’s very little to shout about were the sports and entertainment scenes are concerned. However, Down Under, the going seems good.

Sri Lankans, especially in Melbourne, Australia, have quite a lot of happenings to check out, and they all seem to be having a jolly good time!

Trevine Rodrigo,

who puts pen to paper to keep Sri Lankans informed of the events in Melbourne, was in Sydney, to taken in the scene at the Sri Lanka Schools Sevens Touch Rugby competition. And, this is Trevine’s report:

The weather Gods and S.Thomas aligned, in Sydney, to provide the unexpected at the Sri Lanka Schools Sevens Touch Rugby competition, graced by an appreciative crowd.

Inclement weather was forecast for the day, and a well drilled Dharmaraja College was expected to go back-to-back at this now emerging competition in Sydney’s Sri Lanka expatriate sporting calendar.

But the unforeseen was delivered, with sunny conditions throughout, and the Thomians provided the upset of the competition when they stunned the favourites, Dharmaraja, in the final, to grab the Peninsula Motor Group Trophy.

Still in its infancy, the Sevens Touch Competition, drawn on the lines of Rugby League rules, found new flair and more enthusiasm among its growing number of fans, through the injection of players from around Australia, opposed to the initial tournament which was restricted to mainly Sydneysiders.

A carnival like atmosphere prevailed throughout the day’s competition.

Ten teams pitted themselves in a round robin system, in two groups, and the top four sides then progressed to the semi-finals, on a knock out basis, to find the winner.

A food stall gave fans the opportunity to keep themselves fed and hydrated while the teams provided the thrills of a highly competitive and skilled tournament.

The rugby dished out was fiercely contested, with teams such as Trinity, Royal and St. Peter’s very much in the fray but failing to qualify after narrow losses on a day of unpredictability.

Issipathana and Wesley were the other semi-finalists with the Pathanians grabbing third place in the play-off before the final.

The final was a tense encounter between last year’s finalists Dharmaraja College and S.Thomas. Form suggested that the Rajans were on track for successive wins in as many attempts.  But the Thomians had other ideas.

The fluent Rajans, with deft handling skills and evasive running, looked the goods, but found the Thomian defence impregnable.  Things were tied until the final minutes when the Thomians sealed the result with an intercept try and hung on to claim the unthinkable.

It was perhaps the price for complacency on the Rajans part that cost them the game and a lesson that it is never over until the final whistle.

Peninsula Motor Group, headed by successful businessman Dilip Kumar, was the main sponsor of the event, providing playing gear to all the teams, and prize money to the winners and runners-up.

The plan for the future is to make this event more attractive and better structured, according to the organisers, headed by Deeptha Perera, whose vision was behind the success of this episode.

In a bid to increase interest, an over 40’s tournament, preceded the main event, and it was as interesting as the younger version.

Ceylon Touch Rugby, a mixed team from Melbourne, won the over 40 competition, beating Royal College in the final.

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