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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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BRICS emerging as strong rival to G7

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It was in the fitness of things for Indian Prime Minister Narendra Modi to hold a special telephonic conversation with Russian President Vladimir Putin recently for the purpose of enlightening the latter on the need for a peaceful, diplomatic end to the Russian-initiated blood-letting in Ukraine. Hopefully, wise counsel and humanity would prevail and the world would soon witness the initial steps at least to a complete withdrawal of invading Russian troops from Ukraine.

The urgency for an early end to the Russian invasion of Ukraine which revoltingly testifies afresh to the barbaric cruelty man could inflict on his fellows, is underscored, among other things, by the declaration which came at the end of the 14th BRICS Summit, which was held virtually in Beijing recently. Among other things, the declaration said: ‘BRICS reaffirms commitment to ensuring the promotion and protection of democracy, human rights and fundamental freedoms for all with the aim to build a brighter shared future for the international community based on mutually beneficial cooperation.’

It is anybody’s guess as to what meanings President Putin read into pledges of the above kind, but it does not require exceptional brilliance to perceive that the barbaric actions being carried out by his regime against Ukrainian civilians make a shocking mockery of these enlightened pronouncements. It is plain to see that the Russian President is being brazenly cynical by affixing his signature to the declaration. The credibility of BRICS is at risk on account of such perplexing contradictory conduct on the part of its members. BRICS is obliged to rectify these glaring irregularities sooner rather than later.

At this juncture the important clarification must be made that it is the conduct of the Putin regime, and the Putin regime only, that is being subjected to censure here. Such strictures are in no way intended to project in a negative light, the Russian people, who are heirs to a rich, humanistic civilization that produced the likes of Dostoevsky and Tolstoy, among a host of other eminent spirits, who have done humanity proud and over the decades guided humans in the direction of purposeful living. May their priceless heritage live long, is this columnist’s wish.

However, the invaluable civilization which the Russian people have inherited makes it obligatory on their part to bring constant pressure on the Putin regime to end its barbarism against the Ukrainian civilians who are not at all party to the big power politics of Eastern Europe. They need to point out to their rulers that in this day and age there are civilized, diplomatic and cost-effective means of resolving a state’s perceived differences with its neighbours. The spilling of civilian blood, on the scale witnessed in Ukraine, is a phenomenon of the hoary past.

The BRICS grouping, which encompasses some of the world’s predominant economic and political powers, if not for the irregular conduct of the Putin regime, could be said to have struck on a policy framework that is farsighted and proactive on the issue of global equity.

There is the following extract from a report on its recent summit declaration that needs to be focused on. It reads: BRICS notes the need to ensure “Meaningful participation of developing and least developed countries, especially in Africa, in global decision-making processes and structures and make it better attuned to contemporary realities.”

The above are worthy goals that need to be pursued vigorously by global actors that have taken upon themselves the challenge of easing the lot of the world’s powerless countries. The urgency of resuming the North-South Dialogue, among other questions of importance to the South, has time and again been mentioned in this column. This is on account of the fact that the most underdeveloped regions of the South have been today orphaned in the world system.

Given that the Non-aligned Movement and like organizations, that have espoused the resolution of Southern problems over the decades, are today seemingly ineffective and lacking in political and economic clout, indications that the BRICS grouping is in an effort to fill this breach is heartening news for the powerless of the world. Indeed, the crying need is for the poor and powerless to be brought into international decision-making processes that affect their wellbeing and it is hoped that BRICS’s efforts in this regard would bear fruit.

What could help in increasing the confidence of the underdeveloped countries in BRICS, is the latter’s rising economic and political power. While in terms of economic strength, the US remains foremost in the world with a GDP of $ 20.89 trillion, China is not very far behind with a GDP of $ 14.72 trillion. The relevant readings for some other key BRICS countries are as follows: India – $ 2.66 trillion, Russia – $ 1.48 trillion and Brazil $ 1.44 trillion. Of note is also the fact that except for South Africa, the rest of the BRICS are among the first 15 predominant economies, assessed in GDP terms. In a global situation where economics drives politics, these figures speak volumes for the growing power of the BRICS countries.

In other words, the BRICS are very much abreast of the G7 countries in terms of a number of power indices. The fact that many of the BRICS possess a nuclear capability indicates that in military terms too they are almost on par with the G7.

However, what is crucial is that the BRICS, besides helping in modifying the world economic order to serve the best interests of the powerless as well, contribute towards changing the power balances within the vital organs of the UN system, such as the UN Security Council, to render them more widely representative of changing global power realities.

Thus, India and Brazil, for example, need to be in the UNSC because they are major economic powers in their own right. Since they are of a democratic orientation, besides pushing for a further democratization of the UN’s vital organs, they would be in a position to consistently work towards the wellbeing of the underprivileged in their respective regions, which have tremendous development potential.

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Queen of Hearts

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She has certainly won the hearts of many with the charity work she is engaged in, on a regular basis, helping the poor, and the needy.

Pushpika de Silva was crowned Mrs. Sri Lanka for Mrs. World 2021 and she immediately went into action, with her very own charity project – ‘Lend a Helping Hand.’

When launching this project, she said: “Lend a Helping Hand is dear to me. With the very meaning of the title, I am extending my helping hand to my fellow brothers and sisters in need; in a time where our very existence has become a huge question and people battling for daily survival.”

Since ‘Lend a Helping Hand’ became a reality, last year, Pushpika has embarked on many major charity projects, including building a home for a family, and renovating homes of the poor, as well.

The month of June (2022) saw Pushpika very much in action with ‘Lend a Helping Hand.’

She made International Father’s Day a very special occasion by distributing food items to 100 poor families.

“Many are going without a proper meal, so I was very keen, in my own way, to see that these people had something to keep the hunger pangs away.”

A few days later, the Queen of Hearts made sure that 50 more people enjoyed a delicious and nutritious meal.

“In these trying times, we need to help those who are in dire straits and, I believe, if each one of us could satisfy the hunger, and thirst, of at least one person, per day, that would be a blessing from above.”

Pushpika is also concerned about the mothers, with kids, she sees on the roads, begging.

“How helpless is a mother, carrying a small child, to come to the street and ask for something.

“I see this often and I made a special effort to help some of them out, with food and other necessities.”

What makes Pushpika extra special is her love for animals, as well, and she never forgets the street dogs that are having a tough time, these days, scavenging for food.

“These animals, too, need food, and are voiceless, so we need to think of them, as well. Let’s have mercy on them, too. Let’s love them, as well.”

The former beauty queen served a delicious meal for the poor animals, just recently, and will continue with all her charity projects, on a regular basis, she said.

Through her charity project, ‘Lend a Helping Hand,” she believes she can make a change, though small.

And, she says, she plans to be even more active, with her charity work, during these troubled times.

We wish Pushpika de Silva all the very best, and look forward to seeing more of her great deeds, through her ‘Lend a Helping Hand’ campaign.

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Hope and political change:No more Appachis to the rescue

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KUPPI on the current economic and political crisis: intervention 1

by Harshana Rambukwella

In Buddhist literature, there is the Parable of the Burning House where the children of a wealthy man, trapped inside a burning house, refuse to leave it, fearful of leaving its comfort – because the flames are yet to reach them. Ultimately, they do leave because the father promises them wonderful gifts and are saved from the fire. Sri Lankans have long awaited such father figures – in fact, our political culture is built on the belief that such ‘fathers’ will rescue us. But this time around no fathers are coming. As Sri Lankans stare into an uncertain future, and a multitude of daily sufferings, and indignities continue to pile upon us, there is possibly one political and emotional currency that we all need – hope. Hope is a slippery term. One can hope ‘in-vain’ or place one’s faith in some unachievable goal and be lulled into a sense of complacency. But, at the same time, hope can be critically empowering – when insurmountable obstacles threaten to engulf you, it is the one thing that can carry you forward. We have innumerable examples of such ‘hope’ from history – both religious and secular. When Moses led the Israelites to the promised land, ‘hope’ of a new beginning sustained them, as did faith in God. When Queen Viharamahadevi set off on a perilous voyage, she carried hope, within her, along with the hope of an entire people. When Martin Luther King Jr made his iconic ‘I have a dream’ speech, hope of an America where Black people could live in dignity, struck a resonant chord and this historical sense of hope also provided inspiration for the anti-Apartheid struggle in South Africa.

This particular moment, in Sri Lanka, feels a moment of ‘hopelessness’. In March and April, this year, before the cowardly attack on the Gota Go Gama site, in Galle Face, there was a palpable sense of hope in the aragalaya movement as it spread across the country. While people were struggling with many privations, the aragalaya channeled this collective frustration into a form of political and social action, we have rarely seen in this country. There were moments when the aragalaya managed to transcend many divisions – ethnic, religious and class – that had long defined Sri Lanka. It was also largely a youth led movement which probably added to the ‘hope’ that characterized the aragalaya. However, following the May 09th attack something of this ‘hope’ was lost. People began to resign themselves to the fact that the literally and metaphorically ‘old’ politics, and the corrupt culture it represents had returned. A Prime Minister with no electoral base, and a President in hiding, cobbled together a shaky and illegitimate alliance to stay in power. The fuel lines became longer, the gas queues grew, food prices soared and Sri Lanka began to run out of medicines. But, despite sporadic protests and the untiring commitment of a few committed activists, it appeared that the aragalaya was fizzling out and hope was stagnant and dying, like vehicles virtually abandoned on kilometers-long fuel queues.

However, we now have a moment where ‘hope’ is being rekindled. A national movement is gathering pace. As the prospect of the next shipment of fuel appears to recede into the ever-distant future, people’s anger and frustration are once again being channeled towards political change. This is a do-or-die moment for all Sri Lankans. Regardless of our political beliefs, our ideological orientation, our religion or class, the need for political change has never been clearer. Whether you believe that an IMF bailout will save us, or whether you believe that we need a fundamental change in our economic system, and a socially and economically more just society, neither of these scenarios will come to pass without an immediate political change. The political class that now clings to power, in this country, is like a cancer – poisoning and corrupting the entire body politic, even as it destroys itself. The Prime Minister who was supposed to be the messiah channeling international goodwill and finances to the country has failed miserably and we have a President who seems to be in love with the idea of ‘playing president’. The Sri Lankan people have a single existential choice to make in this moment – to rise as one to expel this rotten political order. In Sri Lanka, we are now in that burning house that the Buddha spoke of and we all seem to be waiting for that father to appear and save us. But now we need to change the plot of this parable. No father will come for us. Our fathers (or appachis) have led us to this sorry state. They have lied, deceived and abandoned us. It is now up to us to rediscover the ‘hope’ that will deliver us from the misery of this economic and political crisis. If we do not act now the house will burn down and we will be consumed in its flames.

Initiated by the Kuppi Collective, a group of academics and activists attached to the university system and other educational institutes and actions.

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