by Kumar David
There is a school of thought (my sparring partners I call them) which contends that the mighty dollar is on its way out as the global trade and reserve currency. Though the argument is flawed it is not without merit. The IMF estimates that China’s economy grew by about 1.9% in pandemic ravaged year 2020 while it declined by 4.3% in the US in the same year. Forecasters now expect the Chinese economy to expand by a stellar 8% in 2021 and the US at a modest 2%; star gazing beyond 2021 is silly till the shape of the post-corvid universe is clearer. Depending on which ‘erudite’ bunch of dismal scientists you consult, the Chinese economy will overtake the American in size somewhere between 2028 and 2032 on a nominal currency basis – it is already bigger on a PPP (purchasing power parity) basis. These numbers are impressive and relevant for a different discussion, viz. choice of a development model (free-market capitalism supported by liberal democracy versus a government-led mixed economy under the guardianship of a strong centralised state) for the developing world if not others as well. But I argue that these striking statistics do not sufficiently support my challengers’ case for the likelihood of the Yuan emerging as an alternative to the dollar as the world’s global currency.
My sparring partners then respond with two other economic trends that are more relevant to the dispute – foreign trade balances and interest rates. China’s trade surplus has averaged about $40 to $50 billion a month since 2015 and in post-covid November 2020 shot up to $75 billion. The high positive trade balance scenario is likely to persist throughout 2021 and 2022 as the rest of the world recovers and imports capital good from China to underpin recovery. Or, other economists argue, it may be a short-lived spike since others will enhance their output and need less from China. (It was Harry Truman who lamented “Oh for a one-handed economist. All my economists say ‘on one hand…’, then ‘but on the other…”). Admittedly the currency of a country with a large trade balance and foreign currency reserves ($1 trillion in China’ case) is a candidate for global status.
The second point that proponents of the Yuan-thesis advance is that China is the only country offering positive interest rates on one-year government bonds after the conventional deflators to deduct the effect of inflation on yields are taken into account. They, my detractors, back it up with remarks like “The whole US$ house of cards will tumble when inflation flares up in the US – already happening but hidden by using bogus inflation measures such as PCE (Personal Consumption Expenditure) inflation, which measures the inflation experienced by the rich 1%. Before long even PCE inflation will exceed 2%”. (The Personal Consumption Expenditure in gross domestic product consists of expenditure of households on durable and non-durable goods and services). I do not agree that PCE is a bogus inflation deflator, but I do concede that an increase in the US inflation rate above the prevailing 1.2% to 1.5% range is very likely. Advocates of MMT that is Modern Monetary Theory (the debt obsessed guys who want to run the electronic money printing press all day and all night) are deluded that inflation is a bogey of a bygone era. I am not a convert to MMT but let that pass; I have discussed it in previous columns.
There are five fundamental reasons why the Yuan cock won’t fight nor win the battle to become the global payments and reserve currency option in the foreseeable future. They are:-
= There is nowhere near enough Yuan in circulation to lubricate all global investment and trade. Or to put it in other words; Chinese financial pockets are nowhere near deep enough to meet global needs.
= The Yuan is not freely convertible, either due to restrictions or because some jurisdictions are not in a position to process Yuan transactions with adequate flexibility.
= Chinese financial markets and banks still constitute a relatively ‘closed economy’.
= The dollar’s successor will be a bastard mix of the Dollar, Gold, Euro, Yuan and SDRs – (Yen?).
There is about $2 trillion worth of US dollar bills in circulation. It is the most popular currency in use worldwide — central-bank reserves, wealthy people’s cash holdings, and money laundering. Grounded on the historical reach and power of US Imperialism since WW2 and because of America’s political stability (Trump’s attempted coup gave everyone a fright though) it is the most liquid currency as a global store of value and safety net. There is about $5 trillion worth, in all currencies, in circulation throughout the world, most of it domestic except the $, Euro, Pound and Yen. The five trillion is what is called the narrow money supply, which is notes and coins. But using a more inclusive definition of money called broad money the amount is much higher since it adds the money in bank current and savings accounts and money-market accounts. This is all money that can be quickly digitally accessed and used. Estimates of the quantum of global broad money vary; the IMF puts it at $35 trillion and the CIA $80 trillion. Take one more step pertinent to my argument and include global hedge funds and derivatives, investments and market capitalisations, then global financial value is estimated at between $500 trillion and $1000 trillion. I cannot be sure, but say a third or more is capitalised in US$.
The narrow money supply in China is equivalent to $1.2 trillion in US dollar terms and therefore comparable to the US, while broad money supply is estimated as equivalent to $33 trillion, again comparable to US dollar money supplies. But nearly all of China’s money supplies are held within China and Hong Kong. However, it is when it comes to the value of global investments, funds and market capitalisations that a big difference shows up. Ali’s Ant Groups whose recent IPO was thwarted (or deferred) by the authorities is valued at $200 billion, while the market capitalisation of China’s largest banks including Hong Kong’s banks is equivalent to about $2 trillion. It is impossible for me with zero research support to make a proper estimate of the capitalisation of China’s companies and giant corporations (many state owned) and China’s overseas holdings. But I would be amazed if it all tots up to more than $50 trillion, which is only a tenth to twentieth of global financial values. This is what makes the Chinese Yuan far from ready to sally forth as an alternative global currency.
China has a few useful cards up its sleeve that could tilt the balance to a degree if it decided to play hardball. A shift from the $ to Yuan could happen in the oil market if China, as the world’s largest importer, attempted to create a Yuan-denominated crude-oil market. Or if it demand payment in Yuan for its exports, which will handicap the US which doesn’t earn sufficient Yuan through exports to China to pay for imports from China. At this stage in the discussion I think it necessary to interject that China does not want to launch the Yuan as a global currency and as major alternative reserve and payments mechanism. Anyone who is witness to the currency chaos that the US may soon run into would be wary. The reserve currency status of the $ has let America pay for everything by merely printing money. This can go on for only so long as people are willing to accept it for purchases or to hold it as a reserve. Has China been playing a long game to dethrone the $, as one of my discussants suggests? I am not sure, but for sure US sanctions on Chinese and Hong Kong leaders and attempts to undermine Chinese technology companies (Huawei most clearly) must be pushing Beijing nearer the edge. There is evidence that China has been accumulating gold and furthermore the Chinese 10-year bond yield now is relatively high at 3% – meaning the Yuan is payments-secure.
A reserve currency should be a medium of exchange, a unit of account and also a store of value. The $ passes with flying colours on the first two counts but with a real interest rate of -2% it is failing as a store of value compared to the Yuan which offers investors a real interest rate of +1%. But the depreciation of the dollar against major currencies is a slow and uneven process. On balance and taking into account the arguments I have advanced in this column, clearly the Yuan’s day has still not dawned. And there is a sting in the tail for Sri Lanka; the gods atop mount Yuan are not in a place from which to vaporise our foreign debt chaos by magic.
Health services face imminent collapse due to fuel crisis
By Dr B. J. C. PERERA
MBBS(Cey), DCH(Cey), DCH(Eng), MD(Paed), MRCP(UK), FRCP(Edin), FRCP(Lon), FRCPCH(UK), FSLCPaed, FCCP, Hony FRCPCH(UK), Hony. FCGP(SL)
Specialist Consultant Pediatrician and Honorary Senior Fellow, Postgraduate Institute of Medicine, University of Colombo, Sri Lanka.
Our free National Health Service is something that brings succor to the poorest of the poor, as well as even the well-to-do, and everybody in-between. As a country and a nation, we are so proud of our health services. In fact, as a developing country, we have shown the entire world how much can be accomplished, even with our meager resources, and with so few facilities made available to us in our health facilities. Our healthcare personnel are second to none anywhere else on the planet, and they try to do their best, even under trying circumstances.
There are shortages of medicines, disposable articles and equipment in our healthcare institutions. It has really gotten worse during the current economic crisis. Yet, we have managed to rise above all that, innovate, beg, borrow and do our best for the patients who come to us. Generally, our health workers will not allow a life to be lost without a fight. A case in point is how these personnel, from the lowest-ranked to the highest, rose and fought tooth and nail during the current COVID-19 pandemic. They worked without any worthwhile rest, even foregoing their meals when things had to be done to save lives. Our countrymen and countrywomen hailed us as their saviours, singing hosannas to all of them for so selflessly handling the crisis. The healthcare personnel showed results and they sacrificed many things and went through hell on earth, to save lives.
However, there is a looming dragon that is likely to inflict telling blows to cripple this hallowed service that is provided for our people. It is not due to shortages of drugs or equipment. Those can be handled to the very best of our abilities. The problem is due to severe human resource depletion that is the likely result of the current fuel shortage. It is a looming catastrophe, as large as life, where our healthcare personnel will not be able to get to their places of work, and they will not be able to respond to sudden emergencies, as there is no transport. The government, ministers and all other stupid politicians do not seem to realise this, and perhaps could not even care less about that. That is of course to be expected, as they have their agendas. They will somehow get their things done, but the people who suffer would be the poor who come to our hospitals.
However, the most distressing thing about this entire fiasco is how among our general public, the thugs, ruffians, desperados, those engaged in nefarious hoarding of fuel and all kinds of Mafias, are beginning to treat healthcare personnel at fuel queues and fuel sheds. Healthcare personnel are not asking for special treatment at fuel stations. They are an absolutely essential service, and all they are asking is for some fuel to enable them to attend to their essential service provisions. Even ambulances have to wait in queues, and are not allowed by the irate public to get priority for fuel.
A couple of weeks ago we saw in the news that a lady doctor driver was driven away from a fuel station by a mob. The most distressing thing about that entire episode was the bravado of a non-health staff lady driver, who shouted with powerful gesticulation of her arms that she had children in the car and could not make concessions to lady doctors. God forbid, but what if one of those children suddenly fell ill and the person to attend to them was the very same lady doctor who was chased away, and that person was not able to get to the hospital due to the lack of fuel?
Starting from Friday the 24th of June 2022, there was a lukewarm arrangement made to provide fuel to essential services, from certain designated fuel stations. every Friday. This was not communicated properly through all the media, and in very many places the public vehemently objected to this. The Borella junction Ceypetco fuel shed was one of the stations which were allocated for this purpose, where the essential services people, including healthcare personnel, queued up in their vehicles from around 6.00 am. The bowsers of fuel arrived only in the late evening, after a 12-hour long wait. There was hardly any security cover and virtually a free for all, with the sparse security personnel turning a blind eye to all the misdemeanors of the general public. There were loads of nurses, doctors and other healthcare workers from the National Hospital, Lady Ridgeway Hospital for Children, National Eye Hospital, De Soysa Maternity Hospital and the Castle Street Hospital for Women, who were in these vehicle queues, twiddling their thumbs and being forced to keep away from their places of work. No doubt, these hospitals worked with only minimal skeleton staff. All these hospitals have a collective staff strength running into very large numbers, all working in an absolutely vital essential service. In some outstation areas, the incensed public insisted on the healthcare personnel queuing up with the general public, even on that dedicated Friday, and at least in one area, the hospital had to be closed as most of the hospital staff had to be in fuel queues. For whatever it is worth, this writer has not been able to see his patients for more than a week due to lack of fuel.
Unless a proper system to provide fuel to essential services is implemented by this impotent government, this situation will go from bad to worse. Many hospitals will have to be closed, not due to strikes or trade union actions, but due to a lack of human resources to run the hospitals. Medical personnel will not be able to attend to emergencies, especially outside working hours, and many lives will be lost. Our inability to provide timely treatment could also lead to some patients being maimed for life.
So be warned, our people of our own country. Selfishness and scant regard for law and order on the part of the general public will lead to an unprecedented catastrophe. There will be riots inside and outside the medical institutions with damage to public property. Innocent lives will be lost and blood will necessarily have to be on the hands of the decision-makers and the powers-that-be.
Promoting ecotourism without depending on imported fuel
By Eng. Mahinda Panapitiya
The main objective of this article is to initiate a community participated low-cost multidisciplinary programme to promote Eco-tourism-cum Environmentally Sustainable Transport (EST) systems not dependent on imported fuel. Eco-tourism could be used as the main strategy to earn returns on capital investment needed to be incurred for the project.
Multidisciplinary Environmentally Sustainable Transport (EST) systems of this nature are very common in developed countries. For example, about 30% of the daily commuters, going to work in developed countries such as Germany, the UK, and Australia, use bicycles. Close to 40% of the commuters in Brazil and India also use bicycles. In most countries, a 3–10-mile bicycle ride is considered to be moderately easy. In Sri Lanka, it is more important because our road designers have not seriously considered cycling as an alternative transport system. Considering the current economic situation and the dangers posed by the road system for people riding bicycles, the stream banks can provide an attractive alternative for people commuting to work. The EST approach will also address the present fuel crisis being faced by the country.
According to this concept, the reservations, along selected natural streams under the purview of the state could be upgraded as cycle tracks or walking paths for the local communities. It is also important to note that stream banks and associated wetlands in the flood plains of those streams represent aquatic terrestrial interfaces of the eco-system having the highest bio-diversity and fertile soil. Therefore, as a parallel activity, those areas could be used to grow high value crops, having medicinal and fruit values. The newly-introduced tracks would play a role of nature trails providing access to those fertile areas. Therefore, this intervention would also generate income for local communities by promoting them to grow high value crops and trees along stream banks. Those tree belts would also play the role of bio-corridors interconnecting isolated forest patches in urban areas enhancing the urban bio-diversity. In selecting the stream banks to transform them to cycle tracks, ecotourism potential of the area should also be used as a criterion.
2 Already completed projects of
similar nature in Sri Lanka
This type of intervention was implemented in 90’s in System B of the Mahaweli Project (Maduru Oya), under an USAID, funded programme called Mahaweli Agriculture and Rural Development (MARD) project launched in the 1990s. In that project, the main focus was to provide Cycle Tracks for farmers doing paddy cultivation in lands bordering natural stream banks. As a parallel activity, fruit trees were introduced along the stream banks, bordering paddy farms. Trees such as Kumbuk, Mee, Karanda, which strengthen stream banks against erosion during floods, were also introduced on the water spread side of streams. For more details about this project please refer the following web site.
Jogging track concepts, introduced by the Provincial Development Authority (WP) in 2011, was the modification of the same concept, addressing the recreational needs of urban communities. It was introduced in parallel to a flood mitigation project in Gampaha. In 2014, that intervention won the first prize from the Institution of Engineers SL as the best water related multidisciplinary intervention1. Later the same concept was duplicated along stream banks around Kiribathgoda, Wattala, Kaduwela, etc. The proposed project, in this note, is diversification of the concept adapted for jogging tracks.
3. Proposed Pilot area
Gampaha District is the target pilot area suggested for this new intervention. The internationally famous Henarthgoda Botanical Garden, located closed to the Gampaha Town, is proposed to be used as the nucleus to attract eco-tourists. Town centres like Minuwangoda and Udugampola, on one side of the Botanical Garden, and Cultural Centres and Asgiriya Rajamaha Viharaya, Pilikuttuwa, Warana, Attanagalla Temples having archeological values, Indigolla Church on the other side could easily be linked by Cycle Tracks laid along natural streams, such as Uruwal Oya and Attangalu Oya. It is expected that the Caves in Pilikuththuwa Temple to be used to attract eco-tourists because it has about 90 rock caves. There are also mini water falls in the target area. For an example Dunumala Ella is one of the most famous waterfalls in the Gampaha District. Yakkala Aurweda Hospital is another attraction.
Another advantage in this pilot area is that it is located closed to the Katunayake Airport. Tourists arriving at Katunayaka Airport could be easily diverted directly to the Gampaha side, instead guiding them to congested concrete cities like Colombo or cities such as Sigiriya located far away without depend on fuel for their mobility. In other countries, facilities are provided to rent cycles for tourists to travel from the airport itself to enjoy the natural biodiversity within the country. On the other hand, the whole world is marching towards a spiritual crisis.
Therefore, tourists of rich categories are looking for alternative ways to be happy life both spiritually as well as physically. This project will ideal opportunities for such tourists of rich categories by designing those paths as nature trails exhibiting our rich biodiversity. Sri Lanka has been identified as one of the 36 global biodiversity hotspots.
4. Design guideline
Note that this project should be a very low-cost intervention. For an example, the surface of the tracks could be upgraded using only gravels mixed with cement. Earth to form tracks should be borrowed from the bed of the adjacent stream. stream banks can be strengthened using bio engineering technologies. Expensive method such as Gabions should not be allowed to strengthened stream banks.
View of a stream bank which could be improved as Cycle Tracks / Nature Trails
5. Implementation Agency and potential funding sources
This project addresses transport sector issues; it facilitates Environmentally sustainable Transport (EST) for local people. Therefore, Provincial Road Development Authority (PRDA – Western Province) is the ideal institution to implement this project. It has experience in launching similar interventions such as jogging tracks along stream banks in Gampaha District. It also has its machinery unit located adjacent to the target area. Private Investor involved in tourism development could also use the PRDA as coordinating body to link with the Ministry of Tourism. USAID might be a potential funding source because this is an extension to a project already launched by them in 90s in Mahaweli Areas as explained above in Para 2. About 0.25 million US$ allocation is sufficient to mobilize this programme.
The project could be named as NIVARANA in view of health benefits both physical spirituals, economical realized from the project. Nivarana is a native name having the meaning “COMPLETE CURE” With the new concepts introduced under this proposal to promote Eco Tourism, name could be improved as NIVARANA FOR SANCHARAKA in Sinhala.
Rejuvenating govt. and fuelling expectations
by Jehan Perera
Prime Minister Ranil Wickremesinghe was expected to turn around the degrading tragic economic situation wherein child malnutrition figures are making Sri Lanka the 7th worst in the world. The country is living almost on a ‘ship-to-mouth’ basis where the delay of a ship, or the cancellation of a ship bringing fuel, can lead to enormous hardships. More than six weeks after the new Prime Minister took over, the deadweight he has to pull is turning out to be too much. It is not possible to say that the economic situation has changed for the better. If at all, it has turned worse. The queues outside the fuel stations that are still open, and only a few remain open, are longer than ever. Most fuel stations are closed.
The progressive shut down of the government continues with the “work from home” policy for government employees being further extended, along with school closures. The reason being given is to save on fuel stocks. There are fewer and fewer vehicles on the road due to the inability to find fuel to pump into vehicles. Schools have been closed for a further two weeks. It appears that the government is paving the way for the younger generation to be both mentally and physically stunted by lack of adequate nutrition and learning opportunities. Nearly all universities are conducting their classes “online” though the university teachers feel this is an ineffective mode of education.
When Prime Minister Wickremesinghe took over office there was much criticism that he had no moral right to become Prime Minister of a government that was no longer wanted by the people. However, there was a positive expectation that he would make a positive difference with his vast experience of politics, encyclopedic knowledge and international reputation. There was no other justification, certainly not one that could come from democracy, as his party had been routed at the last general elections in 2020, being reduced overnight from 105 seats to one. The main justification for him, with his single seat in parliament, to become Prime Minister was to rescue the failing economy.
Prime Minister Wickremesinghe joined a government that was tottering due to the mass anger that had erupted on May 9. On that fateful day there were scenes of uncontrolled violence that gave a grim foreboding of what the future can become. It was widely believed that President Gotabaya Rajapaksa would be the next to step down after his elder brother Mahinda Rajapaksa was forced to step down as Prime Minister following the violence which his party members had instigated. The President pledged to cobble together an all-party government of not more than 15 members and indicated his readiness to call for fresh general elections and a referendum on abolishing the presidency.
There is today much disappointment and anger that Prime Minister Wickremesinghe joining up with the government gave the President the excuse not to take this path. There is today a visible consolidation of the government and its past bad practices, including large size and allegations of gross mismanagement. The size of the Cabinet is presently 20 and there are more to be appointed including controversial persons associated with scams. There is a further complement of around 20 State and Deputy Ministers. Latest reports are that there will be district ministers also appointed which would make the grand total exceed 60 at a minimum.
Members of this government are quick to say they are “sorry’ for the mistakes they make. President Rajapaksa said he is sorry for his mistakes but has said he will stay on for his full term. The Minister of Power and Energy has emulated the President in saying he is sorry for having given false expectations about a fuel tanker docking last week in the port and easing the fuel shortage. But now that ship is no longer coming and there is no assurance of when the next shipment will come. In the meantime, government offices, schools and universities have been ordered to close or restrict their operations.
Apart from an acknowledgment of the wrong committed, an apology also implies two other things—a sincere request for forgiveness and evidence of a change in behaviour. Alas, these last two elements of being truly sorry are not manifested by Sri Lanka’s political leaders. They say sorry but continue as before. The latest manifestation of this characteristic is the landmark 21st Amendment which is ending up to be very different from what it was originally meant to be. It was hoped to be part of the “system change” that the youth–led Aragalaya protest movement, and larger civil society, have been seeking. It was to have removed the excessive powers of the presidency and transfer them to parliament.
Unfortunately, the indications are that the 21st Amendment will be doing much less. It will leave the President as powerful as ever, able to appoint the Prime Minister, ministers and secretaries to ministries and remove them at will. Armed with this power, the President will be able to determine the course of the government and make decisions as he once did, such as to ban chemical fertilisers and pesticides overnight. How long Prime Minister Wickremesinghe will be able to continue and retain the President’s confidence in this environment in which he, with his party’s single seat in Parliament, is a big question. He will have to contend with 60-odd ministers in the government and 224 other MPs in Parliament who are not from his party who belong to the old order and will want to keep it that way.
Last week a dialogue between civil society and parliamentarians on the 21st Amendment took place. The civil society members of the “Collective for Reform ” had labored long and hard to analyse all the civil society proposals with regard to the 21st Amendment and come up with a common minimum set of proposals to present to the parliamentarians. The proposals they studied included those presented by a plethora of organisations—the Bar Association of Sri Lanka, March 12 Movement, National Movement for Social Justice, University Teachers’ Association, PAFFREL, Direction Sri Lanka, Second Generation, ebuildSriLanka2022, People’s Constitution through a Participation Mechanism, People’s Struggle Cooperation Movement, Government Physicians Association, Way forward for Young Leaders, Transparency International Sri Lanka, Socialist Student Union, Inter-University Student Federation, Movement for Consumer’s Rights Protection, National Collective Manifesto, Sri Lanka Administrative Services Association, Public Council, Association of Health Professionals, Ceylon Chamber of Commerce, and Association of Internal Audit Professionals in Sri Lanka.
The parliamentarians who attended the “dialogue” made speeches in which they either claimed the civil society submissions were included in their own submissions, or they spoke on an entirely different track or justified their own conduct in the past and present. They made their speeches early and left early with only a few of them staying on till the end to listen to the conclusions of civil society. Among those who attended were those who had voted successively for the 17th, 18th, 19th and 20th Amendments, one contradictory to the other, and now presumably will vote for the watered-down 21st Amendment. The younger generations represented by the Aragalaya protestors have seen through this lack of integrity and policy. Sri Lanka needs not only a “system change” but also a “politician change” which will best come through elections held sooner rather than later.
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