16 May, 2022

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A Collective Response To Our Economic Crisis

By M.A. Sumanthiran

M.A. Sumanthiran PC MP

Sri Lanka is in the midst of an unprecedented economic crisis, causing severe hardship to all segments of our society, especially our working people and the poor.

Undoubtedly, the government has a daunting task ahead, and as a country there is a need for us all to come together to overcome this challenge.

At the same time, the government’s approach to resolving the crisis raises some serious questions. Its focus, almost solely on meeting foreign debt obligations, is draining the country of dollars needed for importing essentials for our people. The government’s emphasis on avoiding a default at any cost appears to be downplaying a fundamental question – can our people eat? After all, a country’s pride rests not only in repaying its loans, but also in ensuring no citizen goes to bed hungry.

Recognising this dire situation, a group of leaders from over half a dozen key political parties in Sri Lanka came together in a closed-door meeting on Thursday 27th January 2022, to brainstorm ways to tide over this crisis, given the responsibility we have towards the Sri Lankan people.

I approached parliamentary colleagues and party leaders, in my capacity as a former chairman of the Committee on Public Finance in Parliament. MPs came together in the knowledge that Parliament is expected to have full control of public finance, and that each MP, therefore, also has a fiduciary responsibility to ensure the proper management of public finances in Sri Lanka.

The crisis, we noted, is of a proportion that is historically unprecedented for many reasons:

(1) The country’s ratings have fallen to the level of being blacklisted in international credit markets. Since April 2020, Sri Lanka has been locked out of borrowing using International Sovereign Bonds (ISBs) in the international market

(2) Repaying US dollar debt in this context means that the usable foreign reserves are down to below one month of imports – the lowest on record since independence.

(3) The ratio of interest on debt to government revenue was above 70% in 2020, a historical high for Sri Lanka, and amongst the highest in the world.

(4) The ratio of public debt compared to the value of Sri Lanka’s domestic production (GDP) is also the highest on record, at 120%. It skyrocketed, by almost 25 percentage points, in the last two years.

Each of these situations by themselves would spell a serious economic challenge. Occurring simultaneously, they threaten our future in both the short term and long term.

In this context, the Central Bank’s policy has been to hoard the scarce dollars to pay creditors in full and on time. This has fueled a shortage of dollars for the needs of our own people, and reduced imports of essential items such as food, medicines and fuel. We see the shortage manifesting in long queues for essential items and frequent power outages. The situation will only worsen over the year, if the government does not urgently shift gear and ensure adequate dollars are available to the Sri Lankan economy.

Already, the government’s rash chemical fertilizer policy has impacted farmers across Sri Lanka, leaving us with an imminent food crisis. The government’s current policy path on debt management, as it was in the case of fertilizer policy, is exacerbating the crisis, without a sensible or viable solution in sight.

Our recent meeting provided a platform for political leaders to share the concerns of their constituencies and identify the critical issues that require urgent attention.

There was wide acknowledgement that the Central Bank hoarding dollars to make lump-sum debt payments was leading to a shortage of dollars to procure essential supplies within the country. This is resulting in severe economic hardships for the people of Sri Lanka and long-term damage to the economy, while providing windfall gains to the holders of Sri Lanka’s Sovereign Bonds.

We agreed that Sri Lanka should take immediate measures to protect the poor from the adverse impact of this economic crisis, and postpone repaying its debt as a first step. Participating MPs also felt that we need sound reform to the national economic policy to address root causes of the crisis and ensure sustainable solutions.

This group of political leaders agreed to continue engaging and working together towards ensuring justice for the people of Sri Lanka, through solutions that are sustainable. We must steer the country out of this unprecedented economic crisis, and forge an equitable and just future for our future generations.

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Latest comments

  • 4
    1

    Mr. MA Sumanthiran,
    “a group of leaders from over half a dozen key political parties in Sri Lanka came together in a closed-door meeting on Thursday 27th January 2022, to brainstorm ways to tide over this crisis, given the responsibility we have towards the Sri Lankan people.”

    Why did not tell us (public) who are these leaders of political parties? Does this include the leaders of the Government? Have you put your proposals to this government and the President? What was the response?

    • 8
      0

      Dear Ajith,
      Along with the most relevant questions in above, since unnecessary hurried payment to the holders of Sri Lanka’s Sovereign Bonds gives rise to windfall profits, it may be prudent if these leaders get a list of the Bond holders. MPs could demand this from the Central Bank as it is public funds that are dispensed or are some MPs shy because they themselves benefitted through nominees.

      • 1
        0

        I wrote that Sumanthiran was summoned to US to enroll him in the american game plan and not to discuss about federalism. Now he has started his game. This meeting was summoned by Sumanthiran and held at Cinnamon Grand hotel. Who paid for this. Did Sumanthiran get permission from other Tamil parties for this. Economically most deprived province is north followed by east. Sumanthiran has no concern about uplifting the economy of north and east, but wants to solve the economic crisis of the country. This is why I have been saying that Sumanthiran is working on his selfish agenda and not for the benefit of Tamils. He acted as a lackey to Ranil and sabotaged Tamil struggle for justice, and is no acting as an agent to foreign powers to betray Tamils.Tamil should act wisely to play the game and not be a party to regime change, but frustrate India, US and west by letting Rajapkses to ruin the country. Do not listen to rosy pictures painted by Sumanthiran, as by regime change Tamils will not get anything.

        • 1
          0

          Dr.G,
          “Sumanthiran has no concern about uplifting the economy of north and east, but wants to solve the economic crisis of the country. This is why I have been saying that Sumanthiran is working on his selfish agenda”
          Now, that logic is interesting.

  • 6
    0

    Mr Sumanthiran

    It is commendable for all political parties to come together to brainstorm solutions for the current crisis but will the ruling regime accept the recommendations (if any)? In fact, how many in the ruling party are competent economists & the CB governor will arrogantly stick to his guns. It is likely to be ‘my way or no way’ & unlikely to accommodate outside views which may indicate incompetence & blunders they are responsible for. So, at the end of the day, this would be just another fruitless exercise, although, for the politicians involved, it is gesture that they are working for their salaries.

    In commerce, when taking over an ailing enterprise, cost cutting is the first priority. Why not propose trimming the expenses of the politicians, starting with the office of the ‘not fit for purpose’ President? Then, there are the generous pensions & perks of past Presidents & PMs. The country’s population is starving, so, isn’t it noble for those who live off public funds to sacrifice a little?

    • 0
      0

      Good initiative. Perhaps a good move would be to replace all the self-opinionated Viyathmaga charlatans with efficient people from all parties and ethnicities. But is Emperor Nandasena prepared to admit that there are people wiser than him? They need not necessarily be politicians. But definitely not Mahanayakas.

  • 0
    0

    This comment was removed by a moderator because it didn’t abide by our Comment policy.

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  • 1
    0

    The government’s only priority seems to be debt servicing, both loan installment and interest payments and as a result they are hoarding dollars for debt servicing.

    Dollars have become a very scarce resource and the dollars are inadequate to meet all our basic needs.

    Dollars are not only needed for meeting debt obligations, but for importing essentials for our people like fuel, milk ,gas and food stuff and hence planning and prioritizing has become an important managerial skill that is lacking among the government as well as the Central Bank -the custodian of foreign exchange..

    • 2
      0

      Thanks to the guys, mostly abroad, who are making these comments. For us it is hell because …… well, why?
      .
      If we are to believe some explanations, it is because there is a shortage of dollars worldwide. Here’s another explanation:
      .
      https://www.dhakatribune.com/business/2022/01/22/op-ed-how-sri-lanka-became-the-island-of-a-thousand-errors
      .
      That’s what somebody in Bangladesh is now telling us. How does that translate for me in Bandarawela, Lanka; surely one of the loveliest areas in the world. I’ve just got to lie down and conserve energy. I’m too old to do any meaningful work, although I could still teach a little English – but I can’t perform miracles transforming thirty year olds who know nothing, but want to emigrate to Australia. Thankfully, we still have electricity, but when that goes?
      .
      Panini Edirisinhe (NIC 483111444V)

      • 1
        1

        Sinhala_Man,
        Do you know how many Sinhalese live in the developed countries? I know during the Presidential elections a thousands of Sinhalese travelled from developed nations. The cost of travelling from these countries for a family must be over £5000 pounds. If they can volunteer to give this money to resolve the foreign exchange shortage, I am sure that will help the country to come out of this problem unless if the money is safe from the corrupted regime.

        • 0
          0

          Ajith,
          .
          You perfectly know that not those from developed world, but guest workers are the main avenues for foreign exchanges to the country is through house maids and the other skilled workers from Middle East countries. Those who live on the west, north america and australia would not contribute that much.
          .
          Perhpas, some idiots from Italy ( also labouerers) travelled back home to vote for Medamulana CRIMINALS, not many from UK, Germany and france did it to my knowledge.
          Wimal Buruwanse had then a fan base in Milano, Rome and several cities in Italy, But almost many among them would tear off WIMAL into pieces when coming to srialnka next. So would be the case also towards Rajapakshes.
          .
          I think onlyway out to resolve the economic crisis in SL, though tamil diasphora.
          :
          The issue is whether they would agree to send a dollar to the country looking back the way they were treated then.
          :
          Gotabaya AKA MANDHABUDDHIKAYA of the nation once requested TAMIL diasphora to help out srilanka at this highly critical turning point to the same manner, Mara shamelessly fell back to the SRIISENA s lap shortly before the last election.

        • 1
          1

          “If they can volunteer to give this money to resolve the foreign exchange shortage, I am sure that will help the country to come out of this problem”
          Do some arithmetic before making proposals.

          • 1
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            SJ
            This is an assumption. If you have got exact figures you can replace and calculate
            Number of Families = 25000
            dollar per family = 5000
            Total = $ 125,000,000

            • 1
              0

              A
              Assumptions should have an objective basis.
              On what basis do you say 25,000 families (even including Tamils) travelled from developed nations for the elections?
              How did you arrive at the cost per family?
              More seriously, even if those numbers make sense, you think that 125 million dollars will be enough to get over the crisis?
              It can just about make a scratch on the surface of the problem.

    • 2
      0

      Srikrish
      .
      I think it is clear that quite a handsome portion of the interest paid to china for debt servicing must be coming back to Rajapaksa pockets.
      .
      It is not that they need any economic advice, they are just interested in what they will gain from the situation.
      .
      The Rajapaksa clan and their arse licking scavengers around them are milking Sri Lanka and its poor citizens to the last cent.
      .
      No amount of reasoning or logic would have sunk into the heads of the 6.9 million fascist sycophants who blindly voted.
      .
      Mother nature is giving us the best punishment, right in our faces and our bundies.
      .
      I hope this very costly lesson will open our eyes to reality. Politicians can promise heaven and earth, but if they have dubious character, even if they are your family, do not vote. do not believe in unscrupulous people.
      .
      Actions speak louder than words.
      .
      Never trust greedy, selfish, lying, murdering, manipulative, cheap, conniving, opportunistic, shameless, self-centered, hypocritical, loud mouthed, low lives like the bunch we have chosen.
      .
      An ideal leader should be selfless. Not just selfless, but self-sacrificing.
      That is the quality we need to seek in a leader. With selflessness comes the ability to see what is best for the country, and not for himself or herself.

  • 0
    5

    Sumanthiran PC,

    You don’t have to be black and white that who debts are being paid by artificially created shortage to food, milk powder, baby foods and farmers’ fertilizer. There is news that in North some lands those harvest 30 Bushels harvested this January only 5-10. I thank Harsha, Eran Habir like SJB politicians for their intuitiveness. They have been asking why the Aanduwa flatly refusing to restructure the loan and release badly needed dollar to public consumption. What is happening is the Royal Rogues are sucking the country’s wealth in dollar with the name of ISB. They are probably thinking that they may lose power; Ranil no longer will be able to save the; so, they should secure all the investments they made on the Aanduwa’s defense budgets. This is extremely smart ride on the 6.9M Modayas!
    Long Live SingaLE Wildlife Sanctuary!

  • 1
    0

    Sri Lanka is facing bankruptcy not because the politicians are corrupt and mediocre, it is because of bad governance over several decades. The political instability and corruption have brought the country to the current sorry state of affairs.

    All governments since independence have relied on communal and religious politics, a lethal mix, to capture and stay in power. With the passing of 20A, the independence of the judiciary and equality before the law have become a big joke. The president is giving public pardon to criminals and thugs convicted by Courts.
    The country’s president openly declares that he is the president of the majority of Sinhalese Buddhists who elected him to the throne. This makes other ethnic and religious minorities third-class citizens of the country.

    For decades the majority of Sinhala – Buddhists have been told that their prosperity lies in depriving the ethnic and religious minorities of their rights.

    The slogan One country, One law will pit the majority Sinhalese -Buddhists again on a collision course with the minority communities.

    Not COVID19 19, but gross mismanagement of the country’s affairs by self-fish and myopic leaders have to be blamed for the current pathetic situation.

  • 0
    0

    Collective Response? What? But that’s the JVP-NPP purview (maybe with some SJB)! Usher them in by all means!

  • 2
    0

    There is no tailor-made solution that would satisfy everyone, at the same time. No crisis is larger than life. We cannot have a tomorrow, without a today. Essential items must be made available at affordable prices.
    .
    I have a short term-measure. Get rid of the CB Governor.

    • 0
      0

      Nathan, You have said the obvious to the brainless deaf and blind

  • 2
    1

    “I think it is clear that …”
    If it is clear, then there is no need to guess.

  • 2
    1

    Firstly, thank you Mr Sumanthiran for your initiative in trying to get together a ‘national’ project to tackle SL’s present woes. It demonstrates your commitment to the welfare of the country and a desire to work for the common good. I hope this initiative will be grasped by all concerned and everyone rallies around Mr S’s call to come to the country’s rescue. Good ideas, regardless of where they come, should be welcomed and acted on.

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