By Hema Senanayake –
Mr. President do not make this country a failed sate. But you do it by your new Cabinet appointments. At least by the appointment of Ali Sabry as the Minister of Finance in new “interim cabinet” and as I heard, appointing Dhammika Perera as the secretary to the Ministry of Finance. And I am not sure who will be appointed as the Governor of the Central Bank. These three appointments are very vital in the entire administration. I have continued to argue that a country needs to appoint the best economic minds for these three positions. Why? Because the Ministry of Finance is the only ministry in the entire Cabinet that is empowered to deal with the macroeconomic stability of the country and its secretary is an Ex Officio member of the Monetary Board of the Central Bank. The other organization that plays the most vital part in maneuvering macroeconomic variables is the Central Bank which again comes under the purview of the Ministry of Finance. Therefore, the said three appointments are critical in ensuring macroeconomic stability of the country. President cannot appoint any unprofessional rogue to these positions. This malice began when President Ranasinghe Premadasa appointed himself as the Minister of Finance. If macroeconomic stability fails, the country fails. That is exactly what is happening now.
Why the macroeconomic stability is so important? Let us understand it from the recent recommendation of the International Monetary Fund’s (IMF’s) Executive Board, regarding Sri Lanka. It says that “they stressed the urgency of implementing a credible and coherent strategy to restore macroeconomic stability and debt sustainability, while protecting vulnerable groups and reducing poverty through strengthened, well-targeted social safety nets.” Macroeconomic stability is the main thing, according to IMF. It is true. Because macroeconomic stability determines the stabilization of the domestic currency which is depreciating bottomless right now triggering a high inflation, shortages of gas, fuel, fuel needed for electricity generation, milk powder, medicines etc. Does Ali Sabry understand what macroeconomics is or even Dhammika Perera understands it. Economics is a predictive science. Deeper understanding of it helps the ministry of finance to set the causes or necessary conditions that could stabilize the macroeconomic situation of the country quickly. Nothing will happen without the necessary conditions. It must be done quickly. As Keynes said, in the long run we all are dead. Does Ali Sabry understand this?
But for the first time in our history, we have arrived at a situation, that no short-term stabilization is possible without devising a credible and coherent strategy to restore macroeconomic stability, even setting a plan for debt sustainability becomes possible after that. Does Ali Sabry know this?
Now, everybody knows, perhaps except Vasudeva, that Sri Lanka needs IMF’s immediate assistance. Even Basil understood it. When he was in the Cabinet, a few days ago there was a peculiar policy decision taken by the government. This provides a clue as to why Sabry was appointed as the Minister of Finance. The said peculiar policy decision was revealed by the then Cabinet spokesman Ramesh Pathirana as follows, “the government had taken a policy decision to work with the IMF to find a solution to the current economic crisis. To assist Sri Lanka in dealing with the IMF, the government had appointed two committees and those committees had recommended the government hire a company… The company would be hired on a long-term basis and Foreign Minister Professor G.L Peiris, Minister of Justice Mohommad Ali Sabry. Governor of the Central Bank, Ajith Nivard Cabraal and Secretary to the Treasury, S.R. Attygalle, had been entrusted with selecting the international law firm.” (The Island, March 23, 2022). The missing character here is the Minister of Finance, Basil Rajapakse. I leave it for your guess.
Now, president’s simple logic might be this. The government needs an International Law Firm to deal with IMF and so it would be better to have an eminent lawyer as the Minister of Finance. So, Ali Sabry got the job which should be taken up by a talented macroeconomist.
Sri Lanka has had dealt with IMF 16 times before, but as far as I know there was no international law firm hired to act in between the Government of Sri Lanka and IMF. To verify whether the IMF needs an international law firm to advise the government when we deal with IMF, I made a call to IMF headquarters in Washington D.C. on April 01, 2022. They categorically said that there is no necessity of an International Law Firm for us to deal with IMF and IMF deals only with the government and its central bank. It doesn’t deal with a “broker.”
The said policy decision and recommendations of two committees appointed by President, to hire a legal firm to deal with the IMF and the appointment of Ali Sabry as the Minister of Finance clearly show that the collective wisdom of President’s administration is appalling. I am afraid that Sri Lanka might never get a good deal from IMF under such circumstances.