22 October, 2021

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Bleak Economy, Market Mafia & Militarised Rule

By Ameer Ali

Dr. Ameer Ali

There is no gainsaying that the economy is in dire straits. Although the budget submitted to the Parliament glossed over the gravity of confronting challenges, and described it as development oriented to pave the way for realising Gotabaya Rajapaksa’s ‘Vistas of Prosperity and Splendour’, situation on the ground tells a different story. Some months back when Moody, one of the three international credit agencies, downgraded Sri Lanka’s credit rating from B2 to Caa1, the Central Bank Governor and his team of experts called it unfair and even malicious. Last week, Fitch, the second of the three has also lowered the country’s Long-Term Foreign Currency Issuer Deficit Rating (IDR) to CCC, which means it will become increasingly challenging and expensive for the government to translate its proposed bilateral, multilateral and commercial avenues of financing its deficit and promoting development. One of the factors that Fitch took into account fir its action was the negative impact of Covid-19 on the economy, which the budget almost whitewashed. With a total reserve of roughly $6 billion, the country has to pay around $23 billion to settle its debt. Fitch expected Sri Lanka’s debt to GDP ratio to surpass 100% in 2021, and now it sets that level higher at 116% by 2024. No wonder IMF is delaying its response to Sri Lanka’s request for emergency assistance.    

With worsening budget deficit, depreciating rupee, falling public revenue, and uncertain markets for exports, economic revival looks bleak during the term of this government. Bold measures are needed not only to enhance government revenue and hold public expenditure tight, but also to keep domestic consumers happy and satisfied. 

At the household level and in the market place the twin evils of falling or no income and rising prices are pushing many people to the brink of open revolt. What happened a few days ago at Bloemendal where people came out to the street, protesting against arbitrary lockdowns, and demanding money, food and other consumables, which the police found impossible to control and was forced to take prompt action to supply bundles of food and other items, may be a pointer towards what to expect if economic situation continues to worsen. The economy is turning out to be Gota’s Enemy Number One. 

This may be one of the reasons why Gotabaya Rajapaksa has precautionarily militarised even civilian administration and appointed various task forces either headed or overseen by military personal. It was not a surprise therefore, that the budget too, in the middle of another wave of the deadly pandemic, funded the security department more generously than public health. 

One of the multiple reasons why the economy suffocates ordinary households is the structure of the domestic market itself. Even though open and free competition is touted as state policy, in actual fact there are monopolistic and oligopolistic elements operating in certain sectors, particularly in the supply of staples like rice. This market is controlled by a handful of millers who operate like a mafia with strong political connections. The government’s policy of import restriction in the name of achieving a degree of self-sufficiency has also played into the hands of this mafia.      

Students of economics would be familiar with the once famous cobweb analysis which taught them how peasant farmers and market gardeners respond to price fluctuations caused by natural disasters. That was the reason why price and income stabilization schemes became popular in developing countries during the pre-liberal era between 1950s and 1980s. Such beneficial state intervention was condemned by neo-liberals and free market champions, and today, in the name of free competition prices are artificially kept above free market equilibrium, because of artificially created shortages by mafia-like supplier groups.  When these mafia elements join the power cartel of ruling regimes, it is the ordinary consumer who falls victim.

The regime has set ceiling prices for several items, but nowhere in the market could those items be bought at the fixed price. Even government retail outlets like Sathosa seems to have adopted indirect means of profiteering. For example, if a consumer wanted to buy a kilo of sugar at the fixed price for example, he/she was expected to purchase other goods to the tune of at least Rs. 600 before getting that kilo. Likewise, distributors licensed by government to deliver baskets of goods worth Rs. 10,000 each, to households under quarantine, are reported to be charging the same amount of money for less goods. Economic management under Covid-19 has created lucrative opportunities for profiteering by households under quarantine households under quarantine the unscrupulous.   

Domestic market imperfections are closely tied to political imperfections. The President and his government were brought to power by the joint effort of Big Capital, Sangha and the security.  The homegrown rice mafia and its associates are part of that Big Capital. Although this mafia is pre-Gota in origins, it has grown so strong under his presidency that it is virtually setting the price of rice in the market. GR’s resolve to provide clean administration, punish the corrupt and introduce technocratic rule do not touch the power and influence of this mafia. Meddling with its affairs will be politically costly and may even create disharmony within the ruling family.

The danger in this state of affairs is the vulnerability of retail traders. When consumer frustration and anger grow with chronic shortages, long queues and oppressive prices, these retailers, and particularly those from minority communities, will bear the full brunt of public anger. With an ideologically rationalised unwillingness to democratise political power and relying on the support of the Sangha and the military, the regime is deliberately keeping the country communally and religiously divided, because such division has its strategic utility in times of economic crisis. 

In the meantime, even the Central Bank, which expressed its concern about food-driven inflation but believes that the impact is limited, doesn’t want to talk about the need to remove domestic market imperfections. A mafia-controlled food market is a recipe for popular unrest especially when the new wave of the deadly virus is being mishandled by the Ministry of Health and is threatening the life and livelihood of too many. 

It will be interesting to watch how price of turmeric would swing when locally harvested product comes to the market during the early months of 2021. Market imperfections must be removed without considering its political benefits. Militarisation of administration is no solution to economic misery. 

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Latest comments

  • 8
    3

    Gota has started killing prisoners to save his Mafia. A repeat from 2012.

    Everything is spinning out of control.

  • 4
    0

    Bloemendal is nothing. Mahara could be the future. Mahara Murders can be larger than Welikada 2013. Heavy censure is in enforce. No two news are matching because of the difficulty in getting news.

    ICRC must visit there to find the truth of who were shot and who died and body burned , because of Covid-19. I saw some pictures of relatives of victims. Just the reenact of missing persons’ mothers’ scene. The bald heads, called for Hitler, might be in full dope, would not come down from their high throne to visit the prison & console victims.

  • 10
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    It is shocking to note that those who are in prisons and in police custody under Government care are getting killed. These are not isolated incidents. We have seen this even when Gotabaya was the Secretary of Defence under Mahinda Rajapakse Govt and now he is the President and Mahinda the PM same team in place and the numbers are increasing.
    We now have a new Minister Sarath Weerasekera who was a formal Naval Officer in charge of Police and the first statement he makes in Truth with Chamuditha programme – “kanapita gahala hari policiya hadanawa”. What a THUG he is! If the Minister can “kana pita gahala…” one can imagine what the Police Officer would do to civilians. This “Thug” of the Minister also has the audacity to tell another MP where he can go and where he should not go (in the case of Mr. Sumanthiran) in the Parliament. Does he think the MPs are his slaves the way he is a slave to Rajapakse family? Who the hell he thinks he is?
    We also see all crooks, criminals, murderers are getting “nidos kota nidahas” from the courts. The AG who filed cases against crooks does not even appear when the cases are called by the courts and in most of the cases where he himself has filed the case he has backed out.

    • 2
      0

      Confusion increased – If STF cordoned off around the Prison, why kill those who were trying to escape?

      How can the Prison staff shoot with automatic weapons when the Prison staff do not have them, but the STF uses automatic weapons and we heard automatic weapons during the attack.

      How can psychedelic drugs enter Prison when the security in the Prisons were increased by Gota?

      These are confusion based on Govt media statements.

  • 7
    0

    Dr. Ameer Ali

    “Bleak Economy, Market Mafia & Militarised Rule”

    Basil is in action:

    23 May 2020 (ft.lk)
    Excerpt
    Accordingly, agriculture, plantations, livestock and fisheries have been identified as the vital areas for economic revival and food security. Identifying suitable lands and to increase agricultural and livestock production were also discussed at the meeting,

    The discussion also focused on identification of crops which can be cultivated on the basis of land and production requirements and promotion of home gardening for domestic consumption and food security.

    The Task Force also discussed how to regularise lands assigned to various institutions and use them for production purposes and develop an effective program for the fisheries industry. .
    (Note already lands have been targeted, surveyed and secure by the armed forces in the North East)

    6 September 2020

    Basil wants to carry out development of 100,000 KM roads, which will also absorb road developments by Provincial Council, Local Government, ets. (Note all development projects will be carried out by Basil’s lackeys. All profits/surpluses will be passed on to Basil)

  • 3
    0

    “Basil wants to carry out development of 100,000 KM roads, which will also absorb road developments by Provincial Council, Local Government, ets. (Note all development projects will be carried out by Basil’s lackeys. All profits/surpluses will be passed on to Basil)”

    Hi is back in the game thanks to Ranil.
    Ranil should be banished from Sri Lankan politics for giving crooks a free pass.

  • 3
    0

    Food security is a defining factor of the human development index (HDI). In developed countries with mature societies, it is extremely rare to observe state leaders bending laws to suit friends in trouble or even dismiss the laws of a country as being irrelevant against his diktat, with an air of impunity. There are no oligopolies with the regime’s acquiescence. If in the unlikely event an aberration is allowed to pass, there will be swift calls for impeachment and such leaders will be forced out of office, in line with modern norms of decency and civil conduct, not to mention the law being supreme. On the contrary, in countries where tribalism and cronyism go hand in hand with grand corruption, the people are always at the mercy of the state’s leader’s whim coupled with extortion from large businesses, and remain hopelessly mired in desperation, starvation and poverty.

  • 2
    0

    Well deserved. With the down grading, our debt markets/bonds and treasuries have hit the bottom. Govt debt bonds are currently fetching less than 50% of it,s actual value. This in turn will make our borrowing costly and double the interest we pay. Eventually it will lead to bankruptcy and failure of payment. World bank/IMF demand austerity measures for further borrowing. In a country like Lanka, it is a prescription for govt failure, revolt and military suppression.All in all the war seems to be not over yet.

    • 0
      0

      Here we go again, such joy at the misfortune of Sri Lanka just in order to attack the President. Nothing changes.

      What I curious is about the story about rats leaving a sinking ship – apparently some rats want their ship to sink, just because they do not like the Captain.

      Of course that is rats. I am not talking about people who are much more honorable, except for political opponents.

      There were people after all who lamented the end of the war and people getting killed. I suppose they liked it. That shows what kind of people they are.

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