By Jehan Perera –
The government’s plans for reviving the economy show signs of working out for the time being. The long awaited IMF loan has been granted. This would enable the government to access other loans to tide over the current economic difficulties. The challenge will be to ensure that both the old loans and new ones will be repayable. To this end the government has begun to implement its new tax policy which increases the tax burden significantly on income earners who can barely make ends meet even without the taxes in the aftermath of the rise in price levels. The government is also giving signals that it plans to downsize the government bureaucracy and loss making state enterprises. These are reforms that may be necessary to balance the budget, but they are not likely to gain the government the favour of the affected people. The World Bank has warned that many are at risk of falling back into poverty, with 40 percent of the population living on less than 225 rupees per person per day.
The problem for the government is that the economic policies required to stabilize the economy are not popular ones. They are also politically difficult ones. The failure to analyse the past does not help us to ascertain reasons for our failures and also avoids taking action against those who had misused or damaged the system unfairly. The costs of this economic restructuring to make the country financially viable is falling heavily if not disproportionately on those who are middle class and below. Fixed income earners are particularly affected as they bear a double burden in being taxed at higher levels at a time when the cost of living has soared. Unlike those in the business sector and independent professionals who can pass on cost increases to their clients, those in fixed incomes find it impossible to make ends meet. Emigration statistics show that over 1.2 million people, or five percent of the population, left the country for foreign employment last year.
The economic hardships experienced by the people has led to the mobilization of traditional trade unions and professionals’ organisations. They are all up in arms against the government’s income generation at their expense. Last week’s strike, described as a token strike, was successful in that it evoked a conciliatory response from the government. Many workers did not keep away from work, perhaps due to the apprehension that they might not only lose their jobs, but also their properties as threatened by one government member who is close to the president. There is a need to reassess recent tax policies in view of the current sufferings experienced by low and middle income earners. However, conditions laid down by the IMF will indeed be unpalatable based on Sri Lanka’s track records on earlier bailouts, with the last one being jettisoned without completing it in 2019.
The striking unions have explained their decision to temporarily discontinue their strike action due to President Ranil Wickremesinghe’s willingness to reconsider their economic grievances. More than 40 trade unions, in several sectors, joined the strike. They explained they had been compelled to resort to strike action as there was no positive response from the government to their demands. The striking unions have said they would take up the president’s offer to discuss their concerns with the government and temporarily called a halt to their strike action. This would give the government an opportunity to rethink its strategy. Unlike the government in 1981 this one has no popular mandate. In the aftermath of the protest movement, it has only a legal mandate.
So far the government has been unyielding in the face of public discontent. Public protests have been suppressed. Protest leaders have been arrested and price and tax hikes have gone ahead as planned. The government has been justifying the rigid positions it has been taking on the basis of its prioritization of economic recovery for which both political stability and financial resources are necessary. However, by refusing to heed public opinion the government has been putting itself on a course of confrontation with organized forces, be they trade unions or political parties. The severity of the economic burden placed on the larger section of society even as other sectors of society appear to be relatively unaffected creates a perception of injustice that needs to be mitigated. Engaging in discussion with the trade unions and reconsidering its approach to those who have been involved in public protests could be peace making gestures in the current situation.
On the other hand, exacerbating the political crisis is the government’s continuing refusal to hold the local government elections as scheduled on two occasions now by the Elections Commission and demanded by law. The government’s stance is even in contradiction to the Supreme Court’s directives that the government should release the financial resources necessary for the purpose leading to an ever-widening opposition to it. The government’s determination to thwart the local government elections stems from its pragmatic concerns regarding its ability to fare well at them. Public opinion polls show the government parties obtaining much lower support than the opposition parties. Except for the president, the rest of the government consists of the same political parties and government members that faced the wrath of the people’s movement a year ago and had to resign in ignominy.
The government’s response to the pressures it is under has been to repress the protest movement through police action that is especially intolerant of street protests. It has also put pressure on state institutions to conform to its will regardless of the law. The decisions of the Election Commission to set dates for the local government elections have been disregarded once and the elections now appear to have to be postponed yet again. The government is also defying summons upon its ministers by the Human Rights Commission which has been acting independently to hold the government to account to the best extent it can. The government’s refusal to abide by the judicial decision not to block financial resources for election purposes is a blow to the rule of law that will be to the longer term detriment of the country. These are all negative trends that are recipes for future strife and lawlessness. These would have long term and unexpected implications not to the best for the development of the country or its values.
There are indications that President Wickremesinghe is cognizant of the precariousness of the situation. The accumulation of pressures needs to be avoided be it for gas at homes or issues in the country. As an experienced political leader, a student of international politics and a very well read one at that, he would be aware of the dangers posed by precipitating a clash involving the three branches of government. A confrontation with the judiciary, or a negation of its decisions, would erode the confidence in the entire legal system. It would damage the confidence of investors and the international community alike in the stability of the polity and its commitment to the rule of law. The public exhortations of the US ambassador with regard to the need to conduct the local government elections would have driven this point home.
It is also likely that the US position on the importance of holding elections on time is also held by the other Western countries and Japan. Sri Lanka is dependent on these countries, still the wealthiest in the world, for its economic sustenance, trade and aid, in the form of concessional financing and benefits such as the GSP Plus tariff concession. Therefore, the pressures coming from both the ground level in the country and the international community, may push the government in the direction of elections and seeking a mandate from the people. Strengthening the legitimacy of the government to govern effectively and engage in problem solving in the national interest requires an electoral mandate. The mandate sought may not be at the local government level, where public opinion polls show the government at its weakest, but at the national level which the president can exercise at his discretion.