By Sunil J. Wimalawansa –

Prof Sunil J. Wimalawansa

Part 30: Sri Lanka—Changing Pillows to Cure Headaches: Continuing Corruption—Begging IMF—Increasing Taxes 

Parliamentarians are comfortable with the status quo because it allows them to abuse power and pilfer public resources and assets. Consequently, they have zero interest in changing the current System. Therefore, the burden is on people to make that happen.  It is time for people to focus on an affirmative strategy plan to replace the current lot in the parliament through democratic means. To achieve this goal, the root cause ruining Sri Lanka—the corrupt and rotten political system—must be eliminated by replacing the rotten 1977 constitution with a new one. A tangible System change that the public is looking for will never happen through constitutional amendments.

The combination of corruption, appointing incompetent people to higher positions, poor policies, and harmful laws led to the current socio-economic and political crises and bankruptcy in Sri Lanka. In April 2022, Aragalaya initiated the process to change this wretched system. There is no other option but to continue it till the replacement of the Constitution in Sri Lanka. The following video provides some information on the status of Aragalaya at that time.  

Getting rid of corruption, bad politicians, and the rotten constitution 

Politicians and government administrators engaged in corrupt business practices under cover of parliamentary privileges and the constitution and taking the judiciary hostage. These formally opened floodgates for corruption: daylight robberies by politicians with the aid of senior administrators. To overcome this, Sri Lanka needs to replace its current constitution, tainted with perilous amendments for the country: to replace it with one that has no loopholes for corruption.  

In addition to the ability to recall dysfunctional and destructive politicians at every level, the new constitution must include provisions that future politicians cannot change these concepts and positions with amendments or referendums (i.e., permanent change).  

In parallel with pilfering resources by politicians by various means, the accumulating recent past evidence substantiates the provision of large sums of money and material to a proscribed terrorist organisation.  The latter was said to involve/carry out politically motivated murders and other crimes. At times some of these were initiated by politicians to win elections and to stay in power. However, to date, none of these culprits has been brought to justice. A couple of examples are discussed in the following video:

 Politicians systematically created bankruptcy

The same crooked politicians who created the bankruptcy are currently in parliament and their accomplices are bureaucrats in departments and secretarial positions continuing to be in the government. Although hiding behind smoke screens, these co-conspirators are also accountable for these financial crimes against the country.  Despite evidence from various committees over the past few years, hardly anyone has been made accountable or brought to justice.  

Not surprisingly, the public is highly concerned about how those who created this massive fiscal deficit could fix the financial calamity. This scenario is not different from putting in charge of a fox on a flock of chickens. Despite the bankruptcy, the administration is still attempting to borrow money, sometimes through backdoors, to earn commissions. Fortunately, traditional lenders are now more cautious than ever before.   

Fraudulent Ponzi schemes of hazardous borrowing for commission

Haphazard borrowing to gain commissions outside debt restructuring will worsen the situation. While the needed changes are overdue and unpalatable to the populous, firm policies for the benefit of Sri Lanka are needed to reverse the current negative trend worsening the bankruptcy. The most crucial step—significant reduction of the out-of-control government spending—is yet to materialise: Why?  

Is it due to continuing incompetence of the administration, a strategy to stay in power at any cost, or looking or politicians looking for more avenues to steal money from the public coffers by dragging the misery?  

The question is whether the IMF, European Union, the USA, and the UK would continue to allow local politicians to play the same game or would they prevent locals from robbing the country. There is a suggestion that tactically delaying agreeing with the IMF and other potential donors on debt restructuring is to prolong the time for local politicians to embezzle more funds, sell local assets to foreigners, and transfer funds out of the country.  If this is the case, isn’t that also a financial crime that harm the country?

Going to IMF is not the same as getting funded:

As part of advising, restructuring the debt, and funding, the IMF would undoubtedly mandate to impose of a chain of austerity measures, monetary discipline, transparency, restrictions on improper governmental spending, and measures to increase productivity and internal review collections. Going to the IMF after months (in fact, more than a year) of procrastination was not a decision made by the current president, but it became inevitable from the pressure outside. 

The IMF’s involvement should facilitate debt restructuring and implementations to reduce expenses and increase production and exports. However, except for bickering and enacting unnecessary laws to protect politicians (some of whom should be in jail), none of those mentioned above have happened. Even when materialized, it is only a third of the three essential components needed to prepare and rectify the current dreaded financial situation in Sri Lanka.  

Increasing taxes and commodity prices by the government will not resolve the problem

Because of erroneous policies and actions by the government, the bare necessities for the population are at stake.  Especially for middle – and low-income families, which comprise approximately 90% of the population. Hierarchy of government servants, military, police, professionals, prominent business owners, and politicians are affected the least: they do not feel or care about the hardships of the middle- and lower-income families. Evidence suggests that some of the mentioned groups use this dire situation as an opportunity to ‘make’ more money at the expense of the poor. Others are so selfish that they do not mind the suffering of ordinary people if they are not affected. 

No fuel, electricity, food, essential medicine, high unemployment rate with no fallback options—is this the way to run Sri Lanka? The vulnerable low-income families, particularly the daily wage-earners, are desperate for survival, and their families are starving. Fortunately, concerned people, mostly expatriates, philanthropies, and some local groups, have stepped into this vacuum, setting up food banks and other food donation programs as a stop-gap to prevent starvation and the deaths of the poor.  How long could they continue such support? 

What should be done?

Months or years before the current fiscal chaos, there were signs that the economy of Sri Lanka was heading for bankruptcy.  No one took firm action to prevent it, but the corrupt lot has recently begun to blame others. Even for a family heading through financial difficulty, the first thing done is to reduce expenses. However, the Sri Lankan government, despite bankruptcy, even to date, failed to reduce its massive and unnecessary over-expenditure.  This wastage of taxpayers’ funds is more than the treasury could generate via taxes; this is insanity. Most of this expense comes from three times the needed number of government employees hired by politicians as election promises, to increase votes, and for personal gain.  

In addition, the unelected president recently appointed approximately 70 ministers—half of the ruling party members are now ministers—another siphoning mechanism of public funds. This absurdity by the president costs nearly a trillion rupees for the treasure. How can such government expenditure be justified when a country is bankrupt, and people are starving? 

Moreover, the Central Bank is now borrowing at high interest (e.g., from banks) when the treasury is empty and cannot be paid back.  Consequently, it continues to be one of the most negative strategies—printing money not only to pay the interest of its borrowing but to pay salaries of over-blown cader of government servants.  

Rather than increase taxes that negatively affect mainly the middle class and small businesses, the government should have reduced its expenditure by 50% through austerity measures, including its workforce by half by now.  Instead, they have done none of these. The recent decisions made by the current governor of the Central Bank seem no better than the previous offenders.