11 December, 2018

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Developing Downwards

By Ranil Senanayake

Dr Ranil Senanayake

It is with a sense of foreboding that I pen this, returning from Ecuador to find the rupee tumbling at pace that was once familiar to me back in 1994 in Ecuador. At that time the IMF was giving them the same advice that they are providing us today: “The International Monetary Fund urged Sri Lanka Wednesday to let its rupee keep sliding and not intervene further to bolster the ailing currency as it fell to historic lows “(23-08-18). My first arrival in Ecuador it was 1994 and their currency the Sucre, was about 2000 to a dollar but every month it seemed to fall a little further. An inquiry, revealed that the IMF had urged the government not to bolster the ailing currency which was 25 per USD by 1970 and 1990 stood at around 800 per USD. As the currency sank to 3000 Sucre to a dollar in 1995, the impact on the population especially the poor became serious, but that time, the fall was unstoppable and relentless, by the end of 1999 it stood at 25,000 Sucre to the dollar and on March 2000, President Noboa signed a law passed by Congress, replacing the Sucre with the United States dollar at an official exchange rate of 25,000 sucres per US$1.

Does this scenario sound familiar? Does the relentless downward slide of our currency, reflect compliance with the dictates on the IMF? Why do our politicians, having borrowed for useless white elephants, insist on borrowing even more to pay the interest on these extractive loans? Has the public ever considered the consequences of this stupid profligacy, when we have to pay increasingly more for the weekly groceries? It is reported that a former finance minister recently commented that, they need to take loans because “A new government can’t just stop loans. It’s a relay; you need to take them until economic discipline is introduced.” Is the IMF’s idea of economic discipline ‘letting the rupee slide?

It is the uncaring attitude of the political hegemony and their deluded idea of ‘development’ has propelled us down the road of debt and loss of independence, both financially and politically. No matter what stupidities the ‘developers’ mouth, the bottom line is that the purchasing power of the rupee is weaker and we can afford less with what we earn.

Like Scrooge, wanting to extract his pound of flesh, the loan sharks now circle our precious land. They ask for our land, the lowering of public protections and cheap access to our resources. The irresponsible politicians with no idea of how to escape their trap, give up more and more of our protections and independence in exchange for servicing the loans.

To make matters worse, bureaucrats work behind closed doors to negotiate away our well- being through the so-called trade agreements. With no guarantees of public health or public participation, nor information, they agree to opening the doors to the dumping of hazardous, toxic and radioactive waste on our land in the name of re-processing. The irresponsibility by the nation and our future generations is seen in the unilateral agreement to hand over thousands of acres of our county in the south, to Chinese Industrialists without any public discourse or without any requirement for a national Environmental Impact Report (EIA) or similar protection for the citizens.

The current development model stresses the need to be evaluated by abstract metrics such as the GDP as economic indicators of social goals. The problem in applying such metrics for populations, is that, if it is too wide, it will fail to capture the quality of life for a large proportion. If metrics are to be used in development, why not very focused, do- able goals, such as that enunciated by the Hon D.S. Senanayake our founding father, who set the ‘larder of the poorest of our homes’ as the indicator, with the understanding of how this represents ‘trickle up’.

To keep borrowing until ‘economic discipline’ is achieved, seems suicidal, especially if there no clear idea what ‘economic discipline’ means. If it meant evaluating the return on investment (ROI) each time a loan was to be taken, that would be great, but we will have to borrow for a long time until such ‘economic discipline’ happens. To make things worse, not only do we borrow for ‘white elephants’, we also take loans for development infrastructure whose energy requirements are tied to fossil sources such as coal, gas and oil. Resulting in a society completely dependent on external energy to maintain stability.

The burning of fossil fuels to obtain energy produces vast quantities of Carbon Dioxide and Water vapour, that are new and never existed in the atmosphere before. Both seemingly innocuous, but the increase of either in the atmosphere leads to global warming and climate extremes. Carbon Dioxide and water vapour are both contributors to keeping the atmosphere warm, but it is the injection of extra quantities of both through the burning of fossil fuels, that is responsible for the increases in atmospheric concentrations leading to Global Warming and weather extremes. Especially the ‘new’ water vapour, because at saturation it condenses as water from the atmosphere, generating local heat, the driver of cyclonic intensity.

But the worst part is that burning fossil fuels takes from the limited stock of Oxygen present in the Global Commons, our atmosphere. Our atmosphere, is the ‘Global Commons’ which is shared by and sustains humanity. It is being compromised today by the internal combustion engine and industry, which use billions of tons per year for economic development, without paying a penny for its replacement and thus, affecting the life of every living person on the planet.

The replacement of this critical aspect into the Global Commons can be done as a measure of addressing global debt, by actively investing in it. we could help both the planet and the Rupee. The question is can our policymakers try to understand, new economic realities such as the value of Primary Ecosystem Services (PES) and use them to address our balance of payments or will they shuffle about, looking for another loan while the Rupee plummets.

The current vision of development as our experience confirms, has led to the harming of the environment, harming of our economy and suffering of our people, enriching a few and beggaring the most. The collapse of the rupee threatening to amplify the suffering. Should we listen to the IMF to ‘let it slide’ or the Buddha, who in the Kalama Sutra noted that, if “these qualities, when adopted & carried out, lead to harm & to suffering — then you should abandon them.”

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Latest comments

  • 1
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    Only way to get Sri lanka out of the pit is to make it goes bankrupt. Because, Politicians from UPFA/SLPP and UNP are taking turns to steal. Now, Mahinda rajapakse whose newpew was a well known swindler from MIG purchases are bringing back by Mahinda rajapakse, probably before the corruption court. but, the MAtirhpala Srisiena/Ranil govt is letting those happen. Because if the can of worm is opned all the S2hit from everybody comes out.
    Sri lanka’s problem is Right now Western countries are taking advantage of the Sri lankan economy. Every UNP MP looks busy doing that. then from another side, most of the 225 are are busy cheating the public for their won advancement. People – voters – appears to be in the dark. The depreciation of the dollar upto Rs 200 is important for Sri lankan economy to go down. Other countries when their currency goes down, they stop importas which is the one that devalues the country. Even in april, I heard, Srilankan, exports sector gained ZERO,.While the imported lot of CARS. since 2015, Western businesses with the help of other players are trying to bring large amounts of american dollars in various ways (private loans, IMF and many othee loans, investment in the stock market, Bringing billions (from limited editions) I suppose, Mutual funds. Sri lankan politicians are well known swindlers are supporting it becuse that helps them. Sri lanka getting screwed up is important for the west as Sri lanka is getting help from China.

  • 0
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    Anotherf point, is One prominent politician from Rajarata had said noly recently he understtod that he had earned Money from the Fertiliser imports. Can you believe that. All these people earn money, take donations but they did no tknow. On the other hand, another story says that SABITHA’s building is to be named DUMINDA building. SABITHA Says she had some personal business dealings with Mahinda rajapakse and that is how she got it. Mahinda Rajapske says Now I don’t do those but NAmal is doing (not with Sabitha) those. It is weel kniwn IMF has bankrupted many countries that way. I think IMF gave $ 17 billion loan to UKARAAINE and UKraine did not get a penny of that money inside their country, all spend it in teh country where they got it. At present Sri lanka is doing the same thing. what ever isntallemtns they get they spend on various things such as tourist promotions, paying PMS and economists from their ALIEN countries etc., etc.,

    • 4
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      A hard-hitting article by Dr. Senanayake. Excellent remarks on the bogus “development ” of the past regime and the loans taken .
      But what else is the solution but to sell whatever can be sold? Otherwise we will be forced to take even more loans.
      I can’t believe there are still economic illiterates who want Gota back to create more fake development.

  • 4
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    This is where the craftily creates Gnasaras and the saffron clad thugs in to the picture to divert the attention of the public, instead of seeing the their real predicament, they are force fed with myths like Muslim are taking over the land and the Sinhala race is under threat, for the gullible masses, this sensational myth is keeping them away from seeing the real situation.

    Only if they know that the country is on a nose dive in every single area, and fast becoming a failed state

    • 1
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      Actually, the rupee is NOT depreciating as fast as perceived.
      In the past 3 years it has gone from around 130 pre USD to 160. That’s roughly 25 %. Compare this to the 1977 / 1983 period when the USD went from Rs 8 to Rs 14. On average, the Rupee has depreciated at an average 7.6 % every year. Only in 2003 did the Rupee appreciate slightly. No prizes for guessing who the PM was at the time.
      This slide can only be stopped if we learn to live within our means. Otherwise, like Ecuador, we must adopt a stable foreign currency. Our best bet is the Indian Rupee, which is still affordable at around 2.50. That will stop our governments from printing money, since that can only be done in Delhi. But of course I can hear the howls of protest from the “patriots” corner.

      • 2
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        This is the time we can look the US in the eye and say: Give us the US $$ stability (minus India) or we are going China!

        • 0
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          ramona grandma therese fernando

          “Give us the US $$ stability (minus India)”

          What exactly is US $$ stability (minus India)? Why should US give you whatever you beg them?

          • 0
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            NV,
            Some people are known to be ashamed of their ancestors.

            • 1
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              Time to evolve away from useless ancestors.

          • 1
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            No, we are not going to beg US. We are going to look them in the eye. We are going to point the finger and say, “or else” (or else being China). Don’t worry. US + Gota will come up with US-Lankan-Singapore-other Buddhist countries alliance. We can do without our antediluvian ancestors.

      • 3
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        “the rupee is NOT depreciating as fast as perceived.”

        The US$ is appreciating against most currencies ……….. as the Fed is increasing the interest rate from historical lows …….. most currencies will fall even further

        Convert your rupees into US$s and keep it under your pillow ……… you’ll get a compounded annual return of roughly 9% ……….. tax free :))

        That’s Smart Patriotism 101 …………. look after yourself first …….. then be a whatever patriot …….. if you want to

        • 1
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          Nimal,
          “Convert your rupees into US$s and keep it under your pillow ……… you’ll get a compounded annual return of roughly 9% ……….. tax free :))”
          Yes, but that’s less than the 12 to 15 % you can get on rupees. I pine for the 90’s when Treasury Bills were going at 20 %!

        • 1
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          Nimal,
          Don’t tell me you’re Ramona’s husband! Pleeease!!!

          • 2
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            Why? What’s wrong with Ramona?

            I thought she was yours ……… and Champa :))

            • 1
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              I am the other Nimal,
              Ramona(a Spanish girl) remind me of another Ramona during my collage days in 60s in London,a pretty partner I took for Bila(dancing).Those were days for me during the early days of my London life.

              • 1
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                Hi Nimal, you will be pleased to hear that I am now a man. All thanks to you baby!

                • 0
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                  wow……..(some trans is even taking my name…. wowow. psychological effect of not having decent counterargument).

  • 2
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    SL politicians, from SWRD to the current lot, have to be held accountable for the pathetic situation the country is in but it’s the Rajapakse regime that takes the biscuit for pawning the country to international loan sharks, yet, Sirisena too, is no better, & is totally oblivion to the country’s financial mess, pushing the country further down. Maybe it was ignorance or sheer greed or both, the Rajapakses ruined the country, period, but still has the audacity to come back for more, playing the trump card, that is religious nationalism, first introduced by SWRD, to win over the gullible masses. To quote the CEO of a disgraced market analysis company which takes credit for running Donald Trumps election campaign, it’s ’emotions & not facts that win elections’ , how very true in SL.
    It’s an accepted fact that the majority of the current bunch of politicians are uneducated & even the few so-called educated amongst them, are no better than yobs, abusing their privileges & position. As for matters, such as, feasibility & long term repercussions of ‘development’ projects & their impact on average citizens, pollution, environmental hazards, etc. , are irrelant with fat cat bureaucrats joining the gravy train. No sincere person of integrity will come forward to save the country with such a bunch of illiterate, selfish & greedy hypocrites calling the shots in Parliament. If SL is to move forward, we need fresh, novice politicians & put the current bunch behind bars for crimes against the country. I am sure there will be enough dirt on them to do so. Donald Trump promised to ‘drain the swamp that is Washington’ but whether he meant it or not, SL too, needs to drain the swamp that is Diyawanna. The world has had enough of career politicians. Macron was elected President even though he had no political party because the French no longer had faith in major political parties, & with the danger of rising extreme nationalism, elected a novice politician who had intelligence & integrity.

  • 1
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    The economic system dominating the world depends very much on depreciation of ALL currencies. Consumerism,wastage, population growth are part of the system. The climate change pointed out by Ranil Senanayake is a an inevitable outcome of this system. Nature will come up with an answer but we all have to pay a high price.
    Exchange rate changes affect the poor the most. Lanka can in fact use this to our advantage by growing our own food. Imports must be reduced – not by diktats.
    Last week it was reported that China has lifted tariff on animal feed imports FROM Lanka. Our farm produce is yet to take off!
    Our politicians only look at tomorrow and a wee bit ahead at future elections. This is our bane!

  • 0
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    Dear Author, and all Participants,
    The Country plummeting downwards is not a new phenomena after 2005. It began from the 30s because during the British time Tamils were preferred as the main Administrators of the Country. British not only appointed Tamils to all major position in Ceylon, but also sent them all over the world where there was British rule. So the problem soon after independence in Ceylon was to get rid of the Tamils and bring in the majority rule even though the Government was run by the majority Sinhalese. There were only a few Tamils in the Government from the North and East. At that time all schools in the North and East Sinhalese was taught just like Tamil was taught in other provinces. But the new Administration taken over by the majority Sinhalese was hasty in making the change from the Tamils to a complete Sinhalese Administration. Caring any situation for the Country, there were regular riots in all provinces against Tamils except in the North and East. Most of the escaped Tamils returned to the North and East and demanded separation of the North and East from the rest of the Country. The Tamil demand saw more terror from the Governments than any relief. Later the frustrated Tamil youth started armed struggle for freedom that ended in 2009. The politicians thus caused a permanent division oppressing the Tamils and taking revenge against them and the revenge mindset spread down the generations. Today the Sinhalese army is entrenched in the North and East with the intention of replacing the Tamils with Sinhalese. If this happens in other parts of the world a case for genocide will be in process for safeguarding the minority. But somehow the leaders these days are in need of high income as the Country goes down and all politicians go for perks and forget the Country.

  • 0
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    Why the regime in power care if the heavy debt will force the currency be devalued as long as they could get as much and convert into go;d,foreign currency or even Gucci watches like Guchhi Mugabe.

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