29 September, 2020

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Forget Budget-Support What We Now Need Is Life-Support

By Harsha de Silva

Dr Harsha de Silva MP

What this country now needs is neither budget support nor balance of payments support.  What this country need is life support! 

The economic lifeblood of the people of Sri Lanka is being sucked dry the political crooks; be it in handing out front-loaded and unviable projects to the Chinese at horrendously unfavorable terms or in using the money of the millions of employees to manipulate the Colombo Stock Exchange to benefit the mafia.  Like we have said in the past it is now becoming clear the regime is only interested in the 0.1 percent of the people at the expense of the rest.  While the clique drives in under-invoiced Rolls Royce Ghosts that are paid for by the man on the street he is taxed on even the packet of instant noodles he buys for his children to stay alive.    

The President, in his capacity of Minister of Finance announced with the presentation of the 2013 budget that there will be no foreign commercial borrowing to bridge the deficit this year.  This is because the government has borrowed so much under commercial terms that repayments are beginning to bite.  Therefore it was expected that the government would seek the assistance of development partners for budgetary support at concessional terms and also shift the focus to domestic borrowing.

However, when Dr P B Jayasundere announced recently that the government was seeking budgetary support from the IMF, we pointed out this was highly unlikely, as IMF does not have such programs for middle income countries like Sri Lanka, as far as we are aware.  We argued that the government could have perhaps negotiated an Extended Fund Facility (EFF) given to countries facing serious medium term balance of payment problems due to structural weaknesses as in the case of Sri Lanka.  But such negotiations we noted would have certainly included reforms that cannot be postponed and very well understood by the learned Secretary.  In times like this, it is in the interest of everyone to accept reality and deal with it instead of attempting to pretend that we are doing so well that we are not only the wonder of Asia but also the latest Breakout Nation!

In this background we have today been informed by the Governor of the Central Bank that the negotiations with are IMF are over as we do not require any more balance of payments support; neither in the form of a EFF nor in the form of a Stand-By Arrangement like the one we used to bail ourselves out last time.  This, he had said, is because the Central Bank has more than sufficient foreign exchange reserves.

This is almost a tragi-comedy!  The right hand does not seem to know, or care, what the left hand is doing.  One the one hand, the Treasury is looking for budgetary support and on the other, the Central Bank is refusing balance of payments support.

Perhaps the Governor wanted to pull the plug from the conditional ‘Nirvana’ the Secretary was hoping to attain while starting on the reforms the learned economist knows is essential.  That is if IMF gave the Treasury the USD 1 billion up front to be spent even with limited conditions, then that would have meant a huge relief for the Treasury and it would have been possible to undertake the reforms even on a staggered basis.

But now that option is not available.  With the World Bank confined to a project to spruce up Colombo and the ADB continuing with its limited infrastructure financing and no other donor in sight it seems inevitable that the government has no choice but to go back to high cost and almost choking commercial borrowing and Chinese loans, however, with extremely lucrative commissions for the arrangers; all of which will have to paid by the 99 percent of the hard working people of this country.

With a few more years of such sucking out of the economic lifeblood of the people the current need for life support will no longer be there.  The manipulating clique will live in the lap of luxury skiing in the Alps while the rest of the people will be long gone.

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    Harsha wake up – the world is not so simple!
    The IMF and WB loans are as harmful as are the commercial borrowings by the CB clown Nivard Cabrall. BUT listen carefully here, in the end there’s always hope that China will cancel the debt of Sri Lanka – as it did for for Bangladesh sometime ago..
    Whereas IMF debt is never cancelled since they extract their pound of flesh any which way, and IMF reforms make the poor pay for the sins and lifestyle of the rich the world over. Check out Greece, Spain, Argentina during the crash years and Joseph Stiglitz critique of IMF bailouts for which he won the Nobel prize..
    the IMF and WB development model and ETHIC is precisely what the Rajapassa brothers are following with their conspicuous consumption patterns, love for Roll Royce Ghosts and Lambughinis, while Tourism and militarization are “development” sectors promoted by IMF! SO in essence the Rajapassa development goals are the same as the IMF only some of the means differ, and may indeed be more pro-poor in the long run. The world is a complex place darling Harsha and you and the UNP paralimentarians led by the clown Ranil with your whopping allowances do not help the poor of Lanka a jot!

    • 0
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      Well said 007. You hit the nail on Harsha’s head!

      • 0
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        Spot on Bond! The name of the IMF and Rajapassa game is TRICKLE UP: The rich get richer at the expense of the poor, as inequality or the gini coefficient grows exponanetially! Hot air Harsah needs to improve his game and analysis!

        Only, the means to achieve the goal of enriching the rich differ when it comes to choosing between Rajapassa economic development or IMF economic development model, and it may be that the Rajapassa model actually does something for the poor..

        unlike the neo-liberal UNP which is a BASKET CASE due to the CORRUPT, POWER HUNGRY CLOWN Ranil WIckramasinghe accepting Rajapassa’s bribes and free rides to Italy.. which economic policies which

    • 0
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      Let us get a few facts right. Politician have been lying about these facts for decades.

      First it is always better to live within ones means and not to have to resort to borrowings. Second if one does borrow, it should be for some productive purpose, like infrastructure not for consumption.

      In the 1960s, the World Bank took a project-by-project approach to development assistance, focusing on capital-intensive infrastructure projects. By the late 1970s, however, it had become clear that the policy and institutional environment in which projects were implemented was a major determinant of the performance of the Bank’s growing project portfolio. Indeed, in many borrowing countries, policy-induced distortions were so severe that projects could not be expected to succeed no matter how well designed they were.

      This is what lead to the policy framework being imposed. What are these policies?

      the Bank insists on. The Banks approach to monitoring is, to quote:

      1. Clearly articulated statement of objectives, reflected in the design documents and lending agreements

      2. Results framework with output and outcome indicators capable of measuring the results chain leading to achievement of the objectives, specified during project design

      3. Regular supervision and supervision reports

      4. Self-evaluation by the managing units: Implementation Completion and Results Reports (ICR) completed within six months of project closing

      5. Independent validation of the ICRs by the Independent Evaluation Group (ICR Reviews) and independent field evaluations of about one in five projects: Project Performance Assessment Reports (PPARs)

      6. Project evaluations also feed into higher level evaluations, including country-level and sector-level evaluations, as well as meta-synthesis evaluations.

      All of which mean that it is (a) a lot more difficult to come up with a useless white elephant idea, which no one knows about and then (b) to proceed to steal the money which is part and parcel of the whole idea.

      This is why politicians hate the IMF and the World Bank, its difficult to steal money and when things go wrong they are an easy scapegoat for the blame.

      Chinese projects however come with no questions asked and kick backs all around, both on the Chinese side as well as the local side. The Chinese officials approving the loans probably make as much money as the politician’s getting the loans. Unfortunately the general population has to cough up, when the loan needs to be repaid.

      Politicians are thus ever ready to trumpet the benefits of Chinese projects while condemning the World Bank and other lenders. Not that everything that the World Bank has done is a success or that they are right every time, but at least with these projects there is some accountability somewhere. With Chinese projects there is none.

      Who decided to build Norochcholai coal plant, minus a pier or some other economical means of getting coal to the station? Not the World Bank, which funded some village hydro projects, apparently with some small success. Nor did they fund the Hambantota habour (minus container terminal) or the Mattala Airport (runway larger than Changi airport, Singapore).

      Did the World Bank tell the Government to buy SriLankan Airlines, which lost Rs.19bn last year? No. Did they ask the Government to hire 500,000 people into the public sector so that pensions and salaries now account for 54% of all the tax revenue earned by the Government? No.

      What the IMF DOES advise is that the deficit should be controlled- eminently sensible advise. They way to do this is to reduce the waste, corruption and other extravagances that the GoSL indulges in. Instead they raise taxes and the IMF takes the blame.

    • 0
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      Hello James Bond we lived in china for Yonks Chinese do not tie their kondes. They do nothing for nothing!

  • 0
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    UNP urgently need life-support,under the Ranil W due to the policy failure.Eighteen years in opposion due to the out-dated of policy in fail, lack of vision short-sights politics.First correct UNP party policies.Right to air your views are important,but read well before you address the central problems of Economy of Sri Lanka.

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      Ranil himself looks like an artifact from yester year. Ask him to go home or to his grave

  • 0
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    Harsha wake up – the world is not so simple!
    The IMF and WB loans are as harmful as are the commercial borrowings by the CB clown Nivard Cabrall. BUT listen carefully here, in the end there’s always hope that China will cancel the debt of Sri Lanka – as it did for for Bangladesh sometime ago..
    Whereas IMF debt is never cancelled since they extract their pound of flesh any which way, and IMF reforms make the poor pay for the sins and lifestyle of the rich the world over. Check out Greece, Spain, Argentina during the crash years and Joseph Stiglitz critique of IMF bailouts for which he won the Nobel prize..
    the IMF and WB development model and ETHIC is precisely what the Rajapassa brothers are following with their conspicuous consumption patterns, love for Roll Royce Ghosts and Lambughinis, while Tourism and militarization are “development” sectors promoted by IMF! SO in essence the Rajapassa development goals are the same as the IMF only some of the means differ, and may indeed be more pro-poor in the long run. The world is a complex place darling Harsha and you and the UNP para-limentarians led by the clown Ranil with your whopping allowances which are in essense bribes from the Rajapassa regime for your tacit support (as shown in the support RW gave MR to impeach the CJ by claiming the the Diya-wenna parliament of morons, goons, fools, criminals, and left geriatrics is supreme), do not help the poor of Lanka a jot!
    Despite your hysterics against Nivard Cabral, you folks in Lanka’s Parliament of clowns are all the same – a bunch of leaches sucking the people dry! There is really nothing to choose between the UNP and UPFA para-liamentarians!

    • 0
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      James Bond and Don Stanley,

      Although I fully agree with you on the Diyawanna humbug Gon Mottala, Know nothing of economy gon ralas who ever ruined our economy…..I give credit to Dr.Harsha for his forecasts on Sri Lanka’s economy and it’s future.

      I think except Dr.Harsha and very few others…..nobody knows about the gravity and Bad shape we are in.

      It is only Dr. Harsha that warned from some time about the direction we are heading…..as for my judgment it is almost like Greece at the moment.

      None of the Chinese Projects brought any returns to our economy.
      Norochcholai Power plant broke down 12 times in the first year…….with a loss of 6.5 BILLION RUPEES LOSS. You know how much 6.5 Billion rupees…….It could pay salary to the whole electricity board staff for two years without thyem working a single day. How come a brand new plant break down 12 times in first year.
      Don’t you think China purposely did this in order to caquire it.

      Now China wants to take over the plant to run and sell electricity to Govt……
      Very soon China will acquire both Hambanthota Harbour and Mattala Air port due to Govt. inability to pay their loans…….Take my word.

      DON’T THINK CHINA WILL CANCEL ANY OF THESE LOANS. CHINA WILL SURE TO TAKE OVER ALL OF THESE SIMILAR TO THE WAY THEY TOOK OVER COLOMBO DOCKYARD.
      CHINA WILL APPOINT A LOCAL AGENT….BUT THEY ARE THE NEW OWNERS WHO WILL RUN THE SHOW. TAKE MY WORD.
      ALSO VERY SOON CHINA WILL START CATCHING FISH IN OUR INTERNATIONAL BOUNDRIES AND SELL US THE SAME FISH. WAIT UNTIL THEY ACQUIRE HAMBANTHOTA HARBOUR.

      You know when China Built Nelum Pokuna, mattala Airport and the Harbour…..everything was brought from China including cement, stones, furniture,fittings,tiles,roofs,iron,metal, paint, labor etc.etc.
      Only thing they used from Sri Lanka was Water and sand. That’s it. Also same with Road construction.

      1)Do you think without an Independent Judiciary and absence of Law…..any country will come to invest in Sri Lanka……
      2)GOSL rejected 5000 ton Diesel Brought for IOC due to it’s color change…..
      What is color got to do with the quality of oil….these diesel are extracted from many parts of the world…..and due to this color could be different. But the oil was 100% good when tested. Then why Govt. rejected it. Now Govt.eying 100 odd Trincomalee tank farm run by the Indians……..Don’t you think that China may be behind this.

      Since IMF rejected 1 Billion dollar Loan….GOSL looking for other places. So the Trinco storage Tank farm could be the Colaterral for Next China Loan to the Govt.
      3)Now local banks have restricted giving loans to small business owners and house holders. Where’s the development going to be…..

      How many Econ graduates are there in the parliament…….Other than Dr. Harsha.

      That’s why these Gon Harak signed on a Blank paper to Inpeach Dr.Shirani Bandaranayake…….except Prof.Rajiva.
      All others are “yes sir” Gas Gembas

      Dr.harsha should write a book or newsletters on Sri Lanka’s current economy and where it’s heading at the moment…..and how to correct it.

      Also on education crisis, health crisis and unemployment crises and how to resolve them…..while developping country on Industry and agriculture line. Not the ” Eta paha ” divineguma fake 85 billion wastful project. It is like telling people to grow Tea in Colombo and Coconut in Nuwara Eliya. Basil should test various soils in different parts of the country before giving these seeds. Also needs top soil, manure and insetisidies which he didn’t give.
      Also Colombo and suburbs…water costs money and the overheads to grow is high.
      BASILS JOKE DIVINEGUMA WITH BAD PLANNING.

      I DOUBT EVEN WITH THE 6.5 BILLION US DOLLAR GOLD RESERVE AND 7 BILLION DOLLAR FOREIGN CURRENCY RESERVE IN CENTRAL BANK……AS THE GOVERNER IS A MERE CHARTED ACCOUNTANT AND A MARA GOON.

      AWAIT FOR THE THE CHINA MAN CIRCUS SHOW IN SRI LANKA.

      • 0
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        Can Harsha teach my namesake, PB finer points of economics?pleeeeeeeease do. If the economy is improving we have to feel it . We do not. Can you please tech Jayasundara , how to improve the economy with out taxing everything? Do you have to be a genius to make a budget with this kind of deficit?

        Did this fellow never learn any thing other than tax? Come on Harsha teach this fellow and Cabral some thing.
        I hope you are given a chance to do something for the country before your grey matter deteriorates , and you too start sitting on it. This may be what is wrong . jayasundara’s what ever is left of it has, travelled down to his posterior . Cabrals posterior is so constricted , most of it has been dispelled off it . Nothing is left

  • 0
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    People will have to eat the roads and infrastructure when they run short of food, and money to buy food. Thats the time they may think of having Lamborghini for lunch and Rolls Royce for dinner.

    3000 USD per capita boasted by the Govt is for 10% of the population. 0.1% must be earning 300,000 USD per capita. Balance 90% must be on around 1000 USD and less. Also the value of money is depreciating while income is stagnant. Less things for more money.

  • 0
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    “….with extremely lucrative commissions for the arrangers; all of which will have to paid by the 99 percent of the hard working people of this country.”

    Commissons earned by certain individuals on the following by way of Wastage & Corruption is easily forgotten by us Lankans:
    (in billion SL Rs.)
    Hedging deal .. 230 B, Air Lanka 10 B, Mihin Air 5 B, MIG deal .4 B, Weerawila Airport .5 B, VAT Scam 35 B, Safari Park 16 B, Kerawalapitiya 23 B, Uma Oya Project 28 B, Computers for Divisionals 1.2 B, Gantry Purchase 24 B, Kerawalapitia addtnl.losses 25.5 B, North Road Development 28 B,

    Totalling 430.3 B (Source: Transcurrents.com)

    This is further increased with other instances in 2011/12. The newly
    born Opposition Alliance has a lot to counter??

  • 0
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    Please read today’s Daily Mirror on new Mattala Airport opening on following web.
    http://www.dailymirror.lk/news/25698-flights-from-bia-via-mattala.html

    It say form March 18th all Sri Lankan Air BIA-RIYADH flights to Transit at Mattala……..and Mihin Air BIA-BUDHGAYA flights also to transit at MATTALA.

    The point I say is …..A PLANE BURNS ADDITIONAL 4000 GALLONS OF JET FUEL FOR EACH TAKE-OFF….Read following web….
    http://sawaal.ibibo.com/computers-and-technology/how-much-fuel-used-during-boeing-747-takeoff-658947.html

    From BIA to MATTALA IS ONLY 156 KILO METERS.( 110 miles which is 15 minute air travel)Read following web.
    http://www.distancesfrom.com/lk/flight-distance-from-colombo-to-Mattala-International-Airport-Hambantota/FlightHistory/1885684.aspx

    Also Both Riyadh and Bodygaya routes……MATTALA AP IS AWAY FROM THE DIRECT BIA-RIYADH AND BIA BODYGAYA ROUTE.

    Therefore both Air Lanka and Mihin HAVE TO SPEND ADDITIONAL 4000 GALLONS OF JETFUET (for each take off) PLUS ADDITIONAL 156 KILOMETERS ADDING TO THE DESTINATION.

    1)Therefore my question is who is going to pay this additional
    Currently a gallon of jet fuel is Rupees 400.00. see the following web.
    http://www.indexmundi.com/commodities/?commodity=jet-fuel&currency=lkr

    Therefore for each Mattala off route additional take off costs…..
    4000 gallons x 400 rupees = 1,600,000 (a whopping One Million Six hundred thousand Rupees)

    Also……
    1)How much the tire waste costs……There is a limit to airplane number of TIRE TAKE OFF AND LANDINGS AND AFTER THAT THEY HAVE TO BE CHANGED.
    2)Electricity and extra A/C and cabin pressurisings…..
    3)Additional logistics, Mattala airport costs, and passenger . inconveniences……just for a 15 minute travel…..compare to how many additional passengers boarding in and getting out from Mattala AP.
    4))Adding another 156 or more KM to Col-Riyadh and (for BIA – BUDHGAYA route going south and coming bak up to North….312 KM…… (A jet plane burns 4 gallons of jet fuel each second)

    I WOULD SAY EACH LANDING AT MATTALA WITH ADDED ROUTE COST TO WILL COST AIRLINE AN ADDITIONAL WHOPPING 2 MILLION RUPEES.
    ————————————————————————————

    WHO IS GOING TO BARE THIS ADDITIONAL COSTS…..
    ALREADY BOTH SRI LANKAN AND MIHIN AIR ARE RUNNING AT 15 BILLION RUPEES LOSS PER YEAR TO THE ECONOMY.

    No wonder British Air is coming to business in May 2013 on direct London dubai to BIA direct ( avoiding Mattala) with a lower cost.

    ANOTHER MAHINDA CHINTANA EDIRI DEKMA AISCHARYA….. WONDER OF JOKERS WORLD.

    Meanwhile did the company which imported the Rolls Royce Ghost paid the additional 80 million rupee tax owed to Sri Lanka Customs….

    If Dr.Harsha could let us know…..

  • 0
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    Helllloooo.

    If it is that bad ,how come your Boss can’t even muster his own herd to take the fight to the Govt?.

    IMF seems reluctant to invest in Infrastructure.

    Why don’t they like assets that appreciate in value over time ?.

    Do they only believe in fixed deposits?.

  • 0
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    Jayantha,
    YOUR CALCULATION IS PERFECT AND YOU HAVE FACTS WITH PROOF. I WISH THERE WERE MORE SRI LANKAN PEOPLE IN SRI LANKA SIMILAR TO YOU SCIENTIFICALLY THINKING. OUR PRESIDENT OR ANY RULING OR OPPOSITION PARTY MEMBER WILL NOT HAVE THE INTELLIGENCE. GETTING CLOSE CHINEESE IS A BIG MISTAKE. I HAVE WORKED CLOSELY WITH CHINEESE AND I KNOW HOW THEY THINK.

    • 0
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      Thank you GIORA,

      Yes I also had few encounters to move with some chinese…….and I found out that The Chinese People are the people who will never give their Knowledge or secrets to outsidere.

      I had one Chinese woman who was working in an office, and she never showed how to do some calculations to a new comer who joined her department.
      Also they will never give away the most valuable sectet ingrediants of their cooking receipees. They prepare the dishes in TV and will tell the ingrediants that are used…..but with hold the secret ingrediant from public.

      But they are masters of Copy Cat and stealing trade and technology secrets from other countries. They say 80% of chinese goods manufactured are copied from outsede. One guy said Chinese go to Africa and copy their generations old patterns of shoes, slippers and dresses, and bring them home and make same stuff with cheap material and market to Africans at cheaper prise. Same with copying of western patterns, models and patents.

      IF YOU HAVE SEEN ANY CHINA TOWNS AROUND THE WORLD….THEY TELL IT ALL.

      Infact it was USA and West that helped China to Rise economically by opening their markets to China. China now having over 300 Billioneers(US $) of Businessmen and women and growing.

      WEST WOKE UP THE SLEEPING CHINA DRAGON…..WHILE OUR POLITICIANS, AFTER INDEPENDENCE PUT INTO SLEEP OUR SRI LANKAN DRAGONS WHO WERE DOING WELL.

  • 0
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    Dr. Harsha’s says what is needed is life support now. Very true but not for the people of this country. The average common man has been fighting to keep his heart and soul together with the rising prices. Life support now is needed for his leader Ranil Wickremesinghe. He is now a Minister in the Rajapaksa cabinet. He supports them and hopes the Presidency will one day fall on his lap. Great hope when he is becoming a joke due to every action of his.

    • 0
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      My dog does a better job of protecting our family from Intruders and rescuing any of us from drowning while swimming. But not this fake do nothing, know nothing, help nothing fake crook JR’s nephew Ranil Wickremasinghe whose only priority is to safeguard the Supreme Parliamnent.

      The day Ranil becomes president……Men will start to get pregnent and bare children, while women be the head of the house hold. I wonder who on top……..at RW residence…..

  • 0
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    If the IMF has declined the US$1.5 billion stand-by, as it is widely
    speculated, that is virtually switching off life-support. No wonder
    the poodle Modawansa is making queer noises against the Holy Cow PBJ,
    allegedly on advise that the non-performing economic guru’s time is up.
    The next Scene will be when the yakkos rise, one needs to have a sacrificial lamb – and PBJ will fit in nicely. Kabaralal will very likely survive because it is said he tells where the loot should be
    banked – both here and elsewhere. It is good for The Family to study
    Kabaralal’s Charts because his stars have been on the up and up from
    the time he took off from the blocks.

    Senguttuvan

  • 0
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    Poor fools above think that china will forgive our loans if we are unable to pay it, what naive jokers. They will come after their pound of flesh, look what’s happening to norochchoi. harsha does have a point here, instead these fools let their political biases towards the rajapakses pull wool over their eyes.

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