18 September, 2021

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Moral Suasion Or Lakshman’s Farewell Message?

By Ameer Ali

Dr. Ameer Ali

“As responsible members of the financial community of this country, I most categorically require and request your active and tangible cooperation in order to ensure that the exchange rate range of Rs. 200-203 per dollar, and correspondingly, to ensure that the rate does not deteriorate beyond this agreed rate range”. These words of moral suasion (some are already calling it “immoral” suasion) from a departing Central Bank (CB) governor, is a tacit admission that CB’s quantitative credit controls have failed so far to steady the ship. Once again and broadly speaking, it exposes the increasing irrelevance of Central Banks in a borderless world with oligopolistic banks and mega financial companies, which can diversify their assets in so many forms in so many destinations without being noticed by any controlling authorities. 

Be that as it may, there are three different exchange rates prevailing in locally at the moment: CB’s 200-203 rupees per dollar, commercial banks quotes between 225-235 rupees and black markets offer between 240-250 rupees. When the margin of difference among different rates is small CB’s moral suasion may have some bite, but when that margin is wide as it is now, it is the CB that would be forced to change its rate to reflect reality. Even if commercial banks reluctantly keep closer to CB’s recommended rate, black market will thrive with rates shooting even higher than 250 rupees. This is the dilemma that CB is facing now.     

Earlier, when the Governor announced increasing the interest rate, several economists pointed out that it was too little and too late. Timing is the essence in these matters. Was that delay the fault of CB or necessitated by politics? Money market experts have been arguing for sometime that CB had lost its independence to act neutrally and take action promptly, no sooner President GR handpicked its governor, appointed his henchmen/woman to the monetary board and virtually dictated to them to assist implementing HIS economic policies. When a CB succumbs to political pressures, mortgages its independence and ignores the relevance of time factor in taking decisions, consequences would be serious. Political interference in the operation of economic institutions is one of the major problems contributing to current economic difficulties in the country. Technocrats are forced to obey presidential diktats.

At the same time, Governor Lakshman’s moral suasion also sounds like his adieus to local banking and financial institutions. Greek bond fame former governor Nivard Cabraal is said to replace Lakshman even before the latter ends his two-year term. Lakshman’s departure appears to confirm the story circulating in political circles that Rajapaksas only give a two-year appointment to anyone outside their family. Is that the real reason or is he being booted out rather unceremoniously? Or is he going to be promoted to the World Bank in return for his loyalty to the regime?

However, given the parlous state of the economy, officially confirmed by the new Finance Minister in his maiden speech to the parliament, the country requires more than a change in CB’s leadership. Leaving aside Cabraal’s manoeuvres for an attractive entitlement what on earth is he going to do which WD Lakshman could not? The country’s economic woes have less to do with faulty monetary policies than with the entire economic strategy adopted by the current regime. Blunders on the fiscal side and policies on the run emerging out of thought bubbles have caused more damage to the economy than anything else. There would have been absolutely no need for a food emergency had the government dared to remove market rigidities right at the beginning. Political calculations rather than the economic future of the country prevented prompt action. The moment the pandemic started causing economic havoc the government should have summoned the nation’s experts across different the political spectrum and created a taskforce to design a comprehensive plan with time frame to tackle the economy. Instead, the president depended on the so-called expertise of his Viyathmaga, which is no more than a cabal of profiteers, bootlickers and opportunists.

Given the multipronged crisis facing the nation only a systemic change can bring any relief to the people, who have sacrificed much more than what they should have. Naturally, there is wide spread anger within the populace, which the rulers are quite well aware of. This is why they have brought in the emergency rule rather surreptitiously to tackle re-emergence of public protests once the current lock down is removed. However, the real tragedy is the lack of any alternative program from the opposition. Opposition politicians seem to be more interested in exploiting the prevailing dissatisfaction to outvote the government at the next elections, if it were to be held, rather than to mobilize this dissatisfaction around a workable alternative program and bring about a regime change. BBS is slowly raising its ugly head and warning anti-government critics, including the Catholic Cardinal, not to disturb the false calm. How long will this drama continue? 

*Dr. Ameer Ali, School of Business & Governance, Murdoch University, Western Australia

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Latest comments

  • 22
    2

    What Rajapaksas in urgent need to cover up the failures with lies and fake statistics and come up with some positive statistics to show that they have overcome Corona and economy back to normal. China is there to help Sri Lanka with necessary funds (loans with high interest rate) which cannot be retuned back without selling the sovereignty by any one.

    • 21
      1

      The economy is crumbling by the hour, and all that the geriatrics at the top can think of is the solutions tried out in their impressionable youth. Like exchange control and banning all imports. The only difference is that Sirimavo didn’t tell us that sugar, milk powder, turmeric, fertilizer, palm oil, etc are bad for our health. She was honest enough to say we had no money.
      In even a domestic situation, we usually examine what items are taking a big part of our income, and try to prune those. If we can’t afford the water bill, we do the laundry by hand.
      We don’t try to drink less water, do we?
      In the case of the economy, there is an elephant or two in the room that no one wants to talk about.
      The current situation is radically different from the 70’s.

      • 20
        1

        The difference is that the economy is heavily lopsided due to events that happened after the 70’s
        In the 70’s the country was not as dependent on either tourism or remittances.
        If we look at government expenses,
        1.5 Billion USD is spent on the 300,000 strong military, which is more than than the education budget and around the same as the health budget. Some military expenses are cunningly hidden under other headings. What is the need for such a large and idle force?
        It is politically expedient to maintain this sacred cow, because it provides employment to potential trouble-makers. But, 12 years after the end of the war, recruitment still goes on. So is it surprising that we can’t make ends meet? Add to this the million males driving tuks. Imagine the number of factories that could be manned by these people. Also, since most of them have at least a basic education, was all that money wasted too? Do they need an OL pass to drive a tuk? We have been living beyond our means for far too long . I have little faith that even the pandemic will drive sense into our leaders.

  • 8
    2

    Simon, old codger, Nimal Fernando, Sinhala_Man, leelagemalli, chiv, ………………………….and all other good souls,

    Please listen to this Gravitas clip:
    https://www.youtube.com/watch?v=JB5t3V2QcX8

    And tell us what is significance about these visits to Hindia, South Asia, Indian Ocean, …. and Gota’s Chair?

    • 4
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      Native,
      Even if all that the pretty lady says is true, there is bugger-all that can be done. Let’s wait and see.

      • 6
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        “pretty lady”

        Your eyesight is not bad! ……. done your cataracts? :))

        • 3
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          Nimal,
          Got myself a large screen Even prettier!

          • 0
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            “Got myself a large screen”

            OC,

            Did you get an OLED? The best picture quality I’ve seen. Each LED is controlled individually. LG are the ones who make them. Sony designs some too …… they still have some engineers form their heydays who design them using LG panels but someone else builds for them and they put their badge on them. Panasonic also had some great engineers from their glory days and worked on their OLEDs but they have phased them out now.

            Only drawback, OLEDs can’t go very bright ………if you have a sunny well lighted/bright room Samsung QLED would be better, they can go very bright.

            But the Chinese have almost caught up and offer 4K TVs for 1/3rd the price! :))

            • 1
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              Nimal,
              “Did you get an OLED? The best picture quality I’ve seen. “
              Almost as good as a CRT, eh? Those were the days! I pity today’s kids.

    • 7
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      The system is such …….. leaders are compelled to think short-term ……

      They get elected for a 4-year term during which they have to plan/campaign for a 2nd term ……. some big event happens and they are forced to show they are “seen to be doing something”

      9/11 happened and Bush had to show he is “doing something.” ……. Was a full-blown frontal invasion of Afghanistan the best solution? Certainly not ……..but that’s what people’s emotions wanted/demanded (both houses bar a solitary dissenter vote for it) ……. anything else would’ve looked like cowardice ……… So here we are 20 years later.

      Like Vietnam, with time Afghanistan will find its own equilibrium …… that’s the nature of the beast ……….


      “And tell us what is significance about these visits to Hindia”

      SL has bigger problems than these cloak and dagger nonsense ……. the economy is now a basket case …….

      • 12
        1

        In 2004? for the first time in its history SL had a negative GDP ……. Ranil fixed it and the opposition had a breather to gather forces to defeat him.

        The economy was heading for a disaster in 2014 ……. elections were called early …… Ranil fixed the economy ….. again the opposition had a breather to gather forces ……

        Give the devil his due …………

        But Ranil is also responsible for the state of the country today …… his inability to get elected in his own right ……. should have retired from politics a long time ago ….. and allowed SL to find its own equilibrium …….

        The approaching economic disaster will allow SL to find its own political equilibrium ……..

        That’s the nature of the beast …… how things happen …….

        • 5
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          Nimal,
          Ranil ought to have managed the economy and put in a more popular face as “Leader”. Then he wouldn’t need to win elections. There are bright guys, like Eran Wickremaratna, with him, but they aren’t good politicians.

    • 1
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      Native,
      Here’s more from the Taliban:
      https://youtu.be/vHdnfK9fD1Y

      • 2
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        old codger

        Brilliant.
        Thanks.
        I really enjoyed it.
        How come BJP, RSS, VHS, Hindian Saffronistas, Amit Shah, have not kicked out a big fuss about this comic strip?

        • 2
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          Native,
          In India, most media is still much freer than here. The Centre can’t do much about it, unlike here.

          • 1
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            Can you imagine our mainstream media making jokes about the LTTE the way this guy mentioned Kashmir?

          • 1
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            Very correct OC. Thank you as always

            . I always respect your thoughts and that of our brother NV…… ( hope NV would not feel instulted , me having called him Bro).
            .
            I think only thugs could handle srilanken media. Just imagine, former Minister of health did a good job from the begining on to the end. As a result, current govt has profited it yet today. But srilanken media never praised him to the manner, Rajapapkshes would do. Alone that issue regarding local production of Saline, as introduced by current govt lately, was a project of previous govt. And there are unknown but numerous projects completed or half completed by previous govt WITHOUT giving a publicity to what they had been doing. :::: unfortunately, yet today, current men attack former govt louder as they could as if they did nothing….. yellow pet men too played the housanna in this regard…. in order to spread the blatant lie and mislead the nation.
            :
            Looking back, during the last 2 years, since Medamulana Meeharakas are back, nothing seems to move forward, not even price control of daily essentials. But by boast and twisting the mind set of the gawky majority, Rajapashe are seen WORLD champians.

  • 13
    1

    Boduballasena and Ravanaballa is slowly putting the head up and have started to attack CARDINAL MALCOM RANJITH Re April church attacks.THEY HAVE ALREADY TASTED THE BLOOD OF TAMILS AND MUSLIMS.NOW IT THE TURN FOR CATHOLICS IN SRILANAKA.This is not happening without the knowledge of the GOTHAYAS GOVERNMENT.IT WILL NOT BE TOO LONG THE EMERGENCY WILL BE USED TO SHUT THE MOUTH OF CARDINAL AND CATHOLIC COMMUNITY-AMEN.

    • 1
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      Rajapakshe mlechcha politics cant survive without the support of brutal police activities, cheap yellow pets and their public rhetorics, now it s reported that private sector servants are not paid their salaries but srilanken Mugabe enjoy presidential suits as 3000 €/ night (7 lacks LKR).this is the srilanka medamulana meeharak are in making today🐃🐃🐃🐃🐃🐃🐃🐃😡😡😡😡😡😡

  • 8
    1

    Dear Native & other Good Souls: I watched it and thanks for the link. Before expressing my view, I would like all of you to watch: https://www.youtube.com/watch?v=fqq73qQRAOc

    I previously had a lot of “Myths” about this country and its people until I met an “Afghani” national who is well employed (Professional) who does engage in “Painting” as a “Part-Timer” and keep him occupied in it as a “Hobby”. He was introduced to me by a friend when I required a “Painter” to the painting of my house (both interior & exterior). He took quite a lot of time to finish the work because he worked only during weekends and holidays. After knowing his background (a Professional) I got dragged into long conversations especially the “Politics”, “Economics” and “Social” systems of the country and the role of Russia, America, Pakistan, Iran, India & Middle East Block played.

    In “Summery”, I would say, this “Afghani Episode” has laid out a “Chess Board” where the “Big Heads” will draw their plans to spread their “Wings” across the “Region” (Indo-Pacific) and engaged in “Fishing” with “Baits” like “GR”, “Sajith”, “Ranil” and many others who can be “Used” and “Abused”.

  • 7
    1

    Ameer Ali is asking, ‘Is he being booted out rather unceremoniously? Or is he going to the World Bank in return for his loyalty to the regime?’.
    I know know finances. Governor W. D. Lakshman came to his post with aplomb. The Governor should have kept his reputation in tact and resisted the temptation to work for Rajapaksas.

    • 1
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      Regret: I know know finances, should read, I know no finances.

  • 7
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    Dr.Ameer Ali.

    Your line……….
    ……..Instead, the President depended on the so-called expertise of his Viyathmaga which is no more than a cabal of profiteers,bootlickers and opportunists………..

    If a Head of State of a country depends on the types that you have mentioned that constitute the Viyathmaga is that not a reflection of his Presidency?
    The Ear, Nose, Throat of Dr.Seetha Arambepola. a leading member of the Viyathmaga has also not helped.

    A distinguished Academic of the calibre of Prof: Lakshman HAS FOUND HIMSELF LIKE A FISH OUT OF WATER!

  • 3
    0

    Native.

    Thanks for the link.
    At this rate Afghanistan will gravitate towards being wiped out from the world map.
    A partnership of strange bed-fellows!

  • 8
    1

    Just read a news item in Virakesari, Tamil daily that Lakhman was sent his resignation only after the incidents that happened within 10 days and he admitted that he had to work under mental pressure during this period. It clearly shows that Rajapaksas threatened him and there is no place for any one who work honestly to the nation and people. We all know what happened to former Chief Justice Shirani Bandaranaiyake.

    • 2
      0

      Ajith: Dr. Lakshman, at the media briefing said: ” This resignation is a Blessing in Disguise”. That explains in an abridged form of what could be written in volumes.

      One more noteworthy fact I noticed in that briefing was: ” I learned what it means to be a practical economist away from that of a teacher”. To me, it is a “Self Assessment” that every “Professional” who wishes to handle “Public Affairs” must make before accepting such huge responsibilities. Mind you, this Dr. Lakshman is one of the “Architects” of “Viyathmaga” that brought “GR” to the “Throne”. Hope all others in “Viyathmaga” make the same “Self Assessment” as done by Dr. Lakshman.

      • 1
        0

        Simon,
        It is now a great challenge from Rajapaksas to those people who brought them to the power and who gave two third majority without a single question about their past. I understand the after the request of Ajith Cabraal, the monitoring Board of Central Bank approved the lifetime Pension for Ajith Cabraal with arrears from previous term and new with based on the new high salary. To justify their change they also give life time pension for Lakshman who forcefully resigned the post under the pressure from the Government (Rajapaksas). All this happened during the pandemic Corona and the country is facing severe financial and economical suffering and people have to sacrifice for their food. In the same period President is going to attend his grand daughter in USA with his wife using the public fund and Prime Minister already left to Italy to enjoy a holiday.
        Now Rajapaksas are challenging you we will do whatever we do as we did in the past and you cannot remove us from the kingdom. I ask the Buddhist Sinhala people and Buddhist Monks and Buddhist Civil Society are you prepared to take this challenge?

        • 2
          0

          Ajith and All,
          .
          Appointment of ANC as the governor will be their destruction.
          :
          My opinion is this came from Mr 10% percent….to attack GR in his moves. It seems that the WOUNDING in among
          ferocious siblings in that cattle thieving family is worst than appeared to be.
          As was the case in Tripoli, the days they will be found dead in drains is nearing. Let s be patient. How do we know that MR would fall dead in next day, he looked as if he would die tomorrow…. however, he is an actor on the face of the nation yet today.. My sadness is towards the ones over 60 age, but have to fall dead by covid not having injected them with the vaccine. Those voll-vaccinated against COVID will show 8 times less symtoms ….. is what the researchers believe today.

      • 2
        0

        https://www.youtube.com/watch?v=M0V3W53GRuQ

        GR has been proving his abilities.
        :
        His capabilities were not overlooked then.. however, mlechcha media men painted the picture in favour of Rajapakshes.
        They thought the same slogans would work properly…… that was based on so called war victory…… actually, teror was defeated by triforces and the collectivity succeeded it…

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