3 August, 2021

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P.B. Jayasundera Vs. CBSL – Friction Or Disagreement?

By Rusiripala Tennakoon –

Rusiripala Tennakoon

It is a well- known fact that governments are very much interested in reducing internal frictions as they tend to bog down systems. Particularly when the Frictions are in higher echelons the damaging effect is more. In our country we are beginning to experience a serialized dramatic display of growing controversies freely seeable. The episodes are too many to be included in an article like this. On almost all burning issues in the country we observe this phenomenon. Sudden policy announcements, subsequent withdrawals and silently operating amended versions are on tap. A minister who announced the cabinet decision on the fuel price hike came  under heavy attack from among the coalition partners of the own government, as the most glaring recent instance. While some members of the government are making frantic efforts to whitewash the impudence of some inflammable statements and actions of some of their colleagues there are others who attempt to vindicate the effects by resorting to mitigatory statements to please the worried. Both these actions only expose the existence of loose compatibilities among the team members of the government.

The most recent and alarming assertion is the highly critical statement made by the Secretary to the President, P.B. Jayasundera, against a Policy pronouncement of the CBSL on its stand on the issue of Import restrictions. The CBSL, as reported in the media has reiterated its stand of restricting imports to essential items. This restriction is in force for some time now. They are proposing to extend this for a further period. PBJ s barrage is about this matter. He has categorically stated that he does not agree with this policy and more specifically he opposes that policy (vide daily Divaina-14th July 2021 – page 1 contd. on page 4).

As far as the Public is concerned this position conveys a strong difference of opinion prevailing  among the policy makers and high-level government officials. And when it is about a policy stand of the government on an important economic issue such as ‘imports into the country’ it causes an alarm signaling a danger of existing disparities in opinions about extremely important economic policy decisions among the Nation’s most superior posts particularly during  periods of pandemic related disruptions to the economy. Secretary to the President is not directly involved in the economic policy making process unless specially designated to overlook or participate in such matters. Be that as it may, he has chosen to comment and express his opposition against the views of the CBSL.

He has stated that this is not a time to restrict imports but to open it and allow free imports also adding a rider to his view that such opening should be in line  with the policy frame work of the government! Many issues crop up in this regard.

1. Is he claiming that the CBSL is acting ultra-vires to the policy frame work of the Government?

2. Because the CBSL is suggesting only an extension to the restrictions already in force, is PBJ disputing what was being implemented?

3. When he says imports should not be limited to essentials, what are the non-essentials that PBJ is urging the country to import?

4. Presuming that the CBSL has introduced these restrictions in the context of the existing status of the current External Sector Performance of the country, PBJ’s critical observation tantamount to,

a) Either, his disregard of the statistical information monthly published by CBSL on merchandise trade performance; OR

b) his non-acceptance of the veracity of the published statistics of the CBSL.

5. Poses the question as to how the non-essential imports could be financed in a situation where even the essential imports are allowed with greatest difficulty;

Let us take a look at the last published Press Release of the Economic Research Department of the CBSL dated 14th July 2021.Our economy stands on 3 main pillars, Agriculture, Industries and Services. The overview given in the CBSL release is quoted below for easy reference because of its relevancy to the situation arisen.

Overview, “The deficit in the Trade account widened on a year-on-year basis for the third consecutive month in May 2021. Both exports and Imports were significantly higher in May 2021 than in May 2020, mainly due to the effect of pandemic related disruptions a year ago. Earnings from Exports increased, while imports declined in May 2021compared to the previous month. During the Month workers remittances continued to increase, while earnings from tourism remained at minimal levels. In the financial account, foreign investments in the government securities market and the Colombo Stock Exchange (CSE) recorded marginal net outflows in May 2021. Meanwhile, Lankan rupee remained broadly stable throughout the month, and gross official reserves stood at US$ 4.0 billion by end May 2021.”

The rest of the high lights in this report relevant to this discussion are as follows;

1. Trade deficit widened in May 2021 to US$ 716 million compared to US$ 407 million in May 2020 – {causing serious problems in the trade balance already}

2. Terms of trade, deteriorated by 11.55 in May 2021, compared to May 2020, with prices of imports having increased while price of exports declining {even the current imports are causing problems of financing}

3. Overall imports: Expenditure on merchandise imports in May 2021 increased notably by 61,7 % to US$ 1607 million from import expenditure of US$ 994 million in May 2020 {indicates that the restriction is not as hard as presumed}

4. Expenditure on the importation of both food and beverages and non-food consumer good categories declined in may2021.{establishes that the restrictions have had the desired effect}

5. Expenditure on intermediate goods increased by 115.0% in May 2021.{proves the fallacy of the PBJ hypothesis that import of industry raw materials are affected}

6. Import expenditure on fuel, declined in may 2021 attributable to the lower import volumes despite the increase in import prices{the measure taken by the CBSL have been effective even before the great ‘Pythagorous’ innovation suggested by PBJ to rejuvenate the renewable energy}

7. Expenditure on investment goods increased by 27.9% in May 2021{hail Mary! Bravo to CBSL}

8. Cumulative net outflow from the government securities market during the first 5 months of 2021 amounted to US$ 14 million.{the cloak of high post worn by PBJ has been ineffective in stopping the drain}

9. Gross official reserves stood at US$ 4.0 billion at end of May 2021, which provided an import cover sufficient for 2.7 months.{can we blame the CBSL for their inability to print US$}

In such a scenario it does not need high level economic expertise to evaluate the reasons for the CBSL to justify the restriction of import of non-essential items for a further period. We have to excuse the MB of CBSL for their inability to think in UTOPIAN minds!

Now let us examine the remedies proposed by PBJ in his countering of the CBSL policy stand.

He suggests that Fuel imports should be limited and it can be implemented by following a fuel pricing policy. It looks like he is inclined to develop a price formula similar to Mangala era. And to limit the volumes imported through a revival of the renewable energy sector. We find it difficult to understand how he is trying to tide over a difficult period as an immediate solution by theorizing a program for development of renewable energy.

We are aware of the impediments and red-tape that were welded into the Energy sector for nearly a decade preventing many developers from starting their projects. The CEB which is an arm of the government played the role of a nasty mother-in-law refusing to sign the required PPAs with the developers until very recently due to the intervention of a few Ministers initiating action towards a cabinet decision to activate the sector. Many letters and appeals that were addressed to the President apparently had been lying somewhere unnoticed by this Presidential Secretary who has suddenly awaken from his Rip-Van-Winkle slumber and started talking about the renewable energy sector.

He also makes a passing reference to the import of raw material required for exports manufacture. The statistics of the CBSL does not vouch for this claim of PBJ because our exports have not shrunk due to the restrictions in force. We trust the CBSL is knowledgeable to distinguish the items essential for the manufacturing industry and not so naïve to treat them as non-essentials!

The country was carefully watching the role of the Secretary to the President from the time he was appointed to this high post because of many factors. He was a person once reprimanded by the Supreme Court when he was attached to the treasury during a previous regime and subject to heavy criticisms by parliamentarians both in the government side and the opposition.

There are many areas where a Secretary to the President could initiate  policy decisions in his own realm of affairs instead of trespassing on the role play of the CBSL, which is burdened with many responsibilities bestowed on them empowered by the Unique Monetary law Act. The CBSL cannot part with their duty to help the banking sector to remain resilient with required prudential regulatory framework and reforms to ensure the stability of the financial system. It is a far more crucial task with initiatives to improve risk management, corporate governance and meeting the capital requirements. Their role is much more systematic and advanced than what the ‘Nilames’ performed under our kings standing in attention and saying ‘yes sire’.

We as members of the PUBLIC are at a loss to understand the deadly silence of many otherwise vociferous characters on not only burning but highly controversial issues such as;

* Fertilizer and Agro chemicals causing obvious narrowing and contraction of production

* Lowered fitch-ratings including sovereign rates

* Capital adequacy of State banks

* Travel bans and relaxations according to health requirements

* Categorization of the country to level 4 in the international grouping on a/c of Covid pandemic

* Vaccination issues

* Education mess where dates are irrationally announced periodically for school opening only to evaporate the next moment

* Trade Union movement struggling to bring in some resolution to growing inequalities in pay

Members of the Public are aware of the gravity of the roles of the CBSL and the political bystanders who have long exhausted their contributory capacities towards any meaningful steps for the revival of an ailing economy.

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Latest comments

  • 4
    0

    Rusiri, be honest “what the —- were you expecting ?? Are you so naive to not to understand this stupid game plan of Rajapaksas. Confuse, Contradict, Musical Chairs of blame gaming —-etc—etc. Here are some simple cases/controversy created by Rajapaksa brothers (for you to understand) 1) Goman 2) Wimal 3) now Bandula 4) Health Minister/Epidemiology and rest 5) Covid death numbers 6) PC deals, weren’t you a participant in that game. 7)Cremation saga between MR and GR 8) Financial agreement with U.S.A 7 ) recent ship wreck/fire 8) Easter killing findings .9) release of Richard on home bail. 10) taking over and selling public property, land, companies, heritage, forest land 11) importing essential food items, ban, policies Lanka is full of it that, now I question people like you and Jehan who seems to be pretending or naive to not to know this BS.

    • 4
      0

      Most of the imports by value are fuel, raw materials, fertilizer, and food. The so-called non-essentials don’t come to even 10%. If the government really wants to save money, it will have to work on the big four. It’s already started on fertilizer. Fuel will have to be rationed soon, and food too. Back to the merry 70’s everybody!

      • 2
        0

        Facts as they are.
        .
        One billion was to be paid by end of the month no countries are ready to lend except Bangalidesh , Belarus or Swaziland…… nevertheless stupid Rajapakshes behave like weeraya to the gullible yet today.no progress at all for the country/nation. 😉😉😉😉😉😉

  • 6
    0

    Aiya says YES but Malli says NO, both say YES then Basil says NO. There is enough players in the family to keep the 7 million and you excited.

  • 4
    0

    Rusiri DAN SEPADA. Gotha said he will get one more term to fulfill his promises and Moody’s promptly downgraded Lankan sovereign bonds to JUNK.

    • 3
      0

      Chive@ not many seem to have guts to raise “
      DAN SEPADA ” today . Mlechchathwaya is governing. All these were predictable, how st6 people should be ? Muslims get cheated by the empty promises being made to them again and again. Asath Sali is imprisoned. IMF ll not tolerate the level of human rights violations that mlechcha Rajapakshes have made to this nation alone within last 18 months. 😐😐😐😐😐😐😐

  • 4
    0

    Chive@ not many seem to have guts to raise “
    DAN SEPADA ” today . Mlechchathwaya is governing. All these were predictable, how st6 people should be ? Muslims get cheated by the empty promises being made to them again and again. Asath Sali is imprisoned. IMF ll not tolerate the level of human rights violations that mlechcha Rajapakshes have made to this nation alone within last 18 months. 😐😐😐😐😐😐😐😐

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