By Kumar David –

Prof. Kumar David

Several months ago, I forecast that the most likely election scenario in 2024 was a Presidential stand-off between Anura Kumara Dissanayake of the JVP/NPP, and Ranil Wickremesinghe leading a UNP consensus group. The latter view was based on the assumption that Sajith Premadasa, the SJB and sundry pro-UNP factions would in the end all rally round a consensus group mobilised around RW. They would have to promise Sajith the position of Prime Minister and nomination for the Presidency next time. I continue to hold that this forecast is valid.

Media reports in the last fortnight suggest that a consensus grouping is indeed consolidating behind RW as the only feasible way to retard enthusiasm gathering among young people and underprivileged social classes who support Anura. Indeed, there are numerous schemes and diversions in play at the moment on the RW-UNP-Sajith axis. It seems that the ‘Economic Council ‘of the SJB has challenged the ‘Economic Council’ of the NPP for an exchange of views on how each side plans to overcome sovereign default. A GL Peiris-led splinter group of the SLPP has signed an MOU with the SJB about forming an alliance for the upcoming elections. RW has directed ITN to live telecast Sajith–AKD debate! What’s in it for him? There are many irons in the fire and many distractions at play in this year of upcoming elections.

Secondly, I also suggested months ago that the Parliamentary Elections would be a more contentious than Presidential Elections and the chances of either the UNP-group or the NPP/JVP alliance securing enough seats to form a stable government was not good. The NPP’s choice for Prime Minister is likely to be Harini which is good as I see no other viable candidate. At this time of writing, I feel no need to change either of these assessments regarding the Presidency or Parliament. Therefore, the purpose of this essay is to discuss the next step.

For left-minded people, including me, an Anura Presidency and a Harini Prime Ministership are desirable options. Desirable but not easy to achieve, and my objective today is to assess the difficulties standing in the way and suggest ways to address them. So here goes.

First, an anecdote related by a World Bank official and prominent businessman living in the US. He and a few industry heads (all capitalists) invited Anura Kumara for a private dinner and informal chat. Their conclusion was that Anura’s grasp of economics and public finance is limited. In the view of these business people, he used worn-out political cliches like “we will eliminate corruption” and “we will to alleviate poverty”, but gave no meaningful or concrete programme details on how to set about it. It is of course to be expected that the big bourgeoisie dislikes Anura, nevertheless the NPP needs to foster a core of knowledgeable economists and intellectuals around itself.

The difficulties confronting the JVP and the NPP are as follows. There is nothing new in this list; it has all been discussed before, but I repeat it as a starting point.

a) There is fear in the minds of the urban and rural middle-classes, hence a majority of the population, that the JVP may resort to violence again (1971, 1983, 1989, murder of Vijaya Kumaratunga, attempts to assassinate Vickremabahu and destroy the NSSP, and so on).

b) Linked to (a) is concern that future changes of government by regular democratic elections will not be permitted. (Has the JVP made any explicit promises in this respect?)

c) Will the Tamil and Muslim communities trust the NPP? Why should they? What does the NPP program say about devolution? What reason is there to believe that the JVP’s anti minority stance has changed?

d) To the best of my knowledge the NPP has not published a comprehensive economic plan and programme. I understand internal discussions are taking place but there has been no public offering. (I draw attention to the distinction from 1970 when the United Front presented a detailed economic document in preparation for the election).

e) There are negative comments made about the JVP/NPP leaderships’ depth of knowledge about economic matters. That does not matter if leaders are backed by well-informed economic teams, but doubts are being cast on this as mentioned in the above anecdote about Lankan-US businessmen.

Items (a) to (d) are manifestly political and belong to that dimension. Item (e) however is in the economic category and I will now briefly comment on Sri Lanka’s economic situation – international and domestic – with emphasis on the former.

The foreign debt stock by major lenders as it was in 2019 is shown in the diagram. The total debt shown in the figure is $45 billion (may be $50 to $60 billion by end 2023) and nearly 50% is composed of “Market Borrowings” held by International Sovereign Lenders. These are capitalist lending funds, trusts and other profit maximising agencies charging interest rates of 7 to 8%.

One can plead with other countries (China, Japan and India) and with multilateral lenders such as the ADB and the World Bank but market lenders are in it for the profit so they won’t (can’t) make charitable concessions. We are caught by the balls to use a familiar expression.

And now let me say a few words about Bonds and Bond Yields

Bonds

The Total Bond yield is the amount of return an investor can expect on a bond (lending to a country). The “Coupon Rate” and “Current Yield” are added together to give the Total Yield. The lousier a country’s economic prospects the higher the Total Yield without which investors won’t lend to a basket-case country. A bond rating, given to a country by a Rating Agency, indicates the risk involved in purchasing a country’s bonds. Ok, that’s all laymen like you and I need to know about nursery level political-economics.

All (inverted) Bond yields are 25 to 30%; very high!
Source: Central Bank
(Figure shows Inverted Bond Yields)

All of the above are matters that a trained economist can take in his stride and the NPP can obtain ample guidance. So why am I making such a song and dance about it? Well, the immediate past hangs heavy on this country like a pall. Remember Gotabaya Rajapaksa, president hardly a decade ago?  You can’t write him off as a bad dream. Gota may be a moron whose brain has liquified by too frequent banging of boots on hard ground, but it did happen, recently.

Remember Gota’s Viyathmaga; the imbeciles gathered around him? Pure, unmitigated imbeciles! I know a few of them; “qualified” engineers and scientists! They destroyed the country’s agriculture by resorting to a wacky version of organic farming and much else. For a full accounting of the Viyathmaga imbecile tragicomedy read Sarath De Alwis in Colombo Telegraph, 11 March 2017. The NPP cannot afford to take anything for granted since all this happened only a few years ago!

For example, Gota made large tax cuts causing budget deficits to soar. These included an increased tax-free threshold, resulting in a 35% decline in taxpayers, cutting VAT to 8%, reducing corporate tax from 28% to 24% and abolishing Pay-As-You-Earn (PAYE). The massive loss of revenue prompted Rating Agencies to downgrade our sovereign credit-rating; Bonds collapsed. To cover spending the Central Bank printed money in record amounts ignoring advice to stop money printing and instead hike interest rates, raise taxes and cut spending. On 6 April 2022 alone CBSL printed 120 billion rupees, the record for a single day. The paper-money that was added to financial markets in 2022 increased to Rs. 433 billion. Money printing led to an economic implosion.

JVP/NPP does not need to have in-house all the technical savvy to deal with all these issues. My argument, ad nauseam in the last few months has only been that it must acquire people with these abilities around it. It needs them to govern. Getting power is one thing but expertise is needed to govern, to deal with external finances, to formulate import-export policy, to run the Central Bank, trade ministry, education, health and state infrastructure.

Ranil and the newly energised UNP consortium is taking the “IMF line” – cutting expenditure by reducing people’s consumption, raising prices of essential subsidies such as electricity, limiting welfare expenditure and cutting back on education and healthcare. The business community (capitalist class) is cheering on.

The NPP must counter this by more tangible proposals. Bland statements like “we will eliminate corruption” and “we will to alleviate poverty” are inadequate. The NPP needs to rise to the challenge.