By Laksiri Fernando –
This is not a prediction, but the reality. Sri Lanka is already in a serious crisis in people’s living conditions, in the economy, foreign reserves, political system, government’s legitimacy, public administration, foreign relations, and government’s day to day decision making processes. While some are long standing, like the foreign reserves/debt, most of the others are absolutely recent, and are the results of unequivocal incompetence and bad management. Even foreign debt have aggravated under the present administration.
If one draws a balance sheet, a credit can be given to Covid-19 vaccinations, but almost all others are utter failures. At the presidential elections in November 2019, 6.9 million people voted with much hope, but all these are now shattered. The slogan touted was ‘Prosperity and Splendor.’ Prosperity has been acquired by the deal makers and fraudsters; no splendor to the country or the people. In economic policy, the government has zigzagged between ‘state-control’ and ‘free-market,’ and the economy and the people have suffered as a result.
Economy and Inflation
What affects the people in general and their living conditions at present is the thumping inflation in essential commodities. Even according to the Central Bank, the national inflation rate has gone up from 3.7 percent in January 2021 to 7.6 percent in October 2021. As the Trading Economics website has noted, “Prices advanced at a faster pace for both food products (12.8 percent vs 10 percent in September) and non-food products (5.4 percent vs 3.8 percent).” Taking into account the piling up of hardships on people, Moody’s has downgraded Sri Lanka’s sovereign rating from Caa1 to Caa2. Corruption might be another reason for this downgrading.
People’s living difficulties cannot be fully gauged through the official inflation rates. The newspapers and TV interviews with people on the ground have revealed more drastic conditions. Day by day the prices of essentials like rice, tea, milk powder, sugar, bread, coconut, lentils and vegetables have been going up. Men express their anger and women cry referring to their children’s and household needs. One reason for the price inflation is the rapid increase of fuel prices. Undoubtedly the world prices are going up, but in Sri Lanka, the gap between the fuel refinery costs and market prices is also high.
Of course many countries have suffered economically during the covid pandemic. But to alleviate people’s suffering during the lockdowns and after, most countries (if democratic!), have taken measures to supply various payments and relief measures. It is understandable that Sri Lanka has serious public finance difficulties. However, most of these difficulties are due to waste, corruption, and financial mismanagement. The stagnation of salaries in both the public sector and the private sector has also contributed largely to the people’s difficulties.
There have been this zigzag policies and U-turns particularly between August and October this year. First the government imposed a state of emergency on essential food items, including rice and sugar, with controlled prices and started to raid the hoarders. Then it created a huge black market and the prices shot up. The government did not have any control. Then the government withdrew all the gazette notifications on controlled food prices, and the prices again went up!
Even before, since March 2020, import controls were imposed due to foreign currency shortages. Since then and until last month the government was going in a ‘closed economy’ direction. After one year’s ‘experimentation,’ in April this year, Basil Rajapaksa was sworn in as the Minister of Finance to implement a change. It is that change that we are experiencing now! In September this year, Ajith Nivard Cabraal also was appointed as the Governor of the Central Bank changing the previous policies.
Now it appears that we are in an ‘open economy,’ more open than before to corruption and ‘money making’ by politicians, their families and cohorts. This is part of the controversy over the discreet deal between the government and the American New Fortress company.
The old dichotomic controversy between a ‘closed-economy’ and an ‘open-economy’ does not have much meaning today. While an economy should be open as much as possible in market sense and also in investments, the State has a definitive role in holding strategic enterprises like harbors, airports, and the energy sectors. In addition, the State also should offer welfare services to the needy, and encourage people to work hard and contribute to the country’s welfare. To motivate people for work and entrepreneurship, the politicians should exemplary, and free from corruption and misdeeds.
It was in April this year that the President suddenly declared a complete banning of chemical fertilizer importation. It was like a military order. That was the flaw. There is no question that properly composed organic fertilizer is better for the environment and people’s health. However, that transition requires much time, planning, education to the farmers, and necessary arrangements to be made to produce (or import) reliable organic fertilizer.
The immediate effect was on the tea industry and vegetable cultivation. Then came the Maha paddy cultivation season in September. Without fertilizer, chemical or organic, farmers could not continue cultivation. Except in certain areas, the situation is the same today. Although the agriculture contribution to GDP is (under) estimated at eight percent, over 28 percent of the population depend on agriculture and 82 percent of the population lives in rural areas.
In President’s speech in April, he said “the annual sum of USD 400 million spent on fertilizer imports could be used to uplift the lives of the people.” Now what has happened? Perhaps realizing the failure to suddenly produce organic fertilizer locally, the government then decided to import 99,000-tonnes of ‘organic’ fertilizer (solid and liquid) from China. Perhaps there were other reasons.
This fertilizer has proved or alleged to be more harmful than the chemical fertilizer! The government also decided to import 30,000-tonnes of potassium chloride from Lithuania suddenly, but called it ‘organic fertilizer.’ Sri Lanka also had to so far import 3.1 million liters of nano liquid fertilizer from India. All these new foreign contracts may have had some commissions to some politicians.
Within the last three months, fertilizer costs have rocketed to nearly USD 150 million and if calculated with previous imports (Jan-July), definitely exceeding the previous annual cost of fertilizer imports ($ 400m) that the President quoted in April. If these figures are incorrect, it is up to the government to reveal the correct figures to the people.
Elevation of Gnanasara?
The government’s mistakes, blunders or offenses do not limit to mismanagement of the economy, cost of living, or the ‘commission seeking’ deals by the ministers and the appointed officials. The social and public policies are equally disastrous. A recent case in point is the appointment of (Ven.) Galagodaatte Gnanasara as the Chairman of the so-called Presidential Task Force on ‘One Country, One Law.’
‘One country, one law’ is not the correct formulation, if it refers to bringing the civil codes or personal laws in the country to some uniformity or conformity. ‘Uniform civil code’ or ‘common civil code’ might be better formulations. ‘One country, one law’ should refer strictly to offering the validity and application of laws equally to the ‘powerful and the powerless’; the ‘politicians and the ordinary citizens’; and to ‘the rich and the poor’ etc. This is the way the majority of the people must have understood the slogan at the last elections.
Gnanasara undoubtedly is not suitable to either of the tasks. He is appallingly partial, aggressive and a violent man. He is the leader of the Bodu Bala Sena (Buddhist Power Army) with proven discordant behavior. He has been involved in many violent acts and was in jail for six months for threatening a woman in courts. What kind of law reforms one can expect from this type of person? In addition to this dubious Chairman, this so-called 13 member task force do not have a single woman, a Tamil or a Christian.
There is extreme danger that the purpose of the above moves, on the part of the government, would be to instigate and fuel religious and ethnic tensions in the country. This is in order to possibly tighten a stronger military or authoritarian grip on the political system as the economic and political policies of the government have been utter failures. Galagodaatte Gnanasara has close affinity and relations with Myanmar’s extremist monk, Ashin Wirathu, who was a strong supporter of the military coup in Myanmar.
However, in Sri Lanka, the democratic traditions of the country, people’s awareness, trade union movement, independent media, and civil society organizations are stronger than the spoiled and corrupt political leaders. There are some good people both in the government and in the opposition. It is also unlikely that even the military in general could be bent totally on the ‘whims and fancies’ of political leaders. Let us keep our fingers crossed.