19 December, 2018

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The Fate Of The Rupee: Need For Addressing Issues At Root

By W A Wijewardena

Dr. W.A Wijewardena

A choice involving a Devil’s alternative

In the previous part, we looked at how the Sri Lanka rupee has been continuing its one way journey to depreciation ever since the country gained independence from Britain in 1948. Accordingly, the rupee, which was exchanged for Rs 4.76 per US dollar in 1948, could not be maintained at that level even with the strictest set of import and exchange controls till 1977, and in a partially liberalised regime since then. Before 1977, while changing the value of the rupee through deliberate action from time to time, and relying on import and exchange controls to curtail the outflow of foreign currencies, a massive partial devaluation at 65% over the official rate was put in place, through a system officially called the Foreign Exchange Entitlement Certificate or FEEC system.

In a gradual adjustment to the rate, the rupee had been devalued by the Government by about 86% to Rs 8.83 per dollar by end-1976. By enforcing the FEEC requirement at 65%, the effective exchange rate that had been applicable to non-essential imports had been raised from this level to Rs 14.57 per dollar. In 1977, when Sri Lanka moved away from the previous fixed exchange rate system to a more flexible exchange rate system, the rupee value was set at Rs 15.56 per dollar, adding a depreciation of about 7% to the previous effective rate. Since then, year after year, the external value of the rupee fell in the market, since the country could not earn enough foreign exchange to meet the demand for foreign currencies by Sri Lanka’s citizens, businesses and the Government. The gap was filled by borrowing abroad, but it added a greater burden to the country since it had to borrow more to repay foreign loans when they matured and pay interest on such loans annually. Today, it was noted, that Sri Lanka was in a very critical situation, forcing it to make a choice involving high costs whatever the course of action it would take. Such a choice is called a ‘Devil’s Alternative’.

Foreign exchange crises in the past

Of course, this is not the first time Sri Lanka had to face such a critical foreign exchange crisis. There were many in the post-independence period. On all these occasions, Sri Lanka sought to come out of the crisis, mostly temporarily, by getting IMF support.

All events of Foreign Exchange crises have been settled through IMF support

After the JVP insurrection of 1988-9, the country’s official foreign reserves, mainly held by the Central Bank, had fallen from a peak of $ 522 million in 1984 to $ 291 million in 1989. The former was sufficient to finance 3 months of future imports; but in 1989, it could finance only a little more than a month’s imports. On this occasion, Sri Lanka was rescued by an Extended Credit Facility or ECF of SDR 336 million arranged in May 1991. Bur the rupee was allowed to depreciate from Rs 40 per dollar in 1990 to Rs 46 per dollar in 1992, marking a depreciation rate of some 15%. The next crisis came in 2000, when official foreign reserves fell to $ 1049, which was sufficient only for financing 2 months’ imports. A Stand By Arrangement or SBA of SDR 200 million was hastily arranged to overcome the crisis but the rupee had to be allowed to fall to a level of Rs 96.73 per dollar by end-2002.

The next crisis hit the country in 2008 at the tail end of the LTTE war, when the official foreign exchange reserves fell to $ 2560 million, sufficient for financing imports only for 2 months. IMF rescued once again, through a mega SBA of SDR 1654 million in July 2009.

In 2015, again the country went into a foreign exchange crisis, with a fall in foreign reserves and an increase in its foreign loan repayment commitments. Reserves fell to $ 6019 million, which was still sufficient to meet a declined level of 3 months’ imports. But the short-term foreign loan repayment commitments had increased to $ 4300 million, reducing the import capacity of the freely available reserves to slightly more than one month. The Government, sitting on the problem by looking for non-conventional remedies like getting funds from an anonymous Belgian benefactor, delayed any support program from IMF. When the situation became critical and the country could no longer continue with no action program, it went for a mega Extended Fund Facility or EFF of IMF, amounting to SDR 1070 million in June 2016. But by that time, the rupee had depreciated from Rs 131 per dollar at the end of 2014 to Rs 149.80 per dollar by end 2016. Thus, the current crisis has hit the country while it is on an IMF support program.

The present Government’s pledges for reforms 

Sri Lanka, in its letter of intent addressed to IMF under the signatures of the country’s then Finance Minister Ravi Karunanayake and Central Bank Governor Arjuna Mahendran, had pledged that the Government would undertake six pillars of economic reforms to support the goals relating to medium to long term economic growth to be facilitated by IMF’s EFF.

The reform program promised by the Government had covered measures to improve the Budget and its revenue mobilisation, enhance the management of public finances, undertake reform of the public sector enterprises, introduce a facilitating trade and investment program, and change the central bank’s monetary policy action from controlling money supply to directly attain a pre-planned inflation level.

But the most important reform the Government had pledged has been, in the words of IMF, the following: ‘A return to fiscal consolidation, targeting a reduction in the overall fiscal deficit to 3.5%of GDP by 2020, is the linchpin of the reform program. Rebuilding tax revenues through a comprehensive reform of both tax policy and administration will be key in this regard, supplemented by steps toward more effective control over expenditures and putting state enterprise operations on a more commercial footing’.

IMF support is a facilitator for the Government to take measures for sustained growth

One might wonder why, with such generous IMF support, Sri Lanka could not resolve its foreign exchange crisis permanently. This is because IMF support is a facility given to the Central Bank to temporarily fill the gap in the balance of payments.

It is expected to give a breathing space for the country to introduce growth-friendly economic reforms, to place the economy in a long-term economic growth trajectory. In fact, when seeking the IMF support, governments on their own pledge to implement a series of economy-wide economic reforms. However, when it came to implementing them, the commitment shown by past governments had mostly been partial.

Consequently, all past IMF support programs were mere financing facilities, with little or no impact on the country’s growth momentum. Hence, it is not the IMF support that should be blamed for the country’s failure. It is half-hearted initiatives of the past governments that should take full responsibility for its failure.

Unproductive deficit financing has been the root cause

In term of the pledge given by the Government when it sought IMF support in mid-2016, it had planned to hit the root cause of the present currency crisis. That is, the profligate Government expenditure programs, which have done little to improve the country’s productivity to sustain economic growth in the past, have been the main perpetrator of the continued currency crisis.

This is intuitively understandable since the new incomes created by the Government, by running budget deficits of significant amounts year after year, have flown out of the country by way of persistently rising imports. In a small open economy, this is the worst option which any government would have gone for. Even John Exter, the architect of Sri Lanka’s Central Bank had warned of this policy option in his report submitted to the Government on the establishment of a Central Bank in Ceylon, known as the Exter Report.

But this warning had fallen on the deaf ears of all the Finance Ministers of post-independence Sri Lanka, except M D H Jayawardena, who held the position during 1954-6. It was only during his time, both in 1954 and 1955, that Sri Lanka had a surplus budget in all its history. In all other years, the Government budgets had been characterised by liberal expenditure programs, financed by a combination of borrowing and money-printing through the central bank. These profligate expenditure programs in turn led to increase the country’s public debt on the one hand and generate inflationary pressures, on the other. The final result has been the generation of balance of payments shortfalls on a continuous basis thereby putting pressure for the exchange rate to depreciate in the market.

No space for import controls

Now that the foreign exchange crisis has become acute and the country has been left with a dangerous ‘Devil’s Alternative’, desperate attempts have been made by the country’s political authorities to reduce the import flow as a matter of priority. However, Sri Lanka’s import structure has been heavily skewed toward the import of intermediate goods and investment goods, and not toward the consumption goods.

Intermediate goods, which account for about 55% of the total imports, are needed to provide inputs to production processes. Investment goods, accounting for about 23%, will supply capital goods to enhance the country’s production boundaries. Hence, attempts at curtailing them drastically will bring in the undesired repercussion of stunting future economic growth.

In such a situation, it is the consumption goods that amount to $ 4.5 billion or 22% have been the target for curtailment. There again, when essential food items and medicines are excluded, the consumer goods base that could be curtailed without immediate disastrous effects is reduced to about $ 1 to 1.5 billion. Since all these goods cannot be curtailed immediately, and it is not desirable to do so either, the Government may seek to brand them as inessential imports and curtail them by about $ 1 billion. But that would be an insignificant amount given the enormity of the problem being faced by the country today.

Attack on vehicle imports after the horse has bolted from the stable

In order to curtail the flow of vehicle imports to the country, the Central Bank earlier imposed a 100% margin requirement on all vehicle imports except those for commercial purposes.

However, most of the private vehicles that come to Sri Lanka today are supported by duty-free licenses issued by the Ministry of Finance to Parliamentarians or public servants. The permits issued to both categories had a ready underground market price, ranging from Rs 2 million in the case of public servants, to Rs 3 million in the case of others. The Ministry of Finance had promoted the issue of permits by reducing the frequency from 10 years to 5 years in June 2018.

The result was the proliferation of the permits available for sale in the underground market, denying revenue to Government on the one hand, and leaking the benefit from the true public servants to others on the other. Hence, to support the Central Bank’s move to curtail the flow of private vehicle imports, the Ministry of Finance has last week suspended the use of permits, in the case of Parliamentarians for one year and public servants for 6 months.

But almost all Parliamentarians are reported to have availed themselves of this facility already, the suspension made by the Ministry appears to be non-binding on them. In the case of public servants too, the majority of them have already used their vehicles permits. It therefore appears that the door of the stable has been closed by the Ministry after the horse has already bolted.

Address the issue at the source and not at the end

These measures are therefore providing only a signalling effect to the market. They have tried to fix the issue at the end rather than at the beginning. The more appropriate measure would have been for the Government to go for thrift in the budget. Thrift involves a process of cutting wasteful and extravagant expenditure on one side and improving the revenue base on the other. In a previous article in this series, I had drawn the attention of the Minister of Finance in 2016 to the necessity for plugging leaks in the Government budget by presenting it symbolically in the form of ‘Thrift in the Budget Pot’. That symbol is reproduced again for the guidance of the present Minister of Finance.

Government should reinforce the Central Bank’s measures

The Central Bank alone cannot stabilise the external value of the rupee. For that, the Government should extend a helping hand to strengthen the Bank’s initiatives. That can be done by going for thrift at all levels of the Government. It is not too late for the Government to go for it now.

*W A Wijewardena, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at waw1949@gmail.com    

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Latest comments

  • 3
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    It is reported that Britain borrowed money from king Shah of Iran in 1974 to for its shortfall in budget ..
    It was amount of some millions those days?
    Today; where is Iran’s economy and where is British economy ?
    It was said 1957 Sri Lankan economy was far better than Malaysian economy or for that matter Sri Lanka economy was far better than Singaporean in 1962…
    Now ; where is Singapore and where Malaysia in their economies ?
    Where do we stand ?
    It is not merely one aspects so many factors contributed to the downfall of Sri Lankan economy ?..
    Stupid war ?
    Stupid political leadership..
    For instance mega Chinese projects ..
    Corrupt leaders ..
    Billion of public money is stolen recently by both parties ..
    Crafty international policies of IMF/ world bank international manipulation….
    So; our poor country is enslaved by many factors..
    I wonder if rupees go down more and more …..
    This interest based economy is a curse to humanity ..
    Western countries drink the blood of poor nations via Riba….
    This is what western civilization has given to humanity ?
    Rich get more richer ..
    Poor get more poor ??
    Yet ; Pope is busy with his theology of trinity ?
    Whither this world ?
    End of world is near

  • 0
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    http://www.dailymirror.lk/article/Dr-De-Silva-pulls-out-from-Investors-Forum-in-London-156196.html

    harsha has finally admitted that he would be much more useful if he didnt do his job.

    • 0
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      Dr. Wije, Out of box thinking is needed to stop crash of Lankan rupee. 3 things can be done immediately and through the next Budget:

      1. Cut back on excessive military and defense expenditure which is the biggest item in the Lankan budget. Sri Lanka does not have a war today and does not need such high defense budget, but US and Trump is militarizing Lanka and Indian Ocean in Cold War with China and Fake Disaster and Terrorism threats which should be resisted.

      2.. LK Rupee is crashing because of rising oil prices because of US sanctions on Iran. Sri Lanka needs to follow EU and tell US to go to hell and keep buying cheaper oil from Iran. Also, Iran is a huge buyer of Lankan tea and so is a very important trade partner more than US which puts out fake figures on how much it imports from Lanka
      3. Also Lanka needs to go for Renminibi and Yuan Bonds and not depend on USD.

      Sira must impeach Bondscam Ranil for looting Central Bank. He and Hair dresser Mangala, and Marapona are owned by Washington’s IMF, WB, MCC Economic Hit Men and Fake experts, and dancing to their tunes. This must be stopped by civil society activism, JVP and Sira.

  • 2
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    How do these businessmen and politicians and their families based in this country, have dollar accounts in Switzerland ? Millions have gone out this way. Where is the investigation

  • 1
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    Every body knows that the country is in a depression since the 2013. So, Why Ranil’s Economic expert team prepared a Economic program only after 20025 or 2020 and not from 2017 or so. They have abandoned Carebbean island like investment destinations beczuse those places did not develop. See even after their heavy involvement, Phillipines, pacific islands, and MExico are still third world countries. So, after 2020, Sri lanka will be another Banana republic. Every one will work for a foreign company but Sri lankanized.

  • 0
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    Notice: even MPs, except for Rs 5 million they are spending per MP per electorate even though no one has their own electorate. Then another 20 million is given unde another budget. MPS are also the bosses of their Development authority for the elelctorate to which they get to decide the contracts offered. Some where else, IT SYS, THIS CAR IMPORTING BAN CAME AFTER EVERY MP FINISHED IMPORTING THEIR ANNUAL QUOTA. tHERE WON’T BE ANOTHER TIME TO IMPORT BEFORE THE ELECTION.

  • 2
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    A future possibility is they will import another round of cars just before the electionas this banned year ends up and they have prepared every thing to be in just before the election. So, they have another bundle of money by sale of it. Just watch.

  • 3
    1

    Dr.Wijewardena,
    The economic crisis is not merely the result of imports outstripping exports. We have been living beyond our means for a long time.
    Why does nobody talk about the war, during which shells costing even several thousand dollars each were fired off with abandon, not to mention dozens of aircraft and thousands of vehicles destroyed? All these were paid for with loans. Even 10 years after it ended, we are still paying 300,000 members of the forces. Then there are the hundreds of thousands of government employees and their pensions.
    Why are we unable to export? This goes back to the days when idiotic nationalist politicians stopped the import of Indian “cheap labour” . Now we have plenty of locals who don’t want to labour but prefer 3-wheel driving, and the plantations are ruined. Mangala has seen this, and is proposing importing labour again, as many countries in the region do. But the same idiotic nationalists object.
    I think it would be a good idea to give voting rights even to newly imported workers, to offset the nationalist jackasses.Perhaps two votes each.

    • 1
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      After independence, from day one the country has been living beyond means. I remember having read in Royal Asiatic Society, Ceylon Branch that sizeable savings accumulating from the twenties were squandered away before independence. Shock treatment was given in 1960 with controls and a more severe regime came about in the seventies.
      Yet the concern was not on making the controls work and then remove them, but to have them and still eat them. Hence the contrivance of FEECs in the sixties and CRA in the seventies. When controls went off in the late seventies with a manged float, the rupee sank 20 fold in 40 years..
      Whatever the nomenclature coined by WB and IMF in the last 4 decades, the obsession was to have the cake and eat it. Hence the terminal phase now. However honestly or competently or fervently Dr. Wijewardena may advise, the addiction is to borrow and burrow without limit till rock bottom is reached.
      Dr. Wijewardena like Dr. Erhard of West Germany in mid fifties, may have to Father a new currency and get back to a $ = Rs.5.
      A word about financial profligacy. Till eternity irrigable land is being delivered for paddy. The extent of surplus land is unbelievable. Co-terminously, irrigable land is kept fallow, with an unstoppable annual increment. Any other country in the world?!

  • 2
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    Dr Wijewardena,
    Under “No space for import controls” you have argued or stated that 78% percent of imports are for intermediate goods (55%) and investment goods (23%), thus for necessary purposes. I doubt the available figures or interpretation of them. This is around $16 billion I suppose, perhaps actually less. (1) If such a high ‘import intensive’ inputs are there in the economy, how come that our exports and growth rates are such low? (2) If those goods are not available or cannot produce in the local market, why our local business people are complaining about undue foreign competition?
    Is it possible that our ‘importers’ are importing something else, pretending investment and intermediate goods? Fraud and illicit economy and transactions can be part of our problem including the rupee depreciation. I am not against a balanced budget. But the budget deficit might not be the only root cause.

    • 0
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      Laksiri question ` “Is it possible that our ‘importers’ are importing something else, pretending investment and intermediate goods?”
      You have couched the answer very well indeed!
      ~ “Fraud and illicit economy and transactions can be part of our problem including the rupee depreciation”.
      Gut feeling aka rule of thumb is:
      There is an exponential relationship between, corruption/nepotism/impunity and poverty e(examples Nigeria, Zimbabwe, Haiti, Venezuela.)
      The relationship between poverty and money depreciation is almost linear.(India, Pakistan, Bangladesh, Myanmar, Algeria, Egypt, Greece)
      Above statements are NOT quantitative and the examples not exhaustive.
      .
      ~ “I am not against a balanced budget”.
      Successful modern homes run on budget deficit.
      ~ “But the budget deficit might not be the only root cause”.
      Our problem is because of the culture of……………….

  • 0
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    Rupee’s fate decides innocent people’s fate so politicians, please stop playing with rupees & dollars.

    Do politics with a sense of responsibility without passing the blame for the past era.

  • 2
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    When discussing almost any subject we are forced in to the position of blaming “the government” and the politicians who make it up. Corruption spread down from there.
    .
    I won’t attempt to add comments on the technicalities of Economics; they are beyond my ability to make any except naive comments. However, I am able to understand what Dr. W.A Wijewardenais saying. Once more we must praise his efforts to explain developments to us.
    .
    Yes, we must cut down on unnecessary imports. Such an obvious conclusion that I fear that it will be labelled as naive.
    .
    For another area in which dialogue is necessary, please see this wonderful article:
    .
    https://www.colombotelegraph.com/index.php/the-broken-palmyra-under-the-broken-chair/
    .
    How do we get these messages across to “the ordinay man”? We’re not extraordinary, but we tend to be elderly and English-speaking.

  • 1
    0

    Bring back Cabraal

  • 1
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    All the numbers, picture in the WA W article is summed up in the ending ~ “……. can be done by going for thrift at all levels of the Government. It is not too late for the Government to go for it now”.

    The elites will not take this medicine. Others will be forced to take it.

  • 2
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    Man, man, how can the country move forward when we have such large unproductive free loaders who waste a huge sum of the nationa’s wealth which could have been put to better use. One President, one PM, over hundred ministers, 260 MPs, nine CMs, hundreds of provincial councillors, thousands of local councils and over one millions publics servants, all for 21 millions people. Do they do any honest work at least for an hour a day, no, all of them sucking the blood of the poor people. If these lot worked properly the country could have gone far ahead. Also free education and health care to boot. We new the days are fasting approaching for an economic calamity, why, all are living with borrowed money in Style. This could not be sustainable for long, the days are fast approaching for a collopse, and great pain for all. We knew and had painful experience in the early seventies, eating stale bread with cockroaches, ala, bathala, manioc, endless queues for everything. Even we were planting manioc in the school grounds. Unless a real productive economy is build up, all going to suffer for good, unimaginable pains and miseries. This socialism and hand outs wouldn’t do the work. Venezuela with the largest oil reserve in the world with so much oil wealth couldn’t sustain it when they went in the socialist path with free hand outs. Now their people are scrubbing the dustbins for food. Even Saudi Arabia is cutting back, ask ministers to take 30% pay cut plus so many other welfare measures to the people are being withdrawn. Kuwait has sold their bus company, post office and their municipalities. If these wealthy countries are doing such things to get their economy into better sharp, what a beggary country like ours should do else their going to be hell of commotion in the country, and all have to face terrible miseries.

  • 0
    0

    Dr. Wijewardena has given here a tiny history and his explanation to CB’s Numbers (CB is the leader in number cheating game) and his explanation for the devil’s choice. But we all know all the truth about the Lankawe, which is not out of these numbers. Here are some (Not natures’ but intended human destructive actions, directly carried out or sponsored by Appe Anduwa, even without any attempt to hide their part) flamboyant economic developments carried from 1948.

    1. Disaster on the majestic Mountain slopes: Indian Pakistani Citizenship acts & Sirima-Shastri pact; The human pain endured by the poor up country people on is a permanent curse for Buddhism believers. They came by an Odyssey and went with an Odyssey. During the time their red blood turned the mountain rocks to green tea plantation. Those who read EelaNadu would remember the suffering innocents suffered on their home returning during the border crossing at Mannar on both side of the border. Sirimavo placed the Jewel on the Crown by Nationalizing of British tea companies. Her drama of nationalizing estates was exposed by her own Minister Ronnie De Mel. But the pain on the human suffering is not yet over. The last phrase is yet to come, probably in one or two years, when the Chinese labor sends these women home, for permanent rest. This monumental economical damage of this was never talked in Lankan Parliament. Never a writer wrote a book of this, not just on the human tragedy, but the financial down fall.
    2. Flawless Heists In Corporation: If the plantation sector kept losing in Trillion by mismanagement, every corporation sucked in Billions. Communist DEW’s famous report said more than 250 of these blood sucking mega syringes has/ had been sucking the people blood, but making loss. KKS, Paranthan, Valaichenai, Kanthalai, Ouruvela, Sabugaskanda, Poogoda all left their workers down. Air Lanka, Avant Grade all Royals’s pipe lines to suck the people’s wealth. After these experiments still many Biriyani eating Buffalos want the communism for Lankawe.

  • 0
    0

    3. Lawless Laws: Sinhala only created big cultural vacuum to Entire Island, beyond the unemployment it imposed on Tamils. Tamils had directly learned from the British the office disciplines, work ethics, law and order… all other norms of the modern Democracy and capitalistic market. Sinhala Only did not give any chance of handing over or sign off. The lesson given to the Sinhala employees by the government was how to undercut, sideline and get the Tamils out of the offices as quickly as possible. So Lankawe new generational workers have no ethics or no work rules in the offices and factories. The junior workers did not just learn from Tamil senior workers, they simply overruled during the transition period. The classic new example is, instead of using Mahendran to fix the CB problems, Ranil used him to loot the bank. Now, other than few private companies, the entire land is dysfunctional.
    4. After Hanuman, there is fire on the tail of Sinhala Buddhists: In the epic, it is said Hanuman burned the Ceylon with the fire on his tail to soften the ground so Ram can win the war. The Sinhala Buddhists were burning Tamils properties for 45 year until Leader Pirapaharan stopped it after 1983 Black July. Arson, property looting, Business disruption, employments losses, refugees, displacements are another damage to Ceylon’s economy in trillions. After all government pays for its hooligans to do it. But never one Maha Viyath, who understood the country’s economy, came forward to explain that the governments coming to power consecutively were paying to burn the Country’s economy. 1983 an idiot said on a Radio addressing that Tamils starving and dying is good for Sinhalese. If is not about the criminal element in that, it tells that he knows nothing about a country’s economy. If that of people lead a country where will it go. Compare it with Lee’s leadership.

  • 0
    0

    5. Massive irreparable export of labor: Producing refugees (economical and human right violation) exports labor. Anybody left the country as refugee is not simply a shame and business distrust for the country, the whole production networks is disrupted and even halted. Then there the selling of women as slave workers. If a woman gets experience and makes 4 shirts in an hour, it is minimum $40 in exchange. I doubt if these women are sending $4 hour home back from Middle East. Anybody in the universities understands the subject and gets good grade will maneuver something and leave to a foreign country. All those who go on government scholarships, defy returning and obtain foreign citizenship. Practically Lankawe government is funding for all other countries to earn their foreign exchange by spending its exchange reserves. This is rally filtering the cream. How many international prizes we are reading in the Media for Sri Lankans. But they all are earned while all of them were living outside of Lankawe.
    6. JVP rebel: Sirimavo used JVP to topple UNP. But it back fired on her. This invited foreign troops into the country for security and the effect and idea emancipated out of it is still lingering. In 1987 Indian Army came into the land. 2009 again Kathirgamar went to Vajpayee to bring back the army. This was great destruction during Sirimavo’s time and country went bankrupt after the fight. This repeated in JR and Richard. P time too. There is no guarantee that this will not repeat. There is no known costing done for that. I would put internal destruction $50 billion and waring Cost for $50 billion. A total would be $100 Billion from 1971 to 1989.

  • 0
    0

    7. Genocide war: Indian envoy estimated $400billion warring Cost for Lankawe. JVP as considered internal uprising we did go for two numbers. But Tamils Cost of property and funding would go beyond $500 Billion. As it was on Tamils, government is behind on restoring the livelihood and compensating the war affected people. The Business damage to government is not going to estimate for another 30-50 years. Because of that cost only government started to hide under Chinese loans. From JR’s time there was no socialist prime mister or president was in power. So they all would have allowed the FDI to flow in and country develops from there. In fact the first $2.9 Billion loan Old Royals obtained was from IMF. When government having problem for that loan, India issued the guarantee to that loan. After seeing that only China started to infuse it into Lankawe loans.

    If one calculate the real costs, I do not mean mental and Physical damage, & add it to current total wealth of $80 B then certainly it will go far beyond South Korea’s total wealth.

  • 0
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    To put a long story short, fixing the economy, though a top priority, is never a priority of our elected representatives but to make hay while the sun shines. It is only when the cronies who have a lifestyle of “imports” complained that the rupee is falling and that they cannot sustain that this government woke up from its slumber. This article talks of fiscal policy, which is a must. However, I would have preferred the author to analyze the effect on balance of trade as well and measures of overcoming challenges in that sphere.

    • 0
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      Our political appachis and most “Yes-Sir” top administrators from the
      1960s to now have only delivered a virtual dead carcass by way of our economy. Green, Blue or Red regimes have been no different from each other. That Great political move of De-Monetisation by Dr.NMP during the early 1970s also did not meet expectations. From the late 2,000s the period of Public Plundering began. The political leadership began fattening themselves merely to stay in power. Able and patriotic good administrative officials were otherwise silenced in many ways. What we finally produced is a shattered economy where the US$/SLR parity is around 170 today – and rising. Cost of Living is in shambles. Only the blame game among political parties is alive. In spite of the good intentions of decent, educated citizens like Dr. Wijewardena, the plummeting Rupee is unlikely to be resurrected.

      Sri Lanka is unlikely to escape the Devil’s alternative.

      Vanangamudi

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