By Jehan Perera –

Jehan Perera

The stock market boomed after the much awaited domestic debt restructuring programme (DDR), but the national economy continues to be in deep trouble. It does not seem to have the productive capacity and the general population does not have the purchasing power to lift itself out of the doldrums. Even those at the top end of the production chain, the owners of factories, are lamenting the lack of consumer demand for their goods and services. People do not have the money to purchase their output. Examples are given of three lorries per day leaving the factory whereas 60 went out prior to the economic collapse. Or of factories that have laid off 50 of their 200 employees. The newspaper delivery man said that the sale of the state-owned newspapers by him has slumped. He explained that offices used to buy them and said 15 of the 18 offices he distributed them to in the neigbourhood had closed.

The government is doing its best to meet international requirements for economic revival. The international community can make the difference in terms of a major inflow of resources that can kick start the economy. The IMF’s approval is the international standard from which other possible international economic partners get their assurance. By engaging in the DDR process Sri Lanka has begun the arduous journey of meeting the IMF-set economic targets. The IMF sets the targets for economic sustainability, be it by increasing tax revenue or decreasing the budget deficit by a recommended percentage. It is the Sri Lankan government that is expected to decide how it will meet those targets. The government has chosen a path that attempts to deflect the costs away from the corporate sector and its supporters without an attempt being made to recover stolen assets.

One of the main casualties of the restructuring process is the social welfare programme that successive governments sustained over the previous decades. Aswesuma seeks to provide benefits to two million poor and vulnerable families. LIRNEasia’s national survey has shown that four million individuals have fallen into poverty since 2019, and that seven million people are living in poverty at present. It can be anticipated therefore that the selection process will and has caused enormous strife, as there is dispute at the local level about who should be a beneficiary and who should not. Another major casualty has been the EPF/ETF pensions. The taxing of the pension funds and the reduction in the interest they will receive is causing less pain at the present time, but it will surely cause pain later on when those who retire find that the money they receive does not go very far.

Volatile Situation

President Ranil Wickremesinghe’s achievement is that he has been able to lead a government that is composed of ruling party members who were and possibly remain his political opponents. He is getting them to pass laws that will lead to economic restructuring that is causing pain to the majority of people. Opposition and SJB leader Sajith Premadasa has pointed out that the EPF pension fund would lose as much as 12 trillion rupees (USD39 billion) by 2038. Citing a report by economic think tank Verite Research he said “When the heads of the EPF and the ETF were questioned by the Public Finance Committee it was found that this government had not consulted them before introducing the DDO plan. No government body has assessed the losses to be borne by the workers. The Verite Research in its assessment says that the amount would be more than 12 trillion rupees.”

The ruling party members would be aware of the economic discontent among the masses of people who cannot make ends meet. Public opinion polls show that the government, and the president in particular, are gaining in popularity, but it also shows that the overall popularity level continues to be low. The approval rating of the government doubled to 21 percent in June 2023 from the 10 percent that was recorded in both February 2023 and October 2022, according to the latest round of the Gallup style ‘Mood of the Nation’ poll of Verité Research. This may explain the government’s determination not to conduct the local government elections that are now four months overdue and to postpone elections infefintely. These are disturbing signs of a movement towards unsustainable autocracy if the provincial elections are not held any longer and if the local polls are also postponed indefinitely.

In these circumstances, the polarization between the government and opposition is likely to grow. The government is passing new laws and seeking to pass controversial ones such as resurrecting the local government authorities in lieu of holding fresh elections, restricting media freedom and expanding the scope of anti-terrorist laws, using its majority in parliament. However, this majority was elected in a different time before the collapse of the economy. Now that the government’s popularity is only at the 20 percent level it can be seen that the masses of people will not be supportive of what the government is doing. This creates a potentially volatile situation in a country that has been long accustomed to changing unpopular governments at elections. It is not reasonable to expect the people to remain patient forever, it could well lead to another Aragalaya.

Required Cooperation

The prevailing situation in France is a warning of what can happen in Sri Lanka unless economic hardships facing the people are speedily mitigated. France has been experiencing a wave of riots and looting since a police officer shot and killed a 17-year-old boy of Algerian origin, after a car. The incident sparked outrage and protests among people who accused the police of racism and brutality. The unrest soon spread to other cities across the country, including Paris, where rioters clashed with the police, set fire to cars and buildings, and ransacked shops and businesses. More than 3,000 people have been arrested so far, and the damage is estimated at over USD 1 billion. Many of the rioters are young people who feel marginalized and hopeless in a country where the police are accused of using excessive force and targeting minorities.

The problem in Sri Lanka at the present time is that the government does not have the economic resources to distribute as social welfare to mitigate the economic dislocations caused by job losses and the fallen value of the rupee. The World Bank estimates are that the national economy which shrank by more than seven percent last year will continue its downward spiral by a further fall of three percent this year. The resurrection of more than 8000 local government councilors from dissolved local authorities in lieu of elections, as proposed by the government, will be outrageous to people who have lost their jobs and are teetering on the brink of economic survival. It will be a reminder of the Aragalaya’s uncompleted mission of sending the rogues home and effecting a system change.

At a recent public event, President Ranil Wickremesinghe emphasized the importance of avoiding misleading arguments and instead urged the entire opposition, led by the opposition leader, to join the government in addressing the country’s challenges. There is one area in which the opposition can and must support the president and that is in resolving the ethnic conflict and reaching the goal of national reconciliation. Such a success will have the potential to mobilise international support on a large scale. The president has demonstrated commendable courage and vision in this area. Resolving this problem will unify the country and translate into renewed international confidence in Sri Lanka’s future and the economic investments that can flow in as a result instead of another downward spiral like with the economy.