Sri Lanka heading for serious crisis! By Dr. Laksiri Fernando

This is not a prediction, but the reality. Sri Lanka is already in a serious crisis in terms of people’s living conditions, the economy, foreign reserves, political system, government’s legitimacy, public administration, foreign relations and the government’s day to day decision making processes. While some are long standing, like the foreign reserves or debt, most of the others are quite recent, and are the results of unequivocal incompetence and bad management. Even the foreign debt situation has worsened under the present administration.

If one draws a balance sheet, the current administration can be credited for COVID-19 vaccinations, but almost all other endeavours 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 Splendour.’ Prosperity has been acquired by the deal makers and fraudsters; no splendour 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 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, 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-19 pandemic. But to alleviate people’s suffering during the lockdowns and after, most countries (if democratic!) have taken measures to offer various payments and relief measures. It is understandable that Sri Lanka has serious public finance difficulties. However, most of these difficulties are the result of waste, corruption, and financial mismanagement. The stagnation of salaries in both public and private sectors has also contributed considerably to the people’s difficulties.

Zig-zag policies

There have been these zigzag policies and u-turns, particularly between August and October this year. First the government imposed a state of emergency with regard to essential food items, including rice and sugar, with controlled prices and started to raid hoarders. It created a huge black market and the prices shot up. The government did not have any control. It 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 went in the direction of a ‘closed economy’. 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 we are experiencing at present!

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 dichotomous controversy over 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 maintaining strategic enterprises like harbours, airports and the energy sector. In addition, the state also should offer welfare services to the needy and encourage people to work hard to contribute to the country’s welfare. To motivate people towards work and entrepreneurship, politicians should be exemplary, and free from corruption and misdeeds.

Fertilizer crisis

It was in April this year that the President suddenly declared a complete ban on chemical fertilizer importation. It was like a military order. That was the flaw. There is no question that high quality organic fertilizer is better for the environment and people’s health. However, that transition requires much time, planning, raising of awareness among 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 live in rural areas.

In the 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 lack of capacity to produce organic fertilizer locally, at such short notice, 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 is alleged to be more harmful than the chemical fertilizer! The government also decided to import 30,000 tonnes of potassium chloride from Lithuania, but called it ‘organic fertilizer.’ Sri Lanka also had to so far import 3.1 million litres of nano liquid fertilizer from India. Some politicians may have taken commissions from all these new foreign contracts.

Within the last three months, fertilizer costs have rocketed to nearly USD 150 million, and if calculated with previous imports (January to July), definitely exceed 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 offences are not limited to the mismanagement of the economy, cost of living, or the ‘commission seeking’ deals by ministers and appointed officials. The social and public policies are equally disastrous. A recent case in point is the appointment of (Ven.) Galagoda Aththe 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 granting, the civil code or personal laws in the country, 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 powerless’; the ‘politicians and ordinary citizens’; and the ‘rich and poor’. This is the way the majority of the people must have understood the slogan at the last election.

Gnanasara undoubtedly is not suitable to perform either of the tasks. He is appallingly partial and aggressive. He is the leader of the Bodu Bala Sena (Buddhist Power Army) with proven discordant behaviour. He has been involved in many violent acts and was imprisoned for six months for threatening a woman in the courts. What kind of law reforms can one expect from this type of person? In addition to this dubious Chairman, this so-called 13-member task force does not include a single woman, Tamil or a Christian.

Conclusion

One wonders whether the purpose of the above moves, on the part of the government, is 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.

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. Let us keep our fingers crossed.