A Republic Of Chaos By Ameer Ali –

From a “free Sovereign and Independent Republic” in 1972 followed by a “Democratic Socialist Republic” in 1978, Sri Lanka, after nearly fifty years of tumultuous political and economic experiments has been transformed into a republic of chaos. The descent towards this chaotic republic in all its political, economic and social manifestations was accelerated during the two years of Gotabaya Rajapaksa Presidency.

Politically, the parliament, with too many of its current members with low level education and rowdy character, and who otherwise would have found it difficult to find a decent job in the open market, has lost its past prestige and excellent debating caliber, and for all intents and purposes been reduced to an assembly rubber stamping the wishes of an all-powerful executive president. It was the former Prime Minister Ranil Wickremesinghe who once noted that several of his colleagues wouldn’t even know the difference between James Bond and commercial bonds. That decline and indiscipline is also reflected in the cabinet of ministers where the principle of collective responsibility has been thrown out of the window and each minister seems to be a law unto him or herself. Perhaps it was this chaotic parliamentary politics that must have added one more reason for provoking the President to prorogue the parliament before he left for Singapore. There is talk of changes in the cabinet in the new year, but if GR is going to choose from the existing stock of parliamentarians there cannot be much improvement.

More than the chaotic politics it is its corollary in the economic arena that stands out preeminently. Latest figures published by the Department of Census and Statistics show an increase of 4.4% in GDP over the first nine months of 2021. At the same time, after four quarters of expansion the economy has contracted by 1.5%. How does one resolve this contradiction? First of all, these macro statistics are meaningless, firstly because there are questions about methodology of computation, secondly, because they are unidimensional averages and thirdly, because they do not actually reflect the raw situation at ground level where the market and households interact.

While economic problems at macrolevel themselves are alarming especially with rapidly depleting foreign reserves and mounting foreign debt, it is at the microlevel that retail outlets and households are facing the real crunch. Import restrictions and lack of foreign exchange for wholesalers result in empty shelves at retail outlets with chronic shortages in merchandise stock. This situation has been made worse by artificial market rigidities caused by mafia operators uncontrolled by the government. In combination, they have caused unpredictable weekly if not daily increase in retail prices, loss of employment opportunities in the private sector, fall in household income, wide spread poverty and conditions of near-starvation creeping into households. Starvation in the past was an exceptional phenomenon in Sri Lanka, which is now threatening to become normality.

The President, the government and their cronies conveniently and hypocritically, blame the pandemic for all these difficulties. But they made it worse by their misguided economic policies based on empty idealism and populist politics. While the president concentrated all his attention in consolidating his authoritarian hold on power ably assisted by the military, his government took the easy way out by resorting to borrow and spend in search of a mirage of “prosperity with splendour”. Shamefully, the president’s handpicked Central Bank chiefs, the economic theoretician Lakshman and his successor and accountant Cabraal, provided an aura of theoretical substance to an otherwise uncoordinated and contradictory set of policies. These chiefs advertised the strategy as an alternative way towards development, without elaborating its details, and hoped to achieve that development simply by printing money to provide liquidity. To minimize the inflationary effect of this excess money printing, they quite cunningly excluded food prices from calculation. It was in short, a short-sighted strategy with little awareness of how it was going be received by international observers.

While President Gotabaya Rajapaksa’s wreckage of democracy with its attendant values of freedom, justice and human rights sounded alarm bells at UN level, his government’s economic mismanagement and resulting chaos made international financial markets lose confidence on the economy and, unsurprisingly, credit agencies began downgrading the country’s credit risk, which warned foreign investors of Sri Lanka’s rising riskiness. (Just recently, Fitch has downgraded the rating by one notch to CC). Although the Central Bank kept on fuming against the agencies, the warning certainly was heeded by investors. As a result, between 2019 and 2021 when every country in Asia enjoyed inflows of FDI and increased their foreign reserves only Sri Lanka missed out and consequently suffered a decrease in reserves. The country is now on the verge of bankruptcy.

A panic-stricken Finance Minister flew out to India begging for financial assistance while his budget was still being debated in the parliament. This never happened before. It is now understood the Prime Minister with a few Muslim parliamentarians is also scheduling visits to Arab countries, seeking loans or currency swaps to manage the chaos. In spite of all this negatives, it is inconceivable that this regime is still unwilling to approach the cheapest option available: the IMF for a bail lout. One obvious reason is that they do not want to accept the conditions that would be attached to its assistance, because that would tie up government’s hands from dishing out economic privileges and concessions to its coalition factions and mafia moguls. Chaos is therefore set to continue and people would suffer in consequence.

There is also a social dimension to this chaos. This is a post-independence legacy inherited and made worse by the current regime. While pundits and policy advisers are discussing and debating about solving recurring trade and budget deficits, few seem to be willing to talk about the growing social awareness deficit in the country. Social awareness is the ability to understand and feel the people and social groups around you and the ability to interact with them in the most efficient and proper manner. In a multi-ethnic, multi-religious and multi-cultural Sri Lanka social awareness is an asset to be preserved and developed that helps enriching other areas like the economy. That awareness, which was in abundance once upon a time and played a positive role even during the colonial era has been deliberately allowed to run into deficit by post-independence politics. The present inter-communal disharmony is the creation of a divisive and intolerant majoritarian political ideology which, under the present regime has received tremendous impetus. The latest gimmick of appointing a task force to investigate measures to translate the so called one-country-one-law mantra into workable reality, placed it under the chairmanship of an ethno-religious cleric is certainly not going to enhance social awareness.

On multiple fronts therefore, Sri Lanka has become a republic of chaos, and a basket case of economic mismanagement. Political change, although a necessity, is itself not sufficient unless the new regime has a credible economic program to implement. IMF has to be a partner in the new experiment. Even the leftists like JVP and NPP have to swallow this bitter pill. There is also a need for an accommodative national philosophy which would unite all communities and enhance the nation’s social awareness. It is a tall order to ask but has to be accomplished in the interest of future generations. Will the current exercise in constitution making pave the way for a new era?

*Dr. Ameer Ali, School of Business & Governance, Murdoch University, Western Australia