Govt.’s Election Budget And Gota’s Pincer Movement

Finance Minister Mangala Samaraweera delivered an election budget, much against the advise of the IMF

Never a dull moment in Sri Lanka! In a dramatic turn of events replete with irony, National Freedom Front (NFF) Leader Wimal Weerawansa has threatened to break ranks with Opposition Leader Mahinda Rajapaksa if the latter supports the JVP’s move to abolish the executive presidency. Weerawansa left the JVP and threw in his lot with President Rajapaksa during the war; the JVP and Rajapaksa, whose downfall it helped the UNP-led alliance engineer, are today on the same page much to the consternation Weerawansa, where the executive presidency is concerned.

Opposition Leader Rajapaksa, President Mathripala Sirisena and Prime Minister Ranil Wickremesinghe are amenable to the abolition of the executive presidency, for three different reasons. Mahinda is debarred from contesting a presidential election again. His eldest son, Namal, is too young to run for President because the 19th Amendment has raised the minimum age limit to 35 for presidential candidates. The Rajapaksa family is closely knit, but Mahinda does not seem keen to groom any of his brothers for the presidency. Nor does he want to play second fiddle to an Executive President for years even if a brother of his happens to secure that coveted post. He wants to be the Head of state with no one above him. It is only natural that he wants the executive presidency done away with.

President Sirisena is keen to seek another term, but his is in a quandary because the SLFP is split and there is no guarantee that the SLPP will support his candidature. There is also the possibility of a group of SLFP seniors joining former President Chandrika Kumaratunga in the event of Sirisena entering the presidential fray. Given this situation which is far from favourable to him, President Sirisena will be more than happy to have the executive presidency scrapped.

President Sirisena desperately seeks a second term. Who will back him?
President Sirisena desperately seeks a second term. Who will back him?

Ranil can muster the support of the minorities and has the UNP’s solid block vote at his disposal, but it is a worrisome proposition for him to have himself pitted against a formidable candidate like Gotabaya, who has an appeal to the politically active urban middle class. The floating vote is the most decisive factor in a presidential contest. If Gotabaya sorts out his US citizenship issue, wins the ongoing cases against him and succeeds in having Mahinda endorse his candidature and lead his presidential election campaign, Ranil will have his work cut out. If Ranil loses the next presidential election, he will be stripped of party leadership as well. The UNP is full of very ambitious men. It is no surprise that Ranil is also agreeable to the proposal for doing away with the executive presidency.

So, only Gotabaya is keen to retain the executive presidency!

Prime Minister Ranil Wickremasinghe is another presidential hopeful, and with various divisions amongst other candidates, he may stand a chance, but will he be stymied by Gotabhaya Rajapaksa
Prime Minister Ranil Wickremasinghe is another presidential hopeful, and with various divisions amongst other candidates, he may stand a chance, but will he be stymied by Gotabhaya Rajapaksa

Gotabaya’s rise and Mahinda’s dilemma

Whoever would have thought that President Rajapaksa would be beaten by a dark horse in the last presidential race? He is unarguably the most popular person in the Opposition if not in Sri Lankan politics. But will he be able to hold his side together if he makes common cause with Ranil, Sirisena and the JVP to scrap the executive presidency? The signs are that he won’t be if some of the recent developments in Opposition politics are any indication. An alternative power centre is emerging in his camp.

On 23 Feb., all UPFA MPs in the Gampaha District, save Lasantha Alagiyawannawa, were present at Gotabaya’s Eliya foundation meeting. They unequivocally said that they wanted Gotabaya fielded as the SLPP’s presidential candidate this year and they would do everything in their power to achieve that objective.

Gotabaya is using Eliya and Viyathmaga outfits and Opposition MPs for what may be called a pincer movement, on the political front. Having held a successful meeting in Gampaha and securing the backing of the UPFP MPs there, he went all the way to Gelioya, Kandy on March 02. His Eliya event there was attended by all UPFA MPs from the Kandy District, save two. He is likely to campaign in other parts of the country and woo the UPFA MPs and SLPP activists.

What will be Mahinda’s reaction? Will he go all out to help scrap the executive presidency even at the risk of the SLPP suffering a split or will he make a virtue of necessity and support Gotabaya? He will have to make up his mind fast. Time is running out.

He is the only one to have begun his campaign in earnest, yet Gotabhaya Rajapaska has several hurdles to overcome before he can be endorsed.
He is the only one to have begun his campaign in earnest, yet Gotabhaya Rajapaska has several hurdles to overcome before he can be endorsed.

Election budget and macroeconomic realities

The election budget came as no surprise, on Tuesday (05). It would have been plain suicide for the government to present a budget devoid of welfarism and resort to the stringent measures prescribed by the IMF to boost its revenue. The government has, obviously, sought to bite off more than it can chew. The Bretton Woods Twins may have given it some leeway in view of the presidential election to be held towards the yearend.

The proposals for granting the state workers a 2,500-rupee allowance and increasing the number of Samurdhi beneficiaries by 600,000 are bound to aggravate the government’s financial woes further however political advantageous that measure may be in the short run. One of the main criticisms against Samurdhi is that even those who do not deserve state assistance benefit from it due to corruption and lapses on the part of the Samurdhi Officers et al. The proposed increase will make the situation worse, perhaps, with those connected to the ruling coalition receiving benefits. The need for Samurdhi to be better targeted cannot be overemphasized. One can only hope that the targeting errors which characterise the scheme will be rectified without further delay in keeping with the government pledge to adopt ‘objective, transparent and measurable’ criteria.

Housing loans at a very low interest rate (6%) for newly married couples without houses of their own are welcome, but they will be a burden on the state banks which the government is dependent on to implement it pledge. The depositors of these institutions will be affected invariably owing to reduced returns on their investment, and the losses due to default will also be passed on to them in the form of decreases in the interest rates on savings. The soft loans, given without collateral, under the Enterprise Sri Lanka scheme, are likely to have an adverse impact on the balance sheets of the state-owned banks, given the high default rates in the country. It may be recalled that banks are already having a hard time, trying to recover their dues from credit card defaulters.

The lending rates in Sri Lanka are considered very high and they have to be set at realistic levels if investment is to be promoted, but a fine balance has to be maintained without politicians trying to gain mileage at the expense of the state banks.

The proposed interest free loan scheme for the students who fail to secure admission to the state universities is welcome, provided it is implemented properly. The number of students who enter the national universities remains below 25% of those who pass the GCE A/L examination. More than 100,000 students who pass the university entrance examination but are denied admission due to the non-availability of slots in the state universities either opt for higher education in the private sector or seek employment. The new loan scheme will stand a large number of students in good stead. However, the feasibility of the scheme will depend on the proper administration thereof. The government has plunged feet first into implementing the scheme for political reasons; it should reveal the measures to be adopted to ensure recovery. It has to handle public funds carefully.

Welcome as the new loan scheme may be, the government should not consider it a substitute for developing the state universities to accommodate more students.

A careful look at the Budget 2019 makes one doubt the implementability of some key proposals therein. The critics of the government may be justified in calling it an ‘expenditure budget’. The revenue and public investment targets the government has set for itself are overly ambitious.

The tax-mix is becoming increasingly regressive. In 2015, direct taxes accounted for 20.5% of the government tax revenue and indirect taxes stood at 79.5%. In 2018, direct taxes dropped to 16.6 of the total tax revenue and indirect taxes increased to 83.6%. Last year, the government’s revenue forecast of 15.6 of GDP did not materialize, as IPS has pointed out and it had to settle for an actual 14%! A similar situation is anticipated this year as well with the economic growth remaining as low as 3.5%.

These are some disconcerting macroeconomic realities the government has to come to terms without believing in its own rhetoric.

Samantha’s powerful message

US Ambassador to the UN under the Obama administration, Samantha Power, conveyed a powerful message to the rivals of the UNF government on 28 Feb. Delivering the keynote address at a ceremony in Colombo to felicitate Finance Minister Mangala Samaraweera upon the completion of 30 years in politics, she told some home truths to Opposition Leader and former President Mahinda Rajapaksa, who was in the audience.

Samantha Power, the Obama administration US Ambassador to the UN conveyed some home truths Opposition Leader Mahinda Rajapaksa (photo credit, By United States State Department - http://usun.state.gov/leadership/c58902.htm, Public Domain, https://commons.wikimedia.org/w/index.php?curid=28105735)
Samantha Power, the Obama administration US Ambassador to the UN conveyed some home truths to Opposition Leader Mahinda Rajapaksa (photo credit, By United States State Department – http://usun.state.gov/leadership/c58902.htm, Public Domain, https://commons.wikimedia.org/w/index.php?curid=28105735)

Referring to the constitutional crisis last year, she said it had ‘raised alarm bells all around the world.  Whenever US diplomats, past and present, use the word, ‘the world’ they mean ‘the US’, which they consider the world itself. In other words, what she said was the US remained concerned about the power grab in Sri Lanka and was relieved when the status quo ante was restored. She was diplomatic enough not to be critical of President Maithripala Sirisena. Instead, she criticised US President Donald Trump while saying that both the US and Sri Lanka were in the same predicament.

Power, however, did not get it right as regards her claim that during the constitutional crisis here, we had experienced the first-ever spontaneous protests in the streets. Of course, there were demonstrations against the ouster of the UNF government, but they were not spontaneous by any stretch of the imagination. They were staged by those who had links to the UNP or were sympathetic to that party. There were also rallies in support of the Sirisena-Rajapaksa duo and they were held by the UPFA and SLPP supporters.

Power may have been critical of the Trump administration, but she spoke for the US, whose Sri Lanka policy remains unchanged in spite of change of guard in Washington. The Rajapaksa camp has got under Uncle Sam’s skin by getting too close to China. Even if it succeeds in recapturing power in a constitutionally prescribed manner, it will still have to contend with a hostile US unless, of course, it makes a foreign policy U-turn and emulate the UNP, but it will not get any funds from China in such an eventuality.

Thus, it may be seen that the problems that the UPFA/SLPP combine is faced with are not only local but also international.

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