By Lankathilaka
Most Sri Lankans will be hoping that finally, the ‘aha’moment has dawned following Finance Minister Basil Rajapakse’s comment this week to the London based Financial Times that the government ‘is contemplating a programme with the International Monetary Fund (IMF). The minister also went on to say that they are negotiating with bondholders and acknowledged the debt to creditors, hinting at an adjustment or restructuring which with his usual lackadaisical style said ‘could be some type of thing’ or ‘something like that’.
For weeks now, the minister and his governor in the Central Bank Ajith Nivard Cabraal have kept the Sri Lankan polity in suspense about how they intend to reboot the country’s sparse coffers. They have remained stubborn and stoic in the face of a barrage of advice from economists about measures which should be taken to prevent the country having to face an economic apocalypse.
The country’s foreign reserves which nosedived into the red in November last year to US$ 1.6 bn is now skimming the surface with official reserves at US$ 3. 1 bn which includes a 1. 5 bn Yuan denominated swap. Useable reserves of US$1. 5 bn and another US$ 400 mn swap this month from the Reserve Bank of India will bump it up slightly to US$1. 9 bn but with liabilities for this year totaling about US$6. 9 bn the gap between existing reserves and payments will be around US$4 bn. The critical state of Sri Lanka’s dollar account has started to tell on a spectrum of goods and services. Uncertainty around the availability of essential commodities like rice, milk powder and cooking gas have become common place for the consumer who is also literally in the dark with power cuts as the government struggles to find money to purchase fuel to run the power plants to generate electricity. Lately, cracks have started to appear in the construction industry, hamstrung without a steady supply of cement or because what little is in the market is sold at black market prices. To make matters worse there have been warning about an impending shortage of medicines.
It was long felt that the president’s former secretary P.B Jayasundara and Cabraal were the stumbling blocks to reaching out to the IMF. But now with Jayasundara out of the way following his resignation and what appears to have been an unappreciativefarewell at which even his boss had reportedly not shown up, it appears that Cabraal might be the reason for Sri Lanka to fight shy of going to the IMF. While Basil contemplates a deal with the IMF, Cabraal’s statements about his plans to salvage the economy have been at odds with that of his minister. His latest solution is that it will be a ‘homegrown one’. The fumblings of the finance minister and his first in command whose responses to Sri Lanka’s grave economic crisis has been unsustainable measures like currency swaps with friendly countries may very well have reduced Sri Lanka’s options of throwing herself a lifeline.
Economist Nishan De Mel who heads the local think tank Verite Research told the BBC that it is too late now to expect any country to come to Sri Lanka’s help. The IMF too will also not be able to lend to Sri Lanka because of the unsustainability of her debt.
The start of Sri Lanka’s current economic woes can be traced to not that far back in 2019 when a newly installed President Gotabaya Rajapakse announced a series of tax cuts. The Value Added Tax which in 2018 had accounted for 24 percent of government revenue was revised from 15 to 8 percent. In other far reaching changes, the threshold for VAT registration was increased to 300 million rupees, the Nation Building Tax was scrapped and income tax rate for the higher income tax bracket was lowered from 24 to 18 percent. Global credit rating agency Fitch, which downgraded Sri Lanka soon after the tax cuts to a Negative from Stable, estimated that the scrapping of the NBT alone could lower revenue by as much as 2 percent of GDP without off– setting measures. With more rounds of down grading by credit rating agencies Sri Lanka was inched out of the international money markets although every downgrade was hotly contested by the Central Bank as the country tried to have a foot in through the door. Parallel to this, Sri Lanka’s sources of income went on drip feed mode as earnings from tourism and foreign remittances fell and the Colombo Port City, the new cash cow, did not bring in anticipated flows.
Speaking on Newsline Dr Harsha De Silva, an economist and Samagi Jana Balawegaya MP points out that the economic crisis has deteriorated so much that the country will not be able to resurface without a debt restructuring which will have to include negotiating with private creditors for a moratorium. It will also require a debt workout with an increase in interest rates to allow the rupee to find its value. The restructuring will also have to go deep to enable the economy to sustain shocks, like big increases in US interest rates, in the future.
A major hallmark of President Rajapakse’s governance has been what has now come to be commonly known as the ‘ reverse ‘ policy. In his short tenure so far, critical policy decisions such as the fertiliser issue and food security, price controls on essential food stuffs and even the sacking of government servants have been reneged on. They have been experimental debacles that have resulted in thousands of human casualties and come at a cost to the tax payer and the welfare of the people. While there won’t be raised eyebrows among a now de sensitized population if history is to repeat itself during the protracted resolution of the country’s economic crisis as well, what will be worrying nevertheless will be the lack of accountability and breach of trust by the country’s leaders in matters of collective responsibility.
Meanwhile, the death of a prisoner in the Kadurugasara open prison earlier this month has turned the spotlight once again on the administration of prisons in the country. The matter would almost have been brushed under the carpet had it not been taken up by The Committee for Protecting Rights of Prisoners (CPRP) who immediately called a press conference to brief the media about the incident.
According to information given by prison officials to the dead man’s family, the 49– year old prisoner who had already served nearly one year of his three year sentence had died on the 13th of January after he escaped from prison and was assaulted by villagers. The family was also told the inmate had suffered a heart attack. The CPRP which has been following up on the incident closely note that neither the other prisoners or villagers recall such an incident taking place. The CPRP state that the man had rung his family on the 10th and told them that it is unlikely they will see him again. The organisation’s lawyerSenaka Perera alleges that a jailer in the prison had asked the man’s daughter, who went on family visits to see her father in prison, for sexual favours which had not been reciprocated by the girl and that this could be the origins of the issue. The denial of the incident three days later on the 16th by Chandana Ekanayake, the Commissioner of Prisons Administration, is reminiscent of his denial of the high profile prison break in last year by State Minister of Prison Management and Prisoner’s Rehabilitation, Lohan Ratwatte. The Ratwatte incident has now been hushed up and not much is known about the multiple inquiries that were initiated into it including one by retired High Court Judge Kusala Sarojini Weerawardene on the instructions of the President.
The post– mortem which was carried out on the deceased prisoner was inconclusive and the matter is now in the hands of the government analyst. The inquest into the death is being heard in the Embilipitiya magistrate’s court with a second hearing scheduled for the 1st of February.
In ongoing investigations into the hand grenade which was found in the All Saints Church in Borella earlier this month, a 65 –year old retired doctor was arrested in the Panamura area in Embilipitiya.
Initial investigations have revealed that it was this doctor who had been working in the Piliyandala District Hospital before retirement and had later run a private medical clinic close to the hospital, who had handed over the hand grenade and money to the first suspect. The motive for this is yet to be found out.
The other suspect who was arrested in connection with the incident has once worked as the security guard in the doctor’s private practice.
The hand grenade which was discovered inside a prominent private hospital in Narahenpita and the bomb in the Bellanwila temple are also alleged to have been planted by this retired doctor. However, the police have said that they are yet to investigate and confirm this.
Meanwhile Malcom Cardinal Ranjith who is the head of SriLanka’s catholic church and continues his crusade for justice for the Easter Sunday bombing has questioned the integrity of the police after they watched only half and not the full CCCTV footage which clearly showed a man walking into the church and leave what could purportedly have been the grenade.
