By Vishvanath

The Asian Development Bank (ADB) has expressed fear that uncertainty caused by impending elections could take its toll on Sri Lanka’s economic recovery efforts and lead to a possible downward trend in the country’s economic outlook. The next presidential election will have to be held in the latter part of the current year, according to the Constitution, and the SLPP is all out to have a general election to be held before that. The SLPP and President Ranil Wickremesinghe are engaged in a political tug-of-war on the matter. They are at daggers drawn, as a result, and this fact has resulted in the intensification of political uncertainty.

The ADB seems to have read the political situation here accurately, and its fear is not totally unfounded if what we have witnessed in the aftermath of regime changes is anything to go by. President Ranil Wickremesinghe, who is providing political leadership for the implementation of the IMF programme, has issued a similar warning, albeit for political reasons. He has said there will be no elections until the conclusion of the external debt restructuring in line with the IMF conditions, but that will not affect the next presidential election, which will be held after the accomplishment of that task.

Partisan politics has always been the bane of Sri Lanka, and the absence of national policies has made the situation even worse. Political leaders are driven by an insatiable desire to serve self-interest, and never do they hesitate to subjugate national interest to their agendas. All of them have one goal—gaining power or retaining it, and there is hardly anything they scruple to avoid in their efforts to achieve that end, regardless of the consequences of the methods they employ for that purpose. For them the end justifies the means, and anything goes in the quest for power. The collapse of governments therefore upends the policies of the outgoing ones, as we have seen since 1970.

Following its victory, complete with a two-thirds parliamentary majority, in 1970, the SLFP-led United Front government, consisting of several dyed-in-the-wool socialists and swayed by the socialist bloc in a bipolar world, opted for a statist economy and imposed unprecedented import restrictions and domestic consumption of certain goods including food items, such as rice, lentil and sugar. It was a radical departure from the economic policies of the previous government including the SLFP-led ones. Shortages became widespread and queues ubiquitous. The public was brimming with anger. Since there were no national policies, it became obvious that the UNP would tap public resentment to capture power, and the statist economic policies would be abolished.  

The UNP government, elected in 1977, with a five-sixths majority in the parliament, turned the economy on its head instead of opening it up gradually and cautiously, and the local industries could not withstand the tide of imports and most of them went belly up, causing job losses. State institutions such as the Paddy Marketing Board, textile factories, paper and sugar mills and the state-owned bus service were debilitated. It was a swing from one extreme to the other, and, unfortunately, the country became the loser. The SLFP-led governments elected after 1994 continued with more or less the UNP’s economic policies, and the Chandrika Bandaranaike Kumaratunga government even privatized some profit-making state ventures such as the State Distilleries Corporation of Sri Lanka, a cash cow.

Following Mahinda Rajapaksa’s victory in the 2005 presidential election, the process of renationalization got underway with the state reacquiring the gas company and wresting control of the national carrier from Emirates. The country reverted to semi-statism, and this trend showed signs of facing a setback during the UNP-led government (2015-2019), which went all out to get rid of state control over the economy, but the SLPP made a solemn pledge to reverse that policy and obtained a huge popular mandate for that purpose in 2019. It embarked on a campaign to carry out that pledge, after winning the 2020 general election, but the Covid-19 pandemic and the current economic crisis stood in its way, and the very antithesis of what it promised is being implemented at the behest of the International Monetary Fund (IMF).  

Speculation is rife among political analysts that no presidential candidate will be able to cross the 50% plus one vote mark in the first round to secure the presidency, this year, and the next parliament will be hung. The NPP led by the JVP says it is confident of winning both the presidential and general elections. It has said it will renegotiate the IMF agreement. The SJB has pledged to go slow on the implementation of the IMF-prescribed economic recovery measures and grant relief to the public. It has also said it will opt out of some bailout conditions with the concurrence of the IMF. But the question is whether the IMF will agree to what the NPP and the SJB say they are planning to do. If the UNP or the SLPP secures the presidency and forms the next government, the IMF programme will not suffer any setbacks, but the situation will be different in case of either the SJB or the NPP winning. This may be the reason why the IMF officials make it a point to meet the SJB and the NPP leaders whenever they visit Colombo; they must be trying to ensure that their programme will be intact in the event of a change of government. They do not want to leave anything to chance, given Sri Lanka’s history of reneging on its undertakings in respect of IMF conditions. Sri Lanka has left IMF programs on 16 occasions, and this is the first time it has not been able to do so; its economy is too feeble for it to be able to come out of the present crisis without IMF assistance. Even China is reported to have urged Sri Lanka to implement the IMF programme; no country wants to put its taxpayers’ money into a bottomless pit, suffer losses and, above all, face political consequences of such unwise decisions. Only an economic recovery program underwritten by the IMF will help Sri Lanka restore investors’ confidence and increase the inflow of foreign exchange.

All political parties are duty bound to reveal their positions on the IMF bailout program, and give an assurance to the IMF, the World Bank, ADB, lending nations, and individual creditors and investors that nothing will be done that will endanger the ongoing economic efforts here. They must do so if they are to enable the public to make informed decisions when they vote at future elections, especially the coming presidential and parliamentary polls.

The public has realized that it is a mistake to believe in the platform rhetoric of politicians thanks to the suffering they have undergone during the past couple of years and that economic recovery must be prioritized over everything else. No one wants to face shortages and suffer in queues to purchase essentials ever again. The political parties and their leaders, therefore, will have to make their economic policies known to the public, and help clear the pall of pall of political uncertainty, which can adversely impact the stabilization of the battered economy and trouble international lenders, who alone can help solve Sri Lanka’s foreign debt issue, and put its economy back on an even keel.


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