Central Bank Governor Indrajith Coomaraswamy is in the hot seat as the value of the rupee takes a hit.

These are bad times for elephants. The last few weeks have seen more than a dozen of them perish in the outback. Some of them were knocked down by a speeding train. It was only the other day that a herd of wild jumbos drowned in a swamp. The Grand Old Party, which has the elephant as its symbol, is also getting bogged down in a politico-economic mire with no hope of rescue. The harder it struggles to escape, the deeper it gets sucked in.

Misfortunes are like monkeys; they never come singly. The government, reeling from a midterm electoral debacle, has been hit by the falling rupee on the head slap bang. It will be lucky if it recovers from the rude shock in time for the next election expected early next year. The UNP, being the dominant party of the ruling coalition, has incurred more public opprobrium for the current state of affairs than its partners. All frantic efforts to strengthen the rupee have not yielded the intended results. The Central Bank has been releasing US dollars into the market and running the risk of exhausting the country’s foreign reserves in the process. Nearly 190 million US dollars have already been released by the CB. The government cannot be unaware of the fact that there are massive foreign debts to be serviced and millions of dollars are required for that purpose.

The Sirisena-Wickremesinghe government would have the public believe that the blame for the rapid depreciation of the rupee should be placed at the doorstep of US President Donald Trump.  But this is not the whole truth. The US has increased its interest rates, attracting investors, and started a trade war with China besides making grand preparations to slap sanctions on Iran and Syria. All these measures have stood the US in good stead on the economic front. The American economy has gained and the currencies of many countries including India have depreciated steeply, but the bubble is likely to burst. China cannot be expected to take it all lying down. It has been acting with restraint, but it is sure to react to the US action to safeguard its economic interests. Trump may have to face a situation he has not bargained for.

Economic development is a marathon and a nation’s success therein consists in its ability to pace itself properly like the Raramuri runners. The US, on Trump’s watch, has, in its wisdom, chosen to do a sprint and it is bound to get tired out sooner or later. Then it will be China’s turn to show its paces.

The US alone cannot be blamed for the plight of the Sri Lankan rupee, which is depreciating against other foreign currencies as well. The Sirisena-Wickremesinghe government has to take the full responsibility for poor economic management and failure to attract foreign investment. The present currency crisis boils down to a sharp drop in the dollar supply while the demand for greenbacks is increasing. If there had been adequate dollar reserves, the rupee would not have gone into a free fall. The only viable solution is to promote foreign investments to replenish the diminishing dollar reserves substantially while increasing exports.

Friction in the Yahapalanaya government appears to be reaching a breaking point as a desperate President Sirisena tries to map out a political future for himself.
Friction in the Yahapalanaya government appears to be reaching a breaking point as a desperate President Sirisena tries to map out a political future for himself.

The blame for the country’s economic woes should be apportioned to exporters as well; they are not bringing their dollars back. Import restrictions cannot be sustained indefinitely owing to politico-economic problems they entail. The government is already running a very high political risk.

Back to 1970-77 era?

Unless the government acts swiftly and decisively to tackle the current crisis, which has shown signs of getting out of hand, it is likely to find itself in the same predicament as the United Front (UF) government (1970-77), which committed political hara-kiri by taking import restrictions to extremes. Sri Lankans are addicted to foreign goods and they will not take kindly to import controls. The UNP came to power in 1977, promising apples and grapes, which the people had not seen, much less savoured, for nearly seven years under an SLFP-led regime. The country has had enough apples and grapes ever since, but not the much-needed forex. The present-day UNP will ask for trouble if it wants the people to do without some imports and opt for import substitutes.

The SLFP-led UF government’s vise-like grip on the economy, which led to haal and miris polu (barriers put up to prevent unauthorized transport of rice and chillies in short supply) and the rationing of essential commodities helped strengthen the rupee and keep foreign debt low. But it took about 17 years for the SLFP to recover from the electoral shock it received in 1977 mainly due to such economic policies.

Worse, the yahapalana government will be compelled to cut down on its expenses if push comes to shove. That will mean problems for its ambitious rural development drives, launched by the UNP and the SLFP separately, to garner votes.

Blame game

The SLFP-led UPFA in the yahapalana government seems to have made a scapegoat of the UNP for the current economic mess. President Maithripala Sirisena, before the last local government polls on Feb. 10, berated the UNP for mismanaging the economy and causing tremendous suffering to the public; he promised better economic management after the polls. The UNP’s Cabinet Committee on Economic Management headed by Prime Minister Ranil Wickremesinghe was abolished and President Sirisena’s National Economic Council (NEC) took over its functions. However, the UNP, in effect, has been running the economy with the Finance Ministry and the Central Bank under its control. Neither of the main coalition partners has the courage to take the blame for the current situation.

The UNP is now trying to absolve itself of the responsibility for the current economic crisis. The blame game is already on. The SLFP is calling for action to stabilize the rupee. A spokesman for the UNP backbenchers has said his group will ask President Maithripala Sirisena what action his NEC has taken to tackle the current situation which is taking a turn for the worse. The UNP group intends to confront the UPFA when the PM returns from overseas, according to media reports.

The falling rupee has thus acted as a wedge to widen the rift between the UNP and the UPFA in the yahapalana government further.

Disintegration of Yahapalana camp

Having put all its devolution eggs in the yahapalana basket, the TNA is worrying itself sick about the political health of the government. TNA MP M. A. Sumanthiran has called upon the political forces which came together to defeat President Mahinda Rajapaksa in 2015 to remain united. He seems to fear that the disintegration of the yahapalana camp will sound the death knell for the constitution making process. The TNA has promised to obtain more powers to the North and the East and its failure to make good on its pledge has created a situation where the northern hardliners are eating into its traditional support base and vote bank.

While the country goes from crisis to crisis, President Sirisena’s seems happier traveling the world rather than dealing with the problems at home- from Nepal to New York and now Seychelles!
While the country goes from crisis to crisis, President Sirisena’s seems happier traveling the world rather than dealing with the problems at home- from Nepal to New York and now Seychelles!

The constitutes of the ruling coalition and its well-wishers are aware that united they stand only at a presidential election, where all their votes go into one basket and help a candidate of their choice clear the 50 percent mark in the race. But general elections and other polls are different ball games. Their alliance has not gelled at the grassroots level and, therefore, what passes for their unity becomes a political liability at other elections as we saw on Feb. 10, when the UNP, the LFP/UPFA and the JVP suffered a crushing electoral defeat. Hence, some yahapalana allies are taking on each other as they believe that divided they can stand.

The JVP has launched an anti-government campaign apparently in a bid to have the public believe that it has nothing to do with the incumbent administration, whose popularity is manifestly on the wane. The problem with labels is that they stick. The Joint Opposition (JO) has succeeded in branding the JVP as a handmaiden of the government. That the people bought into this claim became evident in the outcome of the Feb. 10 local government polls.

The JVP gained only very little by throwing in its lot with the UNP-led coalition at the last presidential election. It may have achieved its goal of toppling the Rajapaksa government, but no benefits as such accrued to it from the regime change. Only the UNP gained politically and electorally, but it did not know how to manage its fortunes thereafter.

The JVP, therefore, has declared that it will field its own presidential candidate in 2020. The UNP says it will contest the next presidential election. President Sirisena has already thrown his hat into the ring and is busy with his election campaign. He and the Prime Minister are stumping around the country trying to build up support for their election campaigns.

The TNA is apparently hoping against hope.

Mahinda to take over SLPP leadership?

Former President Mahinda Rajapaksa has gone on record as saying that he is ready to take over the leadership of the Sri Lanka Podujana Peramuna (SLPP). He has been the de facto leader of the new party and there is no need for him to officially take over the reins of the new party. It is also doubtful whether Rajapaksa really wants to burn the bridges by being the leader of the SLPP and severing his links with the SLFP. What has prompted him to declare that he is going to lead the SLPP?

Rajapaksa is apparently ratcheting up pressure on the SLFP to leave the UNP-led government and coalesce with the SLPP on his terms. President Sirisena has no political strategy as such though he has said he will seek a second term. If the appalling performance of the SLFP/UPFA at the last local government polls is anything to go by, what the President has undertaken to do is like trying to win an F1 race with a vintage beetle.

Former President Mahinda Rajapaksa always claimed that he would never leave the SLFP. But now he is about to become the leader of the Sri Lanka Podujana Peramuna.
Former President Mahinda Rajapaksa always claimed that he would never leave the SLFP. But now he is about to become the leader of the Sri Lanka Podujana Peramuna.

There is no love lost between President Sirisena and the Rajapaksas. A huge trust deficit is sure to stand in the way of attempts at rapprochement between the warring parties. But anything is possible in politics. The political marriage between the UNP and the SLFP is on the rocks. Their latest fight is over the police chief. President Sirisena launches into tirades against IGP Pujith Jayasundera, whom the UNP defends to the hilt. The SLFP and the UNP lock horns at Cabinet meetings over the IGP’s conduct. The UNP is now openly undermining the President.

Adversity is said to make strange bedfellows. So does expediency. Therefore, it is too early to say whether the SLFP and the SLPP will opt for a political marriage of convenience. U-turns are not uncommon in politics.

Assassination plot

The police are investigating the alleged assassination plot against President Sirisena and former Defence Secretary Gotabaya Rajapaksa in such a way that one wonders whether they are muddying the water. They keep recording statements while the government is all out to create a serious doubt in the public mind as to the sanity of Namal Kumara, who has ‘revealed’ the plot. The Indian High Commission has already described the Indian national, taken into custody over some statements he has made on the alleged conspiracy, as a person with an unsound mind. So, the question is whether a campaign is underway to make the assassination plot out to be a figment of the imagination of a person with bats in the belfry.

Meanwhile, IGP Jayasundera has said he, too, has some revelations to make and he will do so when the time is opportune. He should ask himself how proper it is for him to resort to such theatricals as the police chief. If he has anything of import to disclose now is the time.

Both the SLFP and the SLPP/JO are all out to gain political mileage out of the alleged assassination plot. There has been a call from the SLFP for increasing security for President Sirisena. Ironically, this, the SFLP has done while claiming that Sirisena has restored the rule of law and public security. If the President himself is not safe, according to his own party, how can it be claimed that the government has ensured the safety of the public? The UNP also claims that the law and order situation has improved during the last three years or so. But its main coalition partner says the President’s life is in danger!

Former President Rajapaksa, too, has sought to gain public sympathy. Addressing the media, on Wednesday, he said he wondered whether his political enemies (read the UNP and its allies) having carried out a character assassination campaign against him and his family, were now employing some other sinister method to destroy them. He knows how to play the sympathy card. The alleged plot is sure to be one of the main planks of the JO/SLPP platform.


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