Rajapaksas are government’s chief obsession

Rajapaksas are government’s chief obsession

*May Day review
*Credit rating agencies issue cautionary notes
*A ‘right to withhold information’ law?

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From the reports and comments about last Sunday’s May Day rallies that have been appearing over the past week, it became obvious that The Island was the only newspaper or media organization that had a staffer monitoring the crowds in all three main rallies held in Colombo.

This year, what was important was not the speeches being made but the crowds present at each of the May Day rallies.

This writer observed the three main rallies in Colombo at their peak after 4.30 pm onwards and kept giving a running commentary to certain politically involved individuals about what we saw at the various venues.

  • What we had to report about the Campbell Park rally was that there were a remarkable number of buses and a huge crowd, but it was less well organized than last year and the crowd present seemed to be smaller.
  • The JVP rally seemed to be slightly better attended than last year because there were fewer empty patches in the BRC grounds.

The JVP always has a large decoration covering a good part of the grounds so that the crowds attending look bigger to the outside. The JVP should have been able to attract a record crowd this time because they were able to get the upper hand in protesting against the alterations made in the fertilizer subsidy. Even on the ETCA with India, it is the JVP that had the lead over the Joint Opposition at least in rhetoric.

Furthermore, the government’s declining popularity should have improved the JVP’s crowd pulling capacity by leaps and bounds but it has not. This perhaps is a sign that the JVP’s role in bringing the present government in power has had a negative impact on their political prospects. The whispering going on in political circles about pressure being brought on Anura Kumara Dissanayake to step down from the party leadership probably has something to do with the need to sacrifice someone if the party is to survive the opprobrium attaching to it after the yahapalana coalition misadventure.

On May Day last Sunday it was quite clear where the anti-government vote is gravitating.

The Kirullapone rally of the Joint Opposition was much bigger than the UNP’s Campbell Park rally and the JVP’s BRC grounds rallies. The whole of the six lane High Level road was jam packed with people from near the Kirullapone public market going well beyond the Y junction at the turn off to Seibel Avenue. The crowd was so dense that it was not possible to push through the crush to see how far the crowd expanded towards Nugegoda. It was from a Divaina colleague who was at the Nugegoda end that this writer got to know that the crowd went up to the old ‘Sweet House’ building past the Y junction.

Apart from this concentration on the High Level Road, all six lanes of Baseline road was one sea of heads as far as the eye could see. Once again the crowd was so dense that this writer was unable to push through it to see how far the crowd extended. The crowd on Baseline road alone would have sufficed for a well attended May Day rally. Though this writer gave running commentaries to politically involved friends while observing the crowds, my comments on the Kirullapone crowds was met with incredulity at the other end. When was the May Day rally of the opposition ever larger than the rally of the governing party? Some old timers hark back to the last May Day before the 1977 general elections when the opposition UNP had put on a massive showing. This writer spent the last week trying to convince certain friends that I was not exaggerating when I saw all lanes and pavements of Baseline road packed with people as far as the eye could see. One problem was that even the drones had not picked up the crowd that had accumulated on Baseline road. Be that as it may, the Kirullapone rally was undoubtedly the largest gathering ever at any political meeting held at that location.

A political veteran who was with this writer said that the only crowd comparable to Kirullapone that he had seen was perhaps J.R.Jayewardene’s final rally in Maradana before the 1977 general election. That the Joint Opposition was able to pull this off against all the open threats and sabotage by the SLFP faction serving in the government, is in itself a statement about the political standing of the government.

The Joint Opposition took an enormous risk by having a separate May Day because nobody could say to what extent the threats of the SLFP Sirisena faction would discourage people from attending the rally because the majority of the Joint Opposition are still members of the SLFP.

The Rajapaksa camp took the risk and emerged triumphant. It has now been proved beyond any doubt that the people divide as pro-government and anti-government and not by the names and symbols of political parties. The Rajapaksa camp now has a near complete monopoly of the opposition space in this country. If there is anything that the government should learn from the May Day experience is that it would not be wise or feasible to split the pro-government vote in the hope that the parts contesting separately will be able to bring in more votes than the whole contesting as one unit.

A blow from the rating agencies

Even though the stock market picked up due to signs that the IMF may provide Sri Lanka with an extended financing facility, the ratings agencies are far less optimistic about Sri Lanka’s ability to get out of the woods. Some weeks ago we mentioned in this column that Moody’s had not given us a ‘negative outlook’ categorization because Sri Lanka was going to enter into a programme with the IMF and the discipline that would bring to the management of the economy. However Fitch ratings went ahead and gave us a negative outlook grading because of the huge short term debt commitments that we had – most of which was coming due in 2016. In fact Moody’s too had placed Sri Lanka right at the top of the list of countries most likely to default in the particular grade that they had given Sri Lanka.

Last week as a feeling of relief swept through the Sri Lankan economy with the announcement that an agreement had been reached with the IMF for a three year programme and the stock market reacted with ebullience to the news, both Moody’s and Fitch put a dampener on the upbeat mood by issuing cautionary notes.

In a release issued on 3 May, Fitch stated that the 1.5 billion USD, three-year IMF programme will ease short term balance-of-payments problems, but there will have to be a sustained commitment from the authorities to address issues relating to debt and government revenue. They explained that they downgraded Sri Lanka in February this year mainly due to difficulties in raising credit in the international market, a decline in foreign exchange reserves and a decline in government revenue. They observed that an IMF programme could boost investor confidence and reduce Sri Lanka’s vulnerability to shifts in investor sentiment like that of last year, when investors withdrew nearly USD 2 billion in rupee denominated government bonds. However Fitch warned that Sri Lanka has over USD 3 billion in foreign debt coming due in 2016 in a situation where the external reserves are ‘far below’ the norm for the grade that SL is in. Even more devastatingly, Fitch has observed that the IMF programme sets ambitious government revenue targets that may be hard to achieve. The IMF programme aims to slash Sri Lanka’s fiscal deficit to 3.5% of GDP by 2020 from 7.4% in 2015, and that implementing reforms to the tax system could be challenging. Fitch observed that last November’s budget did not outline any major tax reforms.

It was stated that a significant pick-up in revenues will be required to narrow the 2016 budget’s deficit to the targeted 5.4%, because unavoidable government expenditure such as salaries and interest payments account for almost 40% of the total expenditure. Furthermore Fitch observed that while in the past, high GDP growth has supported Sri Lanka’s credit profile, the adjustments under its IMF programme could slow growth. Furthermore, public debt could be pushed higher in local-currency terms if the rupee weakened, as nearly half of all public debt is foreign-currency denominated. One of the conditions that the IMF has set is that the rupee be allowed to float so that it finds its own level without the Central Bank intervening to control the value of the rupee. Fitch explained that they assigned a Negative Outlook to Sri Lanka’s ratings while downgrading our credit ratings in February despite the likelihood of agreement with the IMF on a programme, because of the country’s ‘patchy implementation record’.

Two days later, Moody’s also issued a statement echoing more or less what Fitch had said. They too observed that the $1.5 billion three-year Extended Fund Facility programme with the IMF will provide some liquidity, but will only ‘marginally affect’ government credit metrics, unless tax policy implementation is much more successful than expected. Moody’s outlined three benefits from the IMF programme – firstly the money coming in will provide much needed liquidity, secondly, the money will be at a concessional interest rate, thirdly, the fact of being in a programme with the IMF to restore discipline will boost the confidence of the credit market and improve SL’s access to the credit market. Moody’s stated that though the government imposed some tax increases, including raising VAT to 15% and broadening the VAT base, they still expect bumps in implementing revenue raising measures. Most ominously, Moody’s forecast a further increase in the government’s debt burden and debt to GDP ratio this year and the next. They also predicted that with slower growth in the next few years and the financial drag of some state-owned enterprises, achieving significant government revenues will be ‘challenging’.

It was reported in the financial press that following fast upon the IMF loan which is expected to be passed in early June, the government had planned to obtain a further 500 million USD from the international market with the facilitation of four banks including Citibank and HSBC. The assessments given by Fitch and Moody’s about Sri Lanka’s prospects even after the IMF loan will almost certainly queer the pitch for SL in the international market. The financial irresponsibility displayed from the mini-budget in January 2015 onwards has been commented on at length by the IMF and later taken up by the ratings agencies. This country is going to pay a heavy price for a government that seems to be hell-bent on not getting its financial act into order. The unedifying sight of a wrong vote count being taken on a financial bill last Thursday leading to another vote being taken is hardly going to increase confidence in the government.

The government’s obsession with the Rajapaksas is causing a burnout in terms of governance.

The government seems to be well organized in matters relating to the Rajapaksas and virtually nothing else. The PM and Sarath Fonseka can come well prepared to parliament to answer questions relating to the withdrawal of the former President’s security, but they are not as well prepared when it comes to getting a routine Finance Bill passed. The withdrawal of the former President’s security has placed the government on the back foot because this become an issue in itself with the Mahanayake of the Amarapura Nikaya the Most Venerable Davuldena Gnanissara Thero and the Mahanayake of the Ramanna Nikaya the Most Venerable Napane Pemasiri writing to the president requesting that the former President’s security be restored. The government for its part complains that the former president is going around the country with army security trying to topple the government. The former president for his part states that he was first given army security by Ranjan Wijeratne during the JVP’s second insurrection and that even when he went on the 1991 pada yathra against the Premadasa government, it was with this army security detail in tow!

Another unpleasant surprise that the government got last week was the decision of vehicle importers to suspend the importation of vehicles from Japan for six months due to the appreciation in the yen which makes vehicles more expensive for Sri Lankan buyers. This too is an unexpected blow for the government as the tax on vehicle imports is the number one revenue generator among all the imports into the country. The suspension of the imports from Japan will result in an unanticipated reduction of revenue at a time when the government can least afford it. Obviously it is not just exchange rate issues that has caused this suspension of imports. The increase in taxes on vehicle imports has clearly had the effect of depressing sales of vehicles as large drops were reported in vehicle imports after the vehicle taxes were increased. One of the IMF’s conditions for the support they will be giving Sri Lanka was to allow the rupee to depreciate further. If that happens, will vehicle imports pick up any time soon and what will happen to government revenues in the meantime?

On top of all these woes the JVP has been warning that the government should see to it that the money for the fertilizer subsidy is sent to the bank accounts of cultivators before 12 May failing which they will bring the farmers to Colombo to surround parliament.

The ‘Right to Withhold Information’ law

Another important event that took place last week was the Supreme Court determination on the constitutionality of the Right to Information Bill that had been placed before parliament by the present government. That the SC has decided that the RTI Bill needs a two thirds majority in parliament if it is to become law is no cause for relief. Even after this SC ruling, the most contentious points in the RTI Bill still remain unresolved. What India has is a right to information bill, but what is before the Sri Lankan parliament is in actual fact a right to withhold information law which will enable the government to legally withhold information in areas where they deem secrecy is required. We pointed out previously in this column that the Sri Lankan draft RTI law places as much importance on withholding economic information as the Indian RTI law places on public security matters. The main cause for concern in the RTI Bill was Clause 5(1)(c) which relates to restrictions on the disclosure of information relating to the economy in areas such as exchange control, banking and credit, taxation, price controls, wages and salaries and entry into overseas economic agreements.

All the petitions filed before the Supreme Court focused in particular on Clauses 5(1)(c)(v) which related to the entry into trade agreements and Clause 5(3) which prevented the release of information pertaining to a trade agreement where negotiations have not yet been completed even after the lapse of ten years. The Supreme Court observed that the main argument of the Petitioners against the RTI Bill was that the economy of Sri Lanka referred in Clause 5(1)(c) does not come under Article 14A(2) of the Constitution which prescribes the restrictions that can be placed on the right of access to information.

Article 14 A (1) of the constitution guarantees the right of citizens to information that is required to uphold citizens rights which is held by various departments and agencies at all levels of government. Article 14A(2) states that No restrictions shall be placed on this right other than such restrictions as are necessary in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals and of the reputation or the rights of others, privacy, prevention of contempt of court, protection of parliamentary privilege, for preventing the disclosure of information communicated in confidence, or for maintaining the authority and impartiality of the judiciary.

The Deputy Solicitor General, representing the government argued in the SC that the petitioners’ contentions are based on the ‘anachronistic notion’ of equating national security to military security. Though petitioners argue that the people at large have a right to know the full details of overseas trade agreements referred to in Clauses 5(1)(c)( v) and 5(3) like all other rights, even this right has recognized limitations; It is by no means absolute. Accordingly, the inclusion of a restriction against the disclosure of information that would cause serious prejudice to the economy of Sri Lanka is justified as part and parcel of the interests of national security.

The SC agreeing with this view stated that the combined effect of Clauses 5(1)(c)(v) and 5(3) read with Article 157 of the Constitution is that overseas trade agreements cannot be challenged in a Court of law and the fact that information relating to the same are denied would prevent those agreements from being challenged prior to their formulation. Hence, the Court did not agree with the petitioners that Clauses 5(1)(c)(v) and 5(3) are in violation of Article 14A of the Constitution.

Since the Supreme Court taken that stand, there is now little hope of preventing the government from withholding information on economic matters. The SC decided that a two thirds majority was needed to pass the RTI Bill only in relation to certain technical matters in the Bill and not in relation to the main issue which caused concern to the media and the petitioners. The only recourse now is political action to prevent the passage of what is essentially a Right to Withhold Information Bill. The country would be better off without this than with it. In any case whose idea was this RTI law anyway? We don’t remember the mainline media asking for an RTI Bill. This was the brainchild of some Western funded NGOs who are now keeping quiet when the pro-Western government is trying to bring in legislation to promote the withholding of information.