Some Political Roots Of Sri Lanka’s Economic Crisis

By Laksiri Fernando –

Dr. Laksiri Fernando

Sri Lanka is within a serious economic and political crisis which has been unprecedent in its recent history. While the Covid-19 pandemic worldwide has aggravated the situation, most of the root causes are within the country related to bad management of the economy, exports and imports, the trade balance, balance of payments, foreign and domestic loans, dollar-rupee value, consumer prices, and many other economic variables.

Even if the management of key economic variables is not the sole responsibility of the politicians, the management of public economic policies is their sole responsibility. No excuses can be accepted. The other responsible group is the top bureaucracy, the subaltern group. The distinction between the two also cannot be clearly distinguished today in Sri Lanka due to the politicization of the whole management processes.

Among the politicians, the most responsible for the economy are the President, the Prime Minister, and the Minister of Finance. Alas, they all come from the same Rajapaksa family! Can that be a root cause of the economic crisis today? Of course, it is.

Main Roots and Subaltern Ones

Not only their policies, but also their behavior supports the assumption of this root cause. Immediately after the budget, the President prorogued Parliament arbitrarily and left for Singapore for of course medical checkup. No postmortem was allowed for the dead budget. The national health system was not good enough for this high soul.

More revealingly, the Minister of Finance went back to his double country America, without much explanation. He was even absent for many of the debates of the budget in Parliament. Of course, they may have family businesses here and there. His trip back also might be a trial run to check what can he do in case of a serious crisis or rebellion in the country. With the New Fortress deal, he apparently has enhanced relations with the American Embassy in Colombo to take refuge at any time.

Only the old Prime Minister, some name as the Old King, remained in the land with his retinue to face the music. He is apparently capable of twisting explanations whether it is economic policies, Tsunami funds, disappeared journalists or anything else. People in the country are desperately angry as we can see from TV and newspaper reports and programs (not to mention the social media).

The subaltern group responsible for economic mismanagement is the recruited advisers and appointed top bureaucrats. They are the retinue of the ruling family. They have been the same people throughout years under their appointments. Under the last Yahapalana administration, not much different to the present one in policy wise or corruption wise, some of them went into jail, but again have been appointed to top positions giving presidential pardon. This is shameful. Because their personal integrity, public image, and legal legitimacy are near zero. Below are some highlights.

* A former Permanent Secretary to the Treasury and the Ministry of Finance, for a long time, is now the Secretary to the President. In 2008, he was found guilty by the Supreme Court of Sri Lanka of a violation of procedure in awarding a large contract for the expansion of the Colombo Port.

* A former Permanent Secretary to the former President is now a Senior Advisor to the present President. He was convicted of course under the last administration for distributing ‘Sil Redi’ violating election laws but acquitted under the present administration on the basis that the previous conviction was not beyond reasonable doubt. He is also a person with an image tarnished.

* A former Governor of the Central Bank who contested elections and became the State Minister of Finance is now again has become the Governor of the CB. Even if his integrity is intact on corruption matters, he is a decision maker according to the whims and fancies of the disgraced family. The list is long and above are only some highlights.

Under the Cover of Pandemic

There is an obvious root cause therefore for the present economic crisis related to the close group of people, the leaders, and subalterns, taking decisions for family and power interests. The decisions are dogmatic on most of the matters (i.e., fertilizer, IMF etc.), making the same mistakes again and again, and disregarding the public opinion or expert advice. Most these are happening under the cover of the Covid-19 pandemic.

The most controversial decision today, in the name of clean energy, is the New Fortress Energy deal. Three key Ministers have contradicted the government claims and even have gone before the Courts that a proper decision was not taken in the Cabinet. Behind them are eleven political parties, including the SLFP, affiliated with the governing alliance.

The agreement with the New Fortress (American) company has never been forwarded before the Cabinet, Parliament, or the public until the JVP leader, Anura Kumara Dissanayake, exposed a copy in Parliament. Obviously, there are numerous clauses and conditions detrimental to the country in the agreement as Dissanayake has explained. There are rumors that the Minister of Finance has now left the country to sort out this matter with American business counterparts.

The other controversial and dogmatic decision was to ban chemical fertilizer, weedicides, and insecticides altogether without proper alternatives, in the name of environmental protection or ‘kidneys’ of the people. The decision was like a military order. Only alternative proposed was for the farmers to use organic (composed) fertilizer. This is not a solution for weeds or insects. Organic fertilizer, if not developed beyond the present ‘composed quality’ is not useful in cultivations particularly other than paddy or some vegetables. Not useful in tea cultivation at all. Even the paddy farmers obviously cannot shift to composed fertilizer overnight. Therefore, the farmers’ mass and angry protests were completely justified under the circumstances.

If the decision at least partly was to preserve foreign exchange from Urea imports, it has completely been boomeranged. There has been so much of fertilizer imports under different names since then, and even a fertilizer ship from China had to be turned back under people’s protests because of low quality. If one draws a balance sheet of these transactions, it is undoubtedly a great loss to the country in many ways including foreign exchange, inflation, and cost of living.

Devastating effects

Most unfortunate are the devastating repercussions on the ordinary people irrespective of ethnicity, language, religion, caste, region, or gender of the above decisions and faults. Most adversely affected sections are the mothers of ordinary families who must shoulder the whole brunt because of cost of living, exploding kitchen gas cylinders, electricity blackouts and many other things. Nearly hundred explosions and two deaths are reported so far, both deaths being women. Conscientious men should take these matters into account and should work towards shouldering the burdens equally in families.

Why are these gas explosions? Two main gas companies, Litro gas and Laugfs, are the main culprits. They have altered the gas compositions in cylinders neglecting the safety of the consumers for profit making. Litro is a state-owned company. The heads of the company are government appointees and close to the ministers. Laugfs is a private company but when the state company manipulates, they also follow suit with or without connections. There is a Sinhala saying, ‘when junglefowls rip Canarium, spurfowls enjoy the feast.’

These frauds do not originate completely locally. They are increasingly international. Taking the opportunities of Covid-19 pandemic, major producers, suppliers, and traders have started profit making under the disguised circumstances. When the local authorities are corrupt and dishonest, they easily come to deals with ministers and top officials.

Some Chinese, Indian, Singapore, Middle East, American and Sri Lankan companies are engaged in these deals. This is kind of a Covid Capitalism! For example, the government has not signed the ‘Yugadanavi’ deal with the New Fortress Energy company. The deal has been signed with its local partner, NFE Sri Lanka Power Holding LLC. Who facilitated the registration of this company? All these are dubious operations.

When the present President was elected in November 2019, people even in the opposition had some hopes that he would be corrupt-free or straight forward, although his name had already been tarnished with some corruption allegations. First, he appeared smart and then started crumbling down in his decisions and policies. His great achievement was Covid-19 management although he allowed his operatives to manipulate case figures and other matters even in this respect. He was reputed as a firm military leader and largely to his credit that the LTTE was defeated in 2009. The University of Colombo also gave him an honorary doctorate in that recognition.

But now it has been proved, beyond reasonable doubt, that just because of military achievements one cannot be a good President. The ‘Peter Principle’ has proved in this case. Simply said, as Laurence J. Peter argued ‘skills in one job do not necessarily translate to another.’ The family is something that Peter did not talk about! These are the political roots of the economic crisis.

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