Banking on loans
The trio had gathered under the margosa tree and thankfully Aldoris, the choon- paan baker, had resumed his deliveries, although indicating, “Mama danne ne mata me bisness eka kochchara kal karanna puluwan weida kiyala mei wediwena ganan ekka (I don’t know for how long I can continue this business with rising costs).”
He was rushing back after selling his breakfast food in the neighbourhood, to join a fuel queue. For the record, queues are springing up all over the countryside with one of the latest queues being for dhal.
Munching a ‘maalu paan’ and sipping tea, Kussi Amma Sera said: “Mata thava kochchara kal me peya 13 ne light kepillata muhuna denna puluwanda mang danne ne. Meka harima amarui (I just can’t manage with these 13-hour power cuts. It’s so difficult).”
Added Serapina: “Kema kadawala saha supermarketwala godak kema narak wenna yanne, generator nethnam (A lot of food will get spoilt in restaurants and supermarkets if they run without generators).”
Joining the conversation, Mabel Rasthiyadu noted: “Mata therenne ne, ape nayakayo me wage hasirenne mokada kiyala. Kisima planak nae ne janathawage prashna wisadanna. Eh gollanta beri nam, us-wenna oney (I don’t know why our leaders are behaving like this. They don’t have any plan to solve the problems of the people. If they can’t manage, they should quit).”
‘Quit’ was on my mind, when the phone rang on Thursday morning. It was Arty, the veteran money market trader, and he seemed to be in a mood to discuss constitutional reforms – rather than the economy – because everyone seems to be an ‘expert’ in constitutional affairs with the ‘land like no other’ island’s administration going haywire and strident calls for the government to step down.
“But how can they do that (the government resigning)? No parliamentary election can be called until mid to late-2023,” I said, when Arty began the discussion on constitutional reforms. “Well the experts need to be looking at ways in which there can be constitutional change. This is a serious situation because there is no remedy in the Constitution for an election after a failed regime completes three years,” he said.
I then recalled a conversation with a business leader last week where he raised an interesting point (of course, it needs expert analysis). For instance he says maybe there should be constitutional provision for a referendum to be held on completion of three years by a government. Such a referendum could ask the people to decide whether a parliamentary election should be called or not and proceed accordingly based on the result.
“While this seems interesting, there should also be constitutional safeguards to ensure the opposition doesn’t demand a referendum (for the sake of simply seeking a regime change) even if a governing party is doing a good job,” I told the business leader, adding that if such a provision is enshrined in the Constitution it should strike a balance between permitting a referendum but for a ‘valid’ reason.
He had also suggested that there should be provision to disallow a single party or coalition securing a 2/3rds majority, a proposal I said would be difficult to implement.
Getting back to my conversation with Arty, I asked him how the money markets are faring. “Looks like the dollar will hit Rs. 400 soon. No amount of threats of punishment against or persuasion of licensed money dealers will keep the rate low. While the dollar is inching towards the Rs. 400 mark, in the kerb (unofficial) market, the rate is between Rs. 350 and Rs. 425,” he said, adding that banks don’t have dollars to service letters of credit. Earlier this week, the Central Bank warned that dealers will lose their licences if they sell dollars at above official market rates (now close to Rs. 300) and on Thursday the licence of one dealer was temporarily suspended.
For all purposes, the economy has collapsed with shortages across the board in food and other essentials. Tourist hotels are struggling to meet their diesel requirement for their vehicles and generators while also running out of stocks of imported liquor which is essential for foreign tourists.
Sri Lanka has been surviving on a hand-to-mouth existence and the Chinese involvement in the country is a classic example of this. For instance, Sri Lanka owes US$ 1.5 to 2 billion in debt payments to China this year, with the deadline last week for these payments. Later on Monday, the Chinese Ambassador to Sri Lanka Qi Zhenhong announced they were considering a $2.5 billion loan and credit line to Sri Lanka, which is essentially to pay back the loans taken from China itself.
The country is deep in debt and often grateful to India for coming to the country’s rescue as it did by agreeing to a $ 1 billion loan and $ 500 credit line for essential imports including fuel, earlier last month. This week, coinciding with the visit of Indian External Affairs Minister Dr. S. Jaishankar, India has agreed to increase the $ 500 million credit line to $ 750 million. Sri Lanka is also seeking a $ 250 million swap facility from Bangladesh in addition to $ 250 million disbursed earlier by Dhaka.
As far as foreign income to the country is concerned, exports totalled $ 1,046 million in February 2022, continuing the momentum of earning an average $ 1 billion a month but worker remittances continue to fall with February showing a value of $ 205 million, a sharp drop from $ 579.7 million in the same 2021 month. For both January and February 2022, the drop was over 60 percent compared to the same 2022 months.
On another front, the Finance Ministry is preparing to appoint an advisor to plan out a debt restructuring scheme ahead of mid-April talks with the International Monetary Fund (IMF), where the country is likely to seek a bailout package of between $ 3-4 billion. In a report released last week, after a visit by IMF officials, the IMF said Sri Lanka’s public debt is unsustainable and gross foreign reserves are critically low and insufficient to cover near-term debt service needs. It has recommended increasing tax revenue. The country’s foreign debt payment this year is $ 1billion to be paid in July and another $ 5 billion at the end of the year.
At this point, Kussi Amma Sera walked into the room with another mug of tea saying, “Sir, thava minittu thihakin light yanawa (Sir, the lights will go off in 30 minutes)”. I nodded and reflected on the sad plight of Sri Lankans who are fast losing their patience with an administration that doesn’t know whether it is coming or going!