Economy in tatters

Just as the economic crisis snowballed into a political crisis with a people’s uprising against President Gotabaya Rajapaksa and the government, the trio rushed to the gate hearing the familiar sounds of Aldoris, the choon-paan karaya’s tuk-tuk as he came down the lane.

“Monawada wenne, monawada wenne (What’s happening; what’s happening),” they asked in unison, as Aldoris prepared to dish out his breakfast food.

“Monawada. Ara virodhatha genada katha-karanne (What? You mean the protests),” he asked.

“Ow, ow (Yes, yes),” said Kussi Amma Sera.

“Mae aanduwa nerapa arinna amarui, Janadhipathi thadin alla-gena innawa wage (Well, it would be difficult to oust this government as the President seems to be holding firm),” he said.

“Anik prashna, indana, aththiyawashya ahara saha gas hingayath amathaka weida mae deshapalana arbudaya hinda (Will the other problems like shortage of fuel, some essential food and cooking gas be forgotten due to the political crisis,” asked Mabel Rasthiyadu.

“Mama hithanne ne, mokada janathawa thama eh adupadu gena virodha thavaya prakasha karana hinda (I don’t think so, since people are still protesting against the shortages),” said Aldoris, happy and proud that the trio was ‘consulting him’ on his views on the country’s turbulent times.

“Mama balaporoththu wenava mae virodhatha prachandakari thathwayakata no ei kiyala (I hope the protests don’t turn violent),” said a worried Serapina. The trio then moved to the margosa tree to continue their conversation, while Aldoris continued down the lane.

Amidst the turmoil and uncertainty, there was a silver lining – the President’s appointment of an eminent group of economists to advise the government on turning around the economic crisis and addressing the issues that need to be discussed with the International Monetary Fund (IMF). The country is without a finance minister or a Treasury Secretary (as of the morning of Thursday, April 7) with former Minister Bandula Gunawardene, who was offered the post, turning it down, days after former Justice Minister Ali Sabry, accepted but resigned a day later. At the time of writing this column, the Ministry of Finance was headless, not a good sign as Sri Lanka prepares for crucial IMF and World Bank negotiations next week in Washington. The country is hoping to receive up to US$4 billion from the IMF under a new programme and needs to have its officials (including new minister) in place ahead of the talks.

The President’s advisory team – ahead of the IMF talks – comprises former Central Bank Governor Dr. Indrajit Coomaraswamy; former World Bank Chief Economist Prof. Shanta Devarajan and former IMF Director Dr. Sharmini Coorey. It is probably one of the best teams to advise the President on the way forward in dealing with the economic crisis and IMF discussions.

Another laudable appointment was former Deputy Governor Dr. Nandalal Weerasinghe as the Central Bank Governor. Dr. Weerasinghe, who has spent the past few years in Australia, should have been an automatic choice as governor when Ajith Nivard Cabraal stepped down in January 2015 (with a new regime being installed), being the Senior Deputy Governor with immense knowledge and experience at that time. Cabraal’s resignation led to the postponement of the monthly monetary review (on April 5), It was released on Friday.

An IMF programme, if successful, is not going to be easy. The fund would require austerity measures like cutting down government expenditure, reducing subsidies to the people and cutting funds to loss-making state organisations, all hard pills for the government to swallow. The country needs at least $6-7 billion annually for the next five years to pay off debt and from where this money would come is anybody’s guess.

While the people’s protests have sprung up across the country with – for the first time – middle class and upper middle class citizens rallying round to demand the resignation of the President and the government, the Avurudu holidays are likely to see a drop in the momentum of the protests. However, with shortages continuing with the government still grappling without dollars to pay for vital imports, the protests are likely to intensify after the holidays.

This week, Sri Lanka’s top corporate bodies urged the government to allow peaceful protests without using force or the state of emergency (which was revoked after a few days), and supporting the right to peaceful protest. Hemas was first off the blocks saying they were supporting the right to peaceful protest followed by Jetwing, John Keells Holdings, Ceylon Biscuits Ltd, 99X and MTI Consulting among others, posting their views on Facebook. MTI Consulting went one step further by giving staff time-off to join the protests. Accountancy body, CA Sri Lanka said that the people’s right to protest and their voices heard by the government should be respected and permitted. “At CA Sri Lanka, we respect the rights of the citizens to hold peaceful demonstrations and have their voices heard by the government. We also urge the masses to remain non-violent during their protests, as violence will not achieve democratic ideals, nor will it promote economic growth,” it said in a statement.

Resorting to peaceful protests and being non-violent echoed in many of the statements of private sector organisations which also focused on the crisis of shortages. “The current crisis has been brewing for several months, and the government’s procrastination has created considerable hardship for ordinary people,” said a Joint Apparel Association Forum spokesperson. “Power and fuel outages have already led to the shutdown of many small establishments and escalated the cost of production for others.”

The tea industry said they were close to collapse as the fuel crisis was affecting transportation in the estates and power cuts were affecting production, a similar grouse from garment manufacturers.

International rating agency, Moody’s, in a statement this week, said the resignations of key officials (Finance Minister and Treasury Secretary) have triggered policy uncertainty, compounding external liquidity and fiscal difficulties. Tourism industry stakeholders also launched a protest in Colombo with their demands including the removal of Sri Lankan Tourism chairperson Kimarli Fernando, who defended her position saying she was willing to sit down with these stakeholders to resolve any dispute or disagreement.

As I received my second mug of tea from Kussi Amma Sera, my thoughts were on the constitutional dilemma of appointing a President if Gotabaya Rajapaksa steps down. To the average Sri Lankan, there is no precedent where a President steps down – except in the case of the assassination of President Ranasinghe Premadasa in May 1993 which led to the automatic appointment of Prime Minister D.B. Wijetunga to this position. With the President standing firm, refusing to step down, for the moment a constitutional crisis appears to have been averted.