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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2619

Between the devil and the deep blue sea

By Jayampathy Molligoda

As reported by veteran International journalist Taylor Dibbert in “Huffington post” in February this year, Mahinda Rajapaksa is a savvy, charismatic political operator and the Rajapaksa brand isn’t toxic. Quote; “He lost a close election and his name will always be linked to the defeat of the Tamil Tigers. The political space for Rajapaksa to return to power cannot be ruled out.” (Courtesy: huffingtonpost.com) For the past decade, former President Mahinda Rajapaksa and his family dominated Sri Lanka’s political scene.

Sri Lankan economy fared well

During his tenure, Sri Lanka continued to experience strong economic growth following the end of the armed conflict with the Liberation Tigers of Tamil Eelam (LTTE). The Institute of Policy Studies of Sri Lanka in its 2014 report says that over five years since the end of the conflict, the economy is now firmly on a path of economic transformation.

The previous government had been pursuing large-scale infrastructure development and other reconstruction & rehabilitation projects in its efforts to spur economic growth not only in urban areas but also in rural, war-torn and disadvantaged areas. In terms of the famous Harrod- Domar model of the development economic theory, it is likely that more Foreign Direct Investments (FDI’s) may flow into the country followed by these developments, as the return on investment of those funded projects would essentially be higher with more efficient infrastructure in place. Sri Lanka's economy is among the fastest growing in South Asia.

As for the economic performance during 2014, the economic analysts here and abroad have pointed out that the Sri Lankan economy fared well during last year’s global slowdown with GDP growth of an estimated 7.5percent, As for external trade in 2014, the overall trade deficit of US$ 8.2 billion was offset by worker remittances of US $ 6.4 billion and tourist earnings of 1.7 billion. The Foreign reserves were at a healthy 7.0 billion US dollars sufficient to cover four months imports. It is pleased to note that Sri Lanka’s annual average inflation has bottomed out at 3.0 percent by February2015 and corresponding figure from March 2013 to end February 2014 was 6.0%.

Whilst commending the high economic growth achieved during the last five to six years, it is necessary to critically analyze whether the benefits of growth have been trickled down among the majority of the people of this country and value for money created with these projects. In fact, President Mahinda Rajapaksa himself at the launch of the Central Bank annual report somewhere in April 2012 had reported to have said that there is no point in having high growth rates if the people are not enjoying the fruits. Even the opposition members have commended the then President for making such a statement at the release of the Central bank report. This is a perennial issue connected with economic growth and equality especially when adopting a more liberalized economic policy. Joseph Stiglitz-former Chief Economist at the World Bank and winner of the Nobel Prize for Economics, in his book titled ‘Globalisation and its discontents’ mentioned that, “Globalisation today is not working for many of the world’s poor for much of the environment” He argued that trickle-down economics was never much more than just a belief.

IMF rules out bail-out package

The IMF on 4 th March this year ruled out a fresh bail-out for Sri Lanka, which had hoped to secure loans of more than US$4.0 billion to restructure expensive debt taken on by the previous regime. Finance Minister Ravi Karunanayake travelled to Washington last month to try to secure loans from the International Monetary Fund and the World Bank. But IMF experts who reviewed Sri Lanka's economy during a nine-day visit said the Indian Ocean Island was not facing an immediate crisis. Delegation leader Todd Schneider said Sri Lanka's foreign reserves were comfortable compared to 2009, when it obtained a US$2.6 billion bailout at the height of a civil war. "The situation today is quite different," Schneider told reporters in Colombo. "We only provide balance of payments support."

UNP rules out national Government and wants dissolution of Parliament

After his defeat, Mahinda Rajapaksa announced that he was resigning as head of his party, SLFP so that President Sirisena could take his place. Since then President MY3 and PM Ranil W have been running the country with more or less the UNP cabinet. They put in place a mechanism to implement the 100 day programme. After some initial euphoria, the scenario has fast becoming changed for worse. According to former State Minister of Higher Education, Prof. Rajiva Wijesinha, the common issue among the increasingly disgruntled ministers is that Prime Minister, Ranil Wickremasinghe, insists on running a one-man show. He was quoted as saying, “President Sirisena said that he had entrusted, in good faith, Cabinet portfolios to Wickramasinghe and former President Kumaratunga.” Furthermore, allegations of an attempted coup (moments after former President discovered he’d lost the election) has raised credibility gap of the new Government. The present administration has requested an investigation, but official statements regarding the findings of the inquiry have not yet been made. It has become a “puss weddilla.”

The IMF warned Sri Lanka was vulnerable to sudden external shocks due to high levels of foreign commercial borrowings and external trade/exchange rate related issues. The central Bank has released some US $ 1.0 Billion during the last two to three months to defend the external value of the rupee around Rs.133/=without allowing it to get depreciated. The Sri Lankan exports are now getting stagnated due to imprudent management of SL rupee currency against the competing countries. As for tea exports, due to their own socio/political turmoil in countries such as Russia/Ukraine and most of the middle east countries, the currencies of those trading partners have either got devalued or were allowing to get depreciated. Consequently the Colombo tea auction prices have plummeted by Rs35/= during the last two months. The real challenge now would be to maintain the rupee value at this level and also find counterpart funds from the government budget in order to obtain funds from the International Lending Organizations as the budget deficit is on the rise. Therefore, a more active and vibrant private sector participation is vital to continue the development projects. Unfortunately, when the new government presented their maiden budget, there were many ill-conceived budget proposals such as “one off” tax levies on better managed blue chip companies, increasing custom duties on hybrid vehicles etc. thus preventing them plough back surplus funds for development activities. All share price indices at the Colombo stock exchange have also plummeted and market capitalization has come down by as much as Rs.100 billion to Rs.3000 billion during the two month period of the new government.

President rules out dissolution and wants electoral reforms

After assuming duties by the new government, there has been some curtailment and /or slow-down on development work throughout the country. Indian media has quoted Chinese Ambassador as saying that Sri Lanka should respect bilateral agreements /business contracts and protect the interests of the investors. Meanwhile Finance Minister Ravi Karunanayake in an interview with “China Morning post” said that SL Government is presently re-examining a US $ 250 million housing project by Indian TATA involving 65,000 low income people in Colombo. Adding insult to injury, the business giant from India, TATA was disappointed by these developments, as reported in local newspapers on Friday the 13th, the day the Indian Premier Modi arrived in Sri Lanka for two day state visit.

It seems that Ranil Wickremesinghe’s days as Prime Minister are numbered. “Nugegoda meeting” on 18th February where people have been asking Mahinda R to come back to lead the opposition campaign at the next election, represents a clear shift of people power from the SLFP led by My3/Nimal Siripala to that of Mahinda Rajapaksa. As, H.L.D. Mahindapala, the senior journalist wrote recently, Quote; “The Nugegoda wave is now unstoppable. He is also bent on changing the mistake he made in the last presidential election. He is the future. It undercuts the power of the CBK-Wickremasinghe-Sirisena combination. Its force will be felt in the coming general election where the “majority” will have a decisive impact in determining the composition of the next Parliament.” He further said that what the “My3” did secretly, behind the back of Mahinda Rajapaksa, the “Nugegoda Man” did it openly on February 18.

Devil and deep blue sea

The dissolution of the Parliament was originally expected by 23rd April and President Sirisena has made it clear that he hopes to abolish the executive presidency before then, though he’d need to muster a two-thirds majority in parliament to make that happen. If they were able to make such a change, they need the Sri Lanka Freedom Party support. SLFP Parliamentary members now request the President to include both amendments simultaneously i.e.; the proposed amendments to the constitution to change the preferential electoral system (Manape) as well as the abolition of executive presidential powers. Whether the President MY3 will eventually agree to Prime Minister Ranil’s request to go for early elections by end April or will he be obliged (as the Chairman of SLFP) to accede to SLFP request to combine both reforms and pass the constitutional amendments before facing the election is yet to be seen. President Sirisena needs to prove he can govern and that the situation in Sri Lanka — particularly as it relates to corruption and the good governance — will change under his rule.

This would mean that the real fight for power would be the parliamentary election to come. Evidence of corruption during previous tenure will likely to receive more attention from government quarters in the coming months as the present Government has nothing new to give the electorate in the coming election. They have exhausted all their promises at the last Presidential election and the people now know that their promises had either contributed or not contributed to improve their quality of life. Some political analysts/experts argue that they are beginning to feel that the presence of the pro-West, pro-Indian Ranil Government poses an existential threat to the future of Sri Lanka.

The reports coming from US are that the U.S. Embassy has already been influenced by this development to undertake a through and comprehensive political survey to ascertain what direction the country is moving. The “battle of the blues” over the weekend was ended in a draw. The next series will commence soon.

- Asian Tribune -

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