The Prince of Kandy
Going to the IMF and letting them decide the policy is not what the general public want. As the formerly brave patriotic forces that littered our opinion space seem to have lost their voice let us take it upon ourselves to outline a policy alternative. Put as simply as possible; the IMF, as with all other proxy American institutions, will seek to protect American interests. This will result in the placing of American creditors’ interests over that of the broader economy as a whole.
‘Go Home Gota’ is a clever and indirect mechanism of getting people to act in a way to ‘put Sajith in power’. Even as an opposition leader against a ruling party facing massive public discontent he fails to become a focal point behind which people can rally behind. His father killed a lot of people and it is high time that the apparel sector revaluate its allegiances.
JAAF members should take a minuscule fraction of what they will end up pouring into an SJB presidential bid and hire a non-partisan (not linked to Harsha De Silva) polling organization and run a survey. The one-man show that is currently the UNP is doing as well if not better in terms of the traction of its message.
How revenues should be raised and expenditures cut are an issue that Sri Lankans should decide for themselves as opposed to being dictated to by the IMF. Political consensus and compromise must be made internally. Countries, most notably Iceland after the Global Financial Crisis, have dealt with their debt issues with a resolute government.
The sheer magnitude of the depreciative hit on the rupees is yet to both fully realize itself or cascade into consumer prices due to stock cycles. The new CBSL Governor has signalled that he views the Central Bank as being independent and expects to pursue an inflation targeting mechanism. The ramifications towards our extensive welfare state and low tax framework will be extreme. Given IMF doctrine, the economy and government policy are very violently going to change in directions that many currently protesting will be dead set against.
On the other hand, even the most ardent leftist would argue that the Sri Lankan state is bloated. Pricing on state-provided utilities has not been reformed and the entities providing the underlying service are not financially viable and are a threat to our extensive state-controlled banking system. Many government servants and state corporation employees serve no useful purpose and are a major obstacle to even the most basic of reforms.
In simple terms
For example, look at the National Water Supply and Drainage Board tariff. There is an active conspiracy to maintain the tariff to which only minor increases are required to keep the vast assets of the institution reliant on either foreign aid or privatization. Though every successive minister in charge of the subject has very publicly called for reform nothing seems to be moving. The plan is highly entrenched in political circles.
Privatization of water is not something that will benefit the consumer or the infrastructure. The state has poured billions of US dollars into infrastructure. Privatization which is likely to be called for by the IMF will both lead to huge levels of fraud given the value of the assets involved and further weaken Sri Lanka’s control over a vital resource.
As other SAARC countries’ water security continues to wane it will be possible to transfer water-intensive economic activity to Sri Lanka with its two monsoons and extensive coastline.
Ousted Pakistani Prime Minister Imran Khan actively blames the Americans for sabotage of his economy and the broader region. He however was ousted from within parliament and not through public discontent. IMF programs are multi-year affairs with lagged divestment of funds and any agreement would also bind subsequent governments. Current shortages must be weighed against this backdrop.
Here protestors must understand that both an excessively pro-Chinese investment and a pro-IMF resolution to the current economic impasse come as being antithetical to the sovereignty of the state. All aid is highly targeted and the limp media organizations that pollute public discourse in this country are too servile to take an active look into this issue.
To paraphrase investigative journalist Namini Wijedasa’s tweet on 7 March;
“While we are all raging against past corruption and, hopefully, blaming ourselves over why we did nothing about it, why don’t you also read about a real-time case that’s happening as we watch? Central Expressway Project Section III…”https://twitter.com/nimilamalee/status/1500729922779758602?t=3t1L3mhaef13I3NCkVmrsg&s=19
Help to help yourself
On a geopolitical timescale, it is fair to take both the Chinese involvement in the Colombo Urban Housing and Indian assistance for the Suwa Seriya Foundation. Both projects seek to prop up political elements loyal to the respective donor agencies. Both projects are carefully designed to net out the largest possible benefit proportionate to their costs.
The large urban housing projects initiated by Mahinda Rajapaksa were funded and probably encapsulated very carefully by the Chinese government. They helped create vote banks in the otherwise staunchly green region of Colombo while at the same time giving the Chinese a foot in for broader involvement in the construction sector of the country.
The Suwa Seriya Foundation though financed by an Indian grant did more to help out the political fortunes of one Harsha De Silva than it did the government of India. Let us not forget that he has seriously been put forth as an interim President. Don’t feel sorry for the Indians though as they will get paid more so if he is ever appointed finance minister or made integral to the devolution of powers debate.
This brings us to rationing. Private vehicles owned by the rich line the queues outside petrol sheds. These from a systemic perspective of economic activity are less important than diesel which is used more widely in commercial and commuter transportation. What fuel type should be prioritized? This conversation becomes even more complex when we question whether we use our scarce dollar reserves for medicines or international exam fees or food.
Economic activity requires multiple resources to take place. As with Liebig’s law of the minimum; growth is dictated not by the total resources available but by the scarcest resource (limiting factor). This is to say that you can have a hundred pairs of hand ready to assemble clothing but they may only output that of fifty people if you are only able to transfer enough material to keep fifty people busy. The question is also fundamentally political.
The banking sector and the treasury are in effect making fundamentally existential decisions on the existence of firms and industry. When the banking system allows a 30% year on year growth in the value of construction material imported into the country, as evidenced in the recent External Sector report, it is in a very real sense preventing the importation of certain fuel shipments given the limited dollar availability in the local banking system.
Now both fuel and construction material have fluctuated quite heavily in price and the figures do not signify anything in terms of volume of either category but it is interesting to see nothing in the way of discourse in any relevant public forum on whether or not the import restrictions are the most suitable for the long term growth of the economy. All I can say is, given that consumer electronic importation was allowed to continue unabated, that the needs of a middle-income child for a tablet and my need for a new smartphone were put ahead of the lower-income child’s need for milk.
The alternative of defaulting
Defaulting is not as catastrophic an outcome as people are making it out to be. Foreign debt, as I have previously alluded to, is not required for the functioning of our economy. Our trade deficit is more than made up for by our large remittance base. Further following Singaporean style taxation towards vehicles and subsequent investment in public transport will both reduce our outflows on vehicle imports and pivot downwards the volume of fuel we import for domestic purposes.
Defaulting would be catastrophic mostly to the political class who are reliant on it to fund their mega projects which the country benefits little from. We invest in very expensive things. Take the disbursed and bipartisan move (policy of the political establishment) to build overhead access roads into Port City. That was not a pressing investment. Colombo is in desperate need of a congestion charge which would cost a fraction to implement and achieve the same in terms of improvement in travel times. Such a solution however wouldn’t allow politicians to line their pockets.
External debt as measured in dollar terms has gone down. The comparison of external debt to GDP is highly misleading given the fallout from the COVID-19 pandemic. The Central Bank’s ineptness to even go for things that have long been delayed like the Panda and Samurai bonds is only explainable by people within those institutions. Assets long earmarked for sale like the Ceylinco Celestial Towers and the Colombo Hilton can still be sold to raise funds.
The remittance figure is artificially low given the misguided policy of playing around with the exchange rate and Sri Lankans abroad probably have considerable sums in savings that they are waiting to bring back to the country. Being late on the payment of an International Sovereign Bond is not a pressing matter if you do not intend to issue any more ISBs which is something that we should consider.
In other words, defaulting would not mean the unavailability of fuel. Defaulting would mean that there would be less scope for things like the Central Expressway which are far less effective than things like an investment in railways. People should look at how Iceland stood by their guns and told the rest of Europe to go to hell.
As with Evergrande’s recent default, it is not the worst thing in the world. We can always catch up on payments in the coming years without starting any new mega projects and use debt repayment as a mechanism to continue to depreciate our LKR to keep our exchange rate competitive.
Lankans against mega projects
On the left
Sirimavo Bandaranaike drunk on her power and international acclaim as the first female leader went on a massive plan to completely restructure land ownership in the span of her premiership. In doing so she paved the way for the long term decline in our plantation sector as the landowners who would have otherwise worked towards seeking the best possible price for the crop and over the long term built up their own brands made way for massive state losses and an oligarchy of brokers in the tea industry.
Sirimavo also decided that Sri Lanka, a country that could barely maintain domestic social order, was going to kick the British American interests in the oil sector from the country. Though the idiots on the left won’t admit it, this put us on a warpath with the west. Oil is power and the West is more than happy to undermine nations like Venezuela and Iran to even invade nations like Iraq to maintain control of that liquid gold.
Today Colombo and even Hambantota remain less than half the scale of the bunkering volumes of the likes of Fujairah and Singapore (both vassal states of the West) remain at the top of the game. Even today these idiots won’t allow for things like the privatization of the CPC which would at the very least ensure the availability of fuel for domestic consumption.
On the right
This as history will show lead to massive discontent and the election of one ultra-right-wing Junius Richard Jayewardene. The JRJ government strapped us into this insanely right-wing system under the Executive Presidency. Previous embers in terms of political division were actively propagated by the state to create longstanding political divides and ethnic conflict. To this day executive presidents as with Mahinda’s Rajapaksa’s most recent speech can call on ethnic division to curry favour.
JRJ implemented the Mahaweli scheme which indebted the country for decades and caused resentment in both the South and the North which did not get proportionately as much investment. When youth from those regions rose up they were quickly and very violently put down and this would have continued indefinitely under a Premadasa regime.
On the inane
Speaking English is only a sign of education to those with limited exposure to the anglicized schooling system. Most of us well versed in the language can quickly spot Sajith Premadasa to be a fraud given his inability to make any real sense. As those not willfully blind have already seen the videos of him allocating jobs on the basis of height I give you this other gem of a story on how Premadasa’s brother in law Rohan Jayakody stole artwork from the President’s house with over 20 witnesses to the theft and tried to fence it in the UK only to be stopped by the Sri Lankan embassy overseas. If not for my sake but rather for the sake of the entire country please just ask yourself whether this man is a suitable candidate to run the country.
Sirimavo Bandaranaike’s broad socialist reform was one of the most misguided and stupidly implemented economic policies in our modern history. JRJ’s reform lasted beyond his tenure ship and we desperately await someone to untie us from this ridiculous system of government. Premadasa can’t even beat a candidate that he outspent in an election. In all cases however, it is these mega centralized plans that get us in trouble. It wouldn’t be the worst thing in the world if the government due to financial constraints was not able to undertake any new ones.