Harim Peiris

By Harim Peiris

(Published in the Island on 21st July 2021)

Dear Sir,

At the outset, may I rather belatedly congratulate you on your assumption of high ministerial office as the new Minister of Finance of Sri Lanka.

Skimming through the rather lengthy gazette notification of the duties and functions, assigned to you, I find that you are tasked with a very wide ambit of duties, and responsibilities, impacting the present and future well being of our nation and her people.

As you take over the Finance portfolio and many of the duties previously entrusted to the Prime Minister, there is a widespread public expectation that this change will result in a mid-term course correction by the government. I venture to highlight and flag a few such issues for your kind consideration, in the interest of the public.

Fighting the Pandemic

As public health is always a crucial factor in the economy and the Covid-19 pandemic dominates the public life of the citizenry, the management of the same is vital for both economic activity and societal well-being.

Accordingly, you may want to consider giving a slightly greater weightage to the medical professionals in the anti-pandemic effort, with the military playing a more supporting role, rather than vice versa. One and a half years into the pandemic, we are no longer in an initial emergency phase but facing a long-term public health issue, best handled by public health professionals.

They require reliable data and depoliticised management. The periodic protests by doctors, nurses and PHIs, regarding the pandemic management, are concerning. Their advice should be heeded and the course corrected.

Rather unfortunately at the early stages of the pandemic, we stigmatised our victims and had a forced cremation policy, since rescinded, but further measures to win public support and cooperation, such as the international practice of home quarantine for Covid patients, not requiring hospital care, and allowing the private healthcare sector to be involved in administering vaccines, may be further desirable changes to the current practices.

The slate of resignations in protest by medical professionals of the National Medicinal Regulatory Authority (NMRA), should not be repeated. Heed their professional views. It increases public confidence, in the overall management of the pandemic.

Fiscal policy, the national debt and foreign reserves

‘Voodoo economics’ is a term first used, about 40 years ago in American presidential politics to describe the economic policies and supply side theories of then US President Ronald Reagan, whose economic policies of deep tax cuts for large corporations, and the very wealthy, resulted in a ballooning national debt.

While the US with a fiercely and institutionally independent central bank can manage such a situation, not least because the US dollar is the reserve currency of the world, we can less afford to go the same route.

So, some kind of course correction in this regard maybe appropriate.

An obvious course of action would be to go for an IMF budgetary support facility. While its size may be small, compared to our need, the investor confidence, such an agreement provides, would not only facilitate foreign direct investment (FDI), but also once again make the global capital markets accessible to us, allowing us to roll over our maturing debt, even as we wisely seek to avoid increasing the same. In hindsight, turning down a near half a billion-dollar grant, not a loan, from the Millennium Challenge Corporation (MCC) and an equal sized equity investment by India’s Adani Group into the Colombo Port’s East Container Terminal (ECT) are unwise missed opportunities.

We could very much have used a billion dollars of non-debt foreign exchange inflows into our economy at this time. Plus developed our port (ECT) and road network (MCC) rather than just the very expensive reclaimed land of the Port City. Policy consistency would be very advisable.

Foreign policy and investments

You may also want to examine our ease of doing business criteria for local, not just foreign investors. As you woo foreign investors, into the largely autonomous Port City Zone, do consider local entrepreneurs, who are finding, among other things, the import ban on intermediate and capital goods, to be a significant drag on their operations.

The closed economy did not work from 1970 to ’77 and resulted in the SLFP, being banished to the opposition for 17 years. I am sure you wish to avoid a similar fate.

A sound foreign policy is a must for an island nation’s economy, such as ours, so acting as if we live in a unipolar world, with China as the world’s sole superpower, has been an unwise approach.

Sri Lanka has been well served in the past by our non-aligned foreign policy and robust relations with India. Also remember that the West is the largest market for our exports, the EU, the US and the UK leading the way and that the Muslim majority Middle East, the host nations for our expatriate workers, whose remittances make up the bulk of our net foreign exchange earnings. So, a rebalancing of our foreign policy is very much needed.

Non-organic fertiliser

Sri Lanka is at its core still very much an agricultural society and the sudden shock therapy of banning all non-organic fertiliser may end up being more shock than therapy.

As we are all aware, decades of agricultural policies have led farmers to switch over to higher yielding varieties of crops, dependent on chemical fertiliser and a sudden halt to the same can have drastic consequences for yields and total national agricultural output, including for our tea production.

Accordingly, you may want to revisit this policy and at least consider a phased process, of using both organic and non-organic fertiliser.

The subsidy to switch over to organic fertiliser is a good start, and therefore continue with such incentives, rather than sudden and unexpected policy changes, that reverse almost four decades of agricultural practices.

Democracy, human rights and reconciliation

Sri Lanka’s human rights and broader governance practices, has come under increasing global scrutiny. Denying reality or being pugnaciously aggressive does not make friends nor influence people in international relations.

A serious rethink of the current practices of expanding the use of the PTA, cracking down on trade unions, peaceful protests and social media users, as well as other human rights issues that threaten our GSP+ trade status with the EU, should be reconsidered. Good politics is good for the economy and vice versa.

As you are aware, in the recent past, during your time in the US, the President invited the TNA for talks and then abruptly cancelled the same, reportedly until you returned.

For over a decade now, since the end of the war, neither the causes of the conflict nor the effects of the same, have been adequately addressed.

So, you may want to commence a process of dialogue with the TNA and the report of the Lessons Learnt and Reconciliation Commission (LLRC) appointed by the Prime Minister, during his time as President, maybe a good starting point. The LLRCs excellent key recommendations are all regrettably ignored and largely implemented in the breech.

You have a lot on your plate now as the Finance Minister and a key leader in the government.

For all our sakes, I wish you every success, to make the course corrections and bring about the prosperity and peace, that our nation so desperately needs and our people so deeply desire.

With best wishes,

Harim Peiris