Harim Peiris

Political and Reconciliation perspectives from Sri Lanka

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Archive for June, 2022

Ranil’s government’s failure was inevitable – elections the only way forward

Posted by harimpeiris on June 27, 2022

By Harim Peiris

(Published in The Island & Groundviews (as “Elections Are the Only Way Forward”) on the 24th June 2022)

The young Sri Lankan cricket team has done the impossible and in the past couple of weeks, beaten the powerful Aussie cricket team several times, in the shorter formats of the game, giving Sri Lankans some much needed respite and cheer. The games have been played to packed crowds, notwithstanding lingering covid spread threats with TV viewership also reportedly high, demonstrating that people understandably seek some avenue of cheer from the misery which Rajapakse rule has plunged our nation to.

In contrast, the Gotabaya Rajapakse / Ranil Wickremasinghe administration has only managed to guide our ravaged economy to a near crash landing and an effective standstill. Government servants are asked to stay at home, school children are again online due to effectively non-existent fuel supplies in the country. During the five weeks of Ranil’s government, its seeming only role has been in coordinating the scare foreign aid, almost exclusively from India and not in effecting many of the significant and required reform measures, economic or political. It sought to argue that political reforms are not required and only emergency management of the economic crisis was needed. There was a basic game plan, backed by a politically naïve business elite, which was to get the white knight IMF in as soon as possible and until then use political contacts to get bridging finance to keep the economy moving. 

Well, this plan has not worked, for reasons which the young people of Sri Lanka correctly understand, but our political and business elites continue to want to ignore. It is that we have an economic crisis on our hands, precisely because of and due to our politics. After all the coming calamity was not sudden but forecast and warned about, most famously by former Finance Minister late Mangala Samaraweera. Even more recently as the proverbial writing was on the wall, using foreign reserves to defend the rupee at a ridiculous over valuation, printing money, not going to the IMF and not commencing early negotiations with our international creditors was the bombastic claim to fame of the lunatic leadership of our politicized Central Bank. It was relatively recently that we turned down a half billion-dollar grant (not loan) from the American Millennium Challenge Corporation (MCC) and opposed another half billion in Indian investment into the East Container Terminal (ECT). A billion dollars we can desperately use now. That is our politics, which drive our economics. The majoritarian ethno-religious nationalism which won big in 2019, drove our politics and drove us to our knees. We were advised by those who should know better to get a Hitler like administration (as opposed to a Mandela) and we voted for one, which has now resulted in our own defeat at Stalingrad, leading to the eventual destruction and fall of Berlin. 

The IMF white knight

There is great hope in the business community because of the naïve belief in the IMF as a white knight, will bail us out of trouble. That is because the business community does not fully appreciate the political constraints to the implementation of the required economic reforms. Reforms which are more painful now, because the economy has crashed, rather than when we were healthy. Any bailout / bridging finance by the IMF and / or bi-lateral lenders require our debt to be sustainable. In other words, that we can come out of bankruptcy and start honoring our obligations, including the bridging finance we are seeking now.

We not only need to raise revenue, but we also need to rationalize Government expenditure. We cannot as a nation afford to spend more on peace time defense, than we do on both education and health combined. But that is Rajapakse politics. We cannot afford badly targeted generally subsidies, though we can and must have a social safety net which takes care of those most vulnerable amongst us, which number is growing daily. We need to privatize our loss-making state-owned enterprises. Rajapakse politics was to re-nationalize Sri Lankan Airlines and kick out Emirates Airlines. Our politics have brought our economic collapse. We need to remove the anti-export bias in our economy and regulatory framework and the failed import substitution of the 1970’s towards which the Viyath maga & Eliya crowd at Shangri-La was dragging us. That would diminish the role of local oligarchs and replace rent seeking wheeler-dealing with internationally competitive businesses following best practices, as drivers of economic growth.

Elections the only solution

Ranil’s interim government has not been able to elect a woman deputy speaker, pass the 21st Amendment or most likely not even pass a genuinely reforms oriented interim budget. It has on the contrary given a major reprieve to the Rajapakses’, taken the steam out of the “Aragalaya” and sought to solidify the status quo. We need the new, not the status quo ante. The reason is because Mr. Wickramasinghe is now Prime Minister of an essentially SLPP Government, of which he is nominally the vice-captain, but does not lead.  The Rajapakses still call the shots. An internal family reshuffle and image makeover, denying any course correction does not provide the reforms which make our debt sustainable, which is what the IMF and all our creditors require. We would not be able to go there and do that with the leadership which brought us to this ruin.

Self-realization of failure dawns slowly, if at all for some people. The Rajapakse Administration and the SLPP are in denial mode and a fractious opposition has not helped the nation by easing up the pressure for the Rajapakses’ to go. The Opposition should challenge the interim government to present to parliament a Cabinet approved minimum common program, which it has not unveiled and can garner bi-partisan support from the Opposition or move a motion to dissolve parliament and go for a general election, because Sri Lanka requires a government with political legitimacy and a mandate to deal with the mess created by those mandated in 2019, to create “vistas of prosperity” who instead bankrupted us. As a recent Verite Research report pointed out, we would spend less on an election than we are on a new defense ministry headquarters or barely more than just the loan, interest component only, for the Kotelawala Defense University’s teaching hospital.

Sri Lankans are inordinately proud of their state, and we have much we can be proud of. Regular elections have been a big social safety valve of releasing pent up political frustrations, empowering the people and they reinforce the legitimacy of governments. We can and must go for parliamentary elections, sooner rather than later.

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Why both political and economic reforms must move in parallel for a turn around 

Posted by harimpeiris on June 9, 2022

By Harim Peiris

(Published in The Island & Groundviews (as “Need for Parallel Political and Economic Reforms”) on the 08th June 2022)

There is a fallacy being promoted by the reconstituted Rajapakse regime, that political reforms such as the proposed 21st Amendment are not really necessary or at least have already occurred through the change of Prime Minister and a reconstitution of the regime and the need of the hour is urgent measures to resuscitate the economy, because people are suffering economic hardship and their misery must be alleviated. Undoubtedly the people are suffering, and their misery must be alleviated, but political reforms are required for the required economic reforms. Both political and economic reforms need to move in tandem and in fact, political reforms are a necessary precursor for sustainable economic reforms.

A regime reconstitution – Ranil as Rajapakse nominee 

The Gotabaya Rajapakse Administration destroyed the Sri Lankan economy. With a combination of the fool hardiness of the naïve, the arrogance of absolute political power and corruption through unaccountability, they delivered not the vistas of prosperity and splendor they promised and was mandated to do, but instead they destroyed of the national economy. Which was resilient even in the face of a thirty-year civil war. It is ironic that the leaders who claimed credit for ending our war, managed to bring about a national destruction which the war never could. 

After the crash landing and the resultant political outcry by the populace, the initial response of the Rajapakse’s was to fire (request the resignation) of their entire cabinet of ministers who obliged. When that did not assuage public anger, the response was a combination of trying to shoot protesters (Rambukkana) and / or beat up the protesters (GotaGoGama) and then reconstituting the regime, with a UNP prime minister, with a full parliamentary group of himself. The rationale for this move was that the Government was resigning, and someone must take over the reins. What now exists in Government, is Mahinda Rajapakse giving up the trappings of a ceremonial PM, a single seat MP as prime minister, dependent on the core SLPP parliamentary group for the government’s survival, Basil Rajapakse reverting to his customary role of SLPP party boss calling the shots, sans ministerial office and President Gotabaya Rajapakse continuing with full executive powers. 

The Samagi Jana Balawegaya (SJB) of Opposition Leader Sajith Premadasa was correct to have adopted the principled position as well as align with the sentiment of the vast majority of the Sri Lankan public, who have been seeking to have the president take responsibility for the economic collapse he engineered and to abdicate power. The Opposition Leader has correctly stated that Sri Lanka had an executive president and a ceremonial prime minister and either the executive president must go and / or his powers transferred to the prime minister and parliament for a prime minister led administration to work. (It was Sajith’s father late President Ranasinghe Premadasa who was famously, quoted as stating that under the 1978 constitution, the PM does not even have a peon’s powers). It is in the light of that reality as well as the constitutional reform discourse since the presidency of Chandrika Bandaranaike Kumaratunga, that the SJB, through its general secretary, Ranjith Madduma Bandara, tabled a proposed 21st Amendment to the constitution, which inter alia, changes the executive presidency to a ceremonial one. 

The proposed 21st Amendment is a significant compromise from the reform proposals of the SJB and is instead, a reversal to the status quo ante of the pre 20th Amendment period, albeit a 19th amendment minus situation. With some degree of consensus reached on many issues of the 21st Amendment, it is now the (still) ruling SLPP which is seeking to renege on the 21st Amendment and keep Ranil as a puppet on a string.

Economic reforms come through policy changes which only which only a government with public political legitimacy can deliver. But the even the truncated 21st Amendment must be passed. 

The economic reforms

Sri Lankan faces a catastrophe which even 30 years of civil law never perpetuated on a hapless general public. It is paradoxical that the political leaders who are credited with ending our war have been clearly responsible for a national destruction, which the war was never able to bring about. 

The response of PM Wickremasinghe’s economic team has been to reverse the lunacy of the Viyath Maga, Eliya and SLPP policy framework, of slashing taxes, defending an artificially low exchange rate with all available foreign reserves, printing money to fund a fiscal deficit, being utterly corrupt, tone deaf to expert advice and banning fertilizer. Now, Interest rates have been raised, the exchange rate has been floated somewhat and the disastrous tax cuts of 2020 are sought to be reversed. Again, a reversal to the status quo ante of 2020. However, what was sufficient before the economic collapse will not suffice to pull us out of the same. That would require a restructure of loss-making state monopolies and other structural reforms of the Sri Lankan economy, especially measures to ensure that our national debt burden is sustainable. Reforms which require public and political legitimacy, which the Rajapakses have totally lost. 

The IMF and the World Bank have made clear, that no new funding facilities can be made available until Sri Lanka demonstrates a policy program which basically makes our national debt, especially its foreign currency component sustainable, i.e., repayable over time. The global financial system requires that sovereign nations honor their debts. Just like a national financial system require it domestically. 

Contrary to popular belief, the reversal of the 2020-22 policies have made no material impact on our national finances and we only have fuel to provide mobility and ease our foreign currency situation because of Indians supply us with fuel on credit. Foreign policy wise, India is very kindly doing for Sri Lanka, what in years past, Germany tried to do for a while for Greece, which is bail us out of trouble. With over six hundred billion dollars in foreign reserves, it has decided that about one or two billion could be used to fill the space vacated by the Chinese, who seeing the writing on the wall have made their cheque book scarce. The middle kingdom is quite hardnosed about their finances, just check the rates at which they lent money for the Rajapakse white elephant projects.

Ranil’s interim government has perhaps done as much as it could, which is clearly not enough. A clear timeline for early elections, perhaps sometime early next year, will be required for the real reforms required for rebuilding our devastated nation. 

(The writer served as Advisor, Ministry of Foreign Affairs from 2016-17)

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