Harim Peiris

Political and Reconciliation perspectives from Sri Lanka

  • June 2022
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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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