Thursday Dec 05, 2024
Thursday Dec 05, 2024
Thursday, 5 December 2024 00:15 - - {{hitsCtrl.values.hits}}
AKD with Senior Economic Advisor and Chairman, Ceylon Chamber of Commerce
Memorial to LTTE dead, Nallur, Jaffna
Memorial wall for Tigers, near Nallur Temple (2024)
“For sweetest things turn sourest by their deeds; Lilies that fester smell far worse than weeds.”
– William Shakespeare,
(from) Sonnet 94
Sri Lanka’s postwar crisis is a tragedy in three Acts.
Act I: Ranil Wickremesinghe (and his CBSL chief) turn the debt problem into a ticking debt-bomb with the ISB surge at tail-end of Prime Ministerial tenure (2015-2019). (https://thediplomat.com/2023/03/the-real-cause-of-sri-lankas-debt-trap/)
Act II: President Gotabaya Rajapaksa ignores the ‘China card’ of ongoing discussions for debt-rollover, inducts new technocrats and pivots to the IMF option. Ranil Wickremesinghe, nominated not elected to Parliament, is appointed by besieged Gotabaya as PM and selected by the SLPP-dominated parliament as President, defeating the competing candidate-- their dissenting colleague and Mahinda’s ideologue in 2005 and 2010, Dullas Alahapperuma. (Insiders say RW was Basil and Gota’s choice; Mahinda tells media he voted for Dullas.)
Act III: Leftwing/left-populist President Anura Dissanayake retains Gotabaya Rajapaksa and Ranil Wickremesinghe’s choice of technocrats as key officials, picks the head of Ceylon Chamber of Commerce as Senior Advisor to the President on Economic Policy. The Advisor then negotiates (with little transparency or parliamentary accountability) with the international bondholders. Wickremesinghe’s roadmap is faithfully followed; his policy choices fast-tracked to the next level.
If I was unaware of Anura Dissanayake and the JVP-NPP, and went strictly by the content and substance of its macroeconomic policy as most crucially manifested its negotiations with the international bond holders and the IMF, I wouldn’t guess it was a leftwing Government (still less one with a revolutionary lineage), or a centre-left Government, or a progressive-centrist Government, or even a centrist Government. I’d think it was a rightwing neoliberal Government.
Counter-revolution in the revolution?
French intellectual and participant in Che Guevara’s Bolivia project, Regis Debray, wrote a famous booklet with a more famous title, ‘Revolution in the Revolution?’ elaborating Che’s contention that the Cuban Revolution had caused a paradigmatic revolution in leftist strategy. An analysis of President Anura Dissanayake and the JVP-NPP administration’s course could be titled ‘Counter-Revolution in the Revolution?’
They say when you’re in a hole, the first thing to do is to stop digging. But the new administration is digging deeper. The question is no longer whether a promising leftist government with a youthful leftist leader could crack the country’s structural economic crisis, but why it is exacerbating that economic crisis and the people’s suffering with its conscious choices which not merely continue the old policies that got us here, but take those counterproductive policies to the next level, locking-us into further international indebtedness and higher repayments on existing debt.
There was a better way. It isn’t that AKD didn’t try hard enough; he just didn’t try at all.
A.The JVP-NPP government should have embraced the economic paradigm of Joe Stiglitz and Paul Krugman (Nobel Prize winners), Robert Reich, Jeffrey Sachs, James Galbraith -the new, New Deal school. But that’s the opposite direction from AKD’s current path.
B. AKD and the big capitalist class could’ve converged on approximately the East Asian formula, combining a streamlined ‘smart’ state and private business in an essentially state-led growth model.
C. AKD could’ve fielded a balanced negotiating team with creditors, especially private international creditors, instead of opting for Citibank and the Chairman, Ceylon Chamber of Commerce. Sympathetic expert on Sri Lanka’s debt crisis, Prof Martin Guzman, Argentina’s former Finance Minister who secured a 50% haircut for his country, could’ve been tapped.
Instead, we are witnessing the AKD-NPP administration’s paradigmatic conversion to neoliberalism. Anura has accepted the Washington Consensus when there’s no longer consensus in Washington. Check out Indiwaree Amuwatte’s exhaustive, enlightening Ada Derana ‘Hyde Park’ interview with the President’s Chief Economic Advisor: ‘Liberal Handling of Market Will Continue |Duminda Hulangamuwa’. (https://youtu.be/KVO_c4Z_gwI?si=4gPLYpV7kEkuzU_n)
The choice of the head of the Ceylon Chamber of Commerce as one of the President’s two Senior Economic Advisors, and the decision of the President, PM and Foreign Minister to be absent from the BRICS Plus Summit, symbolize and signal the Government’s core character and course.
Lousy debt deal
The incoming debt deal is ghastly. Brad W Setser, Senior Fellow at the prestigious Council on Foreign Relations (CFR), and former staff Economist at the US Treasury Department wrote:
“Put the (revised) bond structuring terms for Sri Lanka into a spreadsheet. Sure looks like the bondholders out-negotiated Sri Lanka’s previous Government, and gamed the IMF and the official creditors…”
(https://x.com/brad_setser/status/1843806632842846437?s=12)
Dr Nishan De Mel sounds an alarm.
‘Verité Research finds that Sri Lanka’s statement on September agreement with bondholders had an incorrect expectation on debt reduction.
Debt relief will be 19.8% in Net Present Value (NPV) at a 5% discount rate; not the 30% NPV reduction expected in baseline scenario.’
(https://x.com/ncdemel/status/1846954155241623836?s=48)
In a CFR piece, Setser warned against Macro-linked Bonds.
“Rather than reducing the risk of further debt trouble, Sri Lanka’s macro-linked bonds set up the risk that Sri Lanka will fall back into debt trouble in 2029 or 2030.”
(Sri Lanka’s Bond Deal Should Not Set a Precedent | Council on Foreign Relations)
The Financial Times (London) piece by Theo Maret and Brad Setser is dramatically titled ‘Is the IMF setting Sri Lanka up for a second car crash?’:
“…If you assume a 5 per cent average interest rate on Sri Lanka’s debt and a debt-to-GDP ratio around 100 per cent. the IMF’s revenue projections imply that Sri Lanka will spend about a third of its revenue on interest payments alone in years to come. Even this calculation is optimistic. In the low-interest rate era of the past decade, Sri Lanka’s average debt costs hovered around 8 per cent. Plugging this in the calculation above means more than half of Sri Lanka’s revenue would be gobbled up with interest payments…Countries that dedicate more than a third of projected revenue to interest payment are not likely to be sustainable and regain market access…”
Diagnostics: The dark side
I tapped a young friend, a top-tier Lankan economist whose expositions have a memorably luminous lucidity, for a briefing note on the imminent debt deal and permission to share it with readers on condition of non-attribution. Here’s the 8-point diagnostic:
(I) Flawed debt relief projections:
The nominal “haircut” on the principal is offset by high post-restructuring interest rates, making the deal more costly in the long run.
Depreciation of the Sri Lankan rupee increases the real cost of debt repayments, disproportionately affecting local taxpayers and low-income earners.
(II) Increased burden on working people and low-income groups:
The restructuring deal raises the effective interest rate after 2028, which significantly increases debt servicing costs. This diverts public funds from essential social services to debt repayment.
With over a quarter of the population already living in poverty, higher debt repayments may exacerbate inequality and deepen economic hardship for vulnerable groups.
(III) Labour market liberalisation and its social costs:
As a condition of the IMF program, proposed labour reforms, such as the abolition of overtime pay and the eight-hour workday, threaten to reduce incomes for the working people while increasing economic insecurity.
(IV) Erosion of public resources:
The agreement prioritizes creditor rights over national interests, limiting Sri Lanka’s ability to negotiate better debt cancellation terms.
Limited fiscal space will likely result in cuts to social spending, including healthcare, education, and poverty alleviation programs, which are critical for the poor.
(V) Predatory lending practices:
International lenders ignored financial prudence, lending excessively despite Sri Lanka’s precarious fiscal position. This has led to unsustainable debt that burdens future generations.
Vulnerable communities bear the brunt of these practices, as debt repayments are funded by regressive taxation and reduced public services.
(VI) Economic sovereignty and governance concerns:
The deal compromises economic sovereignty, as creditors can alter the governing law of outstanding debt, restricting the country’s ability to challenge the terms in international forums.
The lack of transparency and allegations of collusion with financial advisors further undermine public trust and accountability, with poor communities left unrepresented in decision-making.
(VII) Comparative disadvantage in restructuring terms:
Unlike Ghana, which secured significant debt relief with reduced interest rates and principal cuts, Sri Lanka’s deal increases nominal payments, reflecting inequitable treatment that disproportionately affects its impoverished population.
(VIII) Long-term economic instability:
The deal locks Sri Lanka into a prolonged debt cycle, with debt servicing costs exceeding potential economic growth rates. This undermines long-term development prospects and risks perpetuating poverty and underdevelopment.
Corporate interests, ideology dominate
Outside of Sri Lanka, no ‘government of leftwing, democratic and progressive forces’ (Tilvin Silva, Daily Mirror) with a ‘progressive, left, socialist’ (Dr Harini Amarasuriya) ruling party would appoint the Chairman of the country’s Chamber of Commerce to its National Economic Council, make him one of two Senior Economic Advisors to the ‘leftwing’/ ‘left-populist’ President, and task him with sensitive international economic negotiations (IMF, bond-holders).
That wouldn’t be done by a pro-business, liberal, US Democrat administration either, to avoid a conflict of interest being spotlighted by Senate scrutiny.
Speaking strictly hypothetically of course, if a corporate association a Presidential Advisor chairs, has among its members, holders of a few billions of US dollars of outstanding ISBs purchased at steep discounts as low as half the original value, it could amount to a serious conflict of interest when negotiating the ISB issue on behalf of the country.
Crossed-wires can be caused inside a head wearing two hats (corporate and state), especially when proffering policy advice to the President on the state sector, ‘targeted’ social entitlements (to ‘deserving schools’) etc. Universal welfare for schoolchildren and subsidies for SMEs is bad. Drain of profits overseas by top corporates (2107 foreign exchange liberalization) is OK.
Roots of right deviation
In March 2014 I had urged:
“…a JVP-centric broad Oppositional project at both Presidential and parliamentary elections…along the lines of the successful Latin American populist-democratic left.” (https://www.wsws.org/en/articles/2014/05/13/jaya-m12.html)
Had AKD led a left-centre Broad Front as I suggested in 2014 and again, emphatically and repeatedly in 2023-2024, he:
a. Would have vaulted the 50% mark.
b. Wouldn’t have been so heavily dependent for economic expertise and experience on corporate fat cats.
Those who spurn my classification of AKD as a ‘minority President’ should start with the Collins Dictionary definition and move to the Oxford University Press, grasping the necessary nexus ‘minority presidents’/’coalition politics’: ‘The Rise of Minority Presidentialism: Why Coalitional Politics Matters’ in ‘Coalitional Presidentialism in Comparative Perspective: Minority Presidents in Multiparty Systems’. (https://academic.oup.com/book/11054/chapter-abstract/159422665?redirectedFrom=fulltext).
Anura preferred the 185-year-old Ceylon Chamber of Commerce—which I have absolutely nothing against, having been for a few years an Advisor/Consultant to the Chamber myself—to a United Front (one of Mao’s ‘Three Magic Wands’) or ‘coalitional politics’ with anyone, however progressive, who had been in any governing party for 76 years. The result is that no administration since Independence has stuffed the state sector and policy-making with as many corporate types as has ‘leftist’/ ‘left-populist’ Anura’s.
AKD-NPP’s preponderant targeting of ‘political culture/governance/old elite’ makes sense now. It diverts attention from the economic model and policy regime at the root of the crisis: neoliberalism (not the post-1977 Open Economy).
The near-nihilistic radical rhetoric rejecting the “76 years since Independence”, pledging to establish the first real people’s government, also makes sense. In ‘The 18th Brumaire of Louis Bonaparte’ Karl Marx observes wryly that the grand incendiary rhetoric invoking the ancient Roman Republic by the bourgeois revolutionaries of France, served to ideologically cover-up and compensate for the quite modest aims of the bourgeois revolution, replacing one exploitative rule with another.
The JVP-NPP Government is barely ‘left-populist’ not only because there is little distinguishably ‘leftist’ about it, but because its ‘populism’ will be eviscerated of meaning by the IMF-ISB package. CBK’s ‘Package’ and PTOMS, Ranil’s CFA and ISGA, Ranil’s IMF deal, and Anura’s IMF and ISB deals, are on a continuum—lopsided sellouts.
AKD’s JVP-NPP Government is neither ‘center-left’ nor ‘left-populist’. A (neoliberal) wolf in (center-left, or left-populist) sheep’s clothing is not a ‘sheep-wolf’ or ‘wolf-sheep’.
Whitewashed Tiger tributes
The November 27th commemoration which took place on a bigger scale this year under President Anura Kumara Dissanayake than at any time since the war ended, was NOT about memorializing ALL the Tamil war dead. (https://x.com/TamilGuardian/status/1860403127943323910)
Mahaveera Day was a martial tradition initiated by Velupillai Prabhakaran in 1989. TV news footage last week caught at least one large public commemoration having at the entrance an arch in palmyra leaves decorated by the decades-old LTTE symbol of a Tiger fighter in dark silhouette, beret-clad, automatic rifle barrel visible over his shoulder, bearing a dead body of a fallen comrade in his arms.
The Tamil Guardian trumpeted ‘Memorial dedicated to fallen LTTE cadres unveiled in Jaffna’:
“A memorial dedicated to the tens of thousands of Liberation Tigers of Tamil Eelam (LTTE) cadres was unveiled today in Nallur, Jaffna to mark the third day of Maaveerar remembrance week. Plaques listing the names of the Tamils who sacrificed their lives in the struggle for liberation between 27 November 1982 and 18 May 2009 were installed at the memorial. A mother of a fallen LTTE cadre hoisted a flag and lit a lamp at the event. The memorial will be open until November 27 for the public to pay their respects. Events are taking place across the Tamil homeland in the lead up to Maaveerar Naal which is marked on November 27.”
(https://www.tamilguardian.com/content/memorial-dedicated-fallen-ltte-cadres-unveiled-jaffna)
Last week’s memorialisation had no space for Tamils killed during the war years by the LTTE: Appapillai Amirthalingam, Sri Sabaratnam, Gopalaswamy Mahendrarajah (a.k.a Mahattaya), Mr. and Mrs. Yogeswaran, Mr. and Mrs. Sam Thambimuttu, K Padmanabha, Kethesh Loganathan, Dr. Neelan Tiruchelvam, Dr. Rajani Thiranagama, Lakshman Kadirgamar and thousands of young TELO, EPRLF and PLOT fighters.
You can’t play ostrich with ‘Tigerism’ (Ram Manikkalingam’s term) as Anura is doing. I suggest strategic pre-emption.
i. Geostrategy and geopolitics dictate a permanent, adequate Lankan military presence in the North and East. Excess land occupied by the military should be returned. What is ‘excess’ must be determined by military planners using strategic and tactical criteria. The camps in the North and East must be defensible in any credible scenario.
ii. Military expenditure must be rescrutinised and trimmed, not slashed.
iii. The directly, nationally-elected executive Presidency must remain, though subjected to structural reforms ensuring greater transparency and democratization. The Presidency is the ONLY institution elected by the whole island. Without it, we shall have a PM elected from one area, with electoral compulsions sourced in parochial demography. The Presidency must remain on ‘overwatch’, a panoptic mechanism over the Provincial Councils, with interventionist capacity.
iv. The current absence of Northern and Eastern Tamil representation in the Cabinet must be rectified. The Provincial Council elections must be held. The system of Proportional Representation must remain. A political vacuum or a deficit of elected representation can only weaken moderation and exacerbate radicalization.
v. Delegating powers over law-and-order and land to the Provincial Councils should, if at all, be in an incremental/graduated manner, over/after a 10-year period, conditional on responsible political conduct by the PCs.
The JVP-NPP must initiate an educational and ideological campaign to combat overt or covert separatism in the North.
[For my electronic archive, please visit: https://dayanjayatilleka.webflow.io/]
