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UNP Leader and MP Ranil Wickremesinghe
By Darshana Abayasingha
Former Prime Minister Ranil Wickremesinghe says Sri Lanka must enter the record books as the only country to antagonise the US, Europe, India, Japan, and China at the same time, and before the end of the year, segments of the population will have to skip a meal, possibly two, during the day due to the current economic crisis.
Wickremesinghe was the Guest Speaker at a meeting of the Rotary Club of Colombo West, where he averred that Sri Lanka should engage with the International Monetary Fund (IMF) to overcome the current economic crisis, and many countries have had to tighten their belts.
If the Government says it cannot go to the IMF, then it must come out with a viable option, but there can be no homegrown solutions, he said. Wickremesinghe said he will ask for a statement from the Minister in Parliament as to what the Government hopes to do, as the public has a right to know.
The UNP Leader called on the Government and political parties to come up with a long-term solution, adding that if any leader says it can be fixed in one term he is “talking rot”. Wickremesinghe says there will be no big Chinese investments coming as the actions concerning the fertiliser deal have broken the confidence of Chinese investors, and even nations like India and Japan. His outlook is detailed below.
“The current crisis is leading to the unravelling of our economy, our social system, and most probably, the unravelling of our political system. Economically, we have not seen such a situation since 1988, 1989, when we had the LTTE on one hand, the JVP and the IPKF. The economy really took a bashing, but that is nothing compared to what we are going through today.”
“Firstly, there is a decline in our foreign exchange reserves. Our overall situation is bad because the banks don’t carry their own reserves. Secondly, there’s a decline in Government revenue, and total debt has risen. By 2020, we had hit 101% of our GDP, which has never happened before. We always try to keep it at 85% and then try to bring it down.”
“Due to the shortage of revenue, we have resorted to money printing. In 2020, the money increase was 23%. So, what have we got? You have money being printed on one side, and a decline of foreign exchange as a result of the dollar appreciation, which was Rs. 181 in 2019 November and is now coming closer to 250. That depends on the Government’s rate, or the bank rate or the ‘Pettah’ rate.”
“What is the result? As the economy contracts that fast, the impact is being felt by the working-class, low-income people, Samurdhi recipients and others. I think, before the end of the year, there will be a time when we have to stick to one meal instead of three. They are feeling it badly.
“We are also finding that part of the middle class is slipping down from the middle class to the lower-income category. That is the second issue. Unemployment and inflation are on the rise. Another issue is that there’s going to be a shortage of food production by about March. In contrast, there are still enterprises which make good profits which leads to social debts.”
“So, how do we resolve this? Some people feel that this will be resolved when the global economy recovers from COVID-19. On earlier occasions when we had problems; when we hit rock bottom in 77 or 89 or 2001, or needed help in 2015, the global economy was doing well. So, we could always go to them and get some spare cash. We went along to the IMF, and they provided us funding. But there were always allies around, we ensured that every country was our friend. This time it’s different.
“According to the IMF, in the first quarter of 2022 there will be a slowing down of growth. That is due to ‘Omicron’. But thereafter, because the US and China are slowing down, the rate of growth globally will slow down. The global economy will lose up to 13 trillion dollars by 2024 and global debt – that is the official debt – will be 256% of the global GDP.”
“So, this is what we will face in the next few years. The other short-term issue is Omicron. In advanced countries and China over 70% of the people have received two vaccines. And nearly 50% plus the booster. In Sri Lanka, 60% coverage has received two vaccines and 25% the booster. So, you can understand why the health authorities are saying hospitals are filling up.”
“In addition to these issues that we face, there are other long-term issues. We have no money to pay Government pensions. When we were in Government, we calculated it to be somewhere by 2032 or 2035. I think now we will run out of that money much earlier. Till 2030, it’ll be alright, but afterwards, there will be problems. The other is climate change. You need a fair amount of money to fight climate change. I think they have done a study that says from Mumbai downwards to our west coast the water will rise to about three feet.”
“So, these are the problems. Money is required for modernising education, running the health system, but where do we find money in the future. Let’s say the first step is stabilising the economy. How do you hold it? How do you find foreign exchange? But that alone is not enough. How do you handle declining Government revenue? How do you bring financial discipline? This is the first part. I have suggested, as many others have suggested, to go to the IMF. It will be difficult in this situation; many countries have had to tighten their belts.”
“Then we must look at our long-term issues. We have a balance of payment issues. Now we can’t put that right in 24 hours. It’ll take us time. We have to find new sources of foreign exchange. It will take 10-15 years. There is a repletion period. So, where do we go? How do we manage until then? Where are we going to find our foreign exchange? What’s going to be our export? We can’t have apparel only. We have to compete with Bangladesh. That is just one sector. What are we going to do with tea? We have to think anew. Are we going for semi-automation? Are we going to become a logistic centre? Are we going for AI, which means training people? So, say we want to go into IT, I will say you can’t do it now. You haven’t got the people. These are long-term efforts. There is no magic wand.”
“We have to look at the environment. How do we modernise? How do we join the fifth industrial revolution? So, these are all to do with medium- and long-term economic development. You can’t just come and say I will stabilise the economy. No. You must have a plan. By 2050, we should ensure that our GDP increases at least five-fold or six-fold. It’ll take a massive effort, but it can be done.”
“Let me tell you that there are no short-term fixes. No one is going to turn up and say we will help Sri Lanka. We should go into the Guinness book of world records as the only country that has antagonised the US, Europe, India, Japan, and China. No one else has done that. You don’t realise the problem that we’ve had with these fertiliser deals. It has broken the confidence of the Chinese investors. It’s going to take time to repair it. If someone says there are going to be Chinese investors coming, no, because we’ve broken their confidence. India is looking the same. We were promised LNG plants which are not coming.”
“I don’t think we can do the way we do our politics now. We go on personalities. We go on sound bites, and we are all there to save the country. So, we have to realise that anyone who is saying that I will do it in one term is talking rot.”
“What do you need? The country, the political system, the business system, all should understand that we should agree on a broad economic framework that will last for 15-20 years. Governments come and Governments go, it doesn't matter. I mean very few prime ministers in Japan have lasted more than two years. Look at the development that takes place. Look at the development of European Governments? Because the basic economic framework is not touched.”
“What do we want to be in 2050? The Chinese have worked out their plan for 2049, the centenary of the creation of the People’s Republic of China. The report is called the ‘Rejuvenation of the Chinese nation’. We should be prepared. This is a test for everyone; for politicians. How do we get together and how do we come up with a national framework? You see the drama that goes on in Tamil Nadu. One group comes and locks the other groups up or they do something else. But it’s one of the fastest-growing states in India. Whatever they do in politics or hit each other, they will not touch the economy.”
“So, we have to learn. There are no short-term fixes. There can be no film stars. The country must have solid policies and people who can implement it; not merely at the top of the Government but those who are committed in the private sector. This is a chance we have to modernise. We won’t get another chance again. We have to now think of 2048 and go ahead.”
When asked what three things Wickremesinghe would do are, the UNP Leader said he would first plan with Parliament to enter into a national program.
“Without that, I don’t think anyone can do anything. The economy must be stabilised first as people find it difficult to live. The dollar may go to about Rs. 275, but ensure that people who are affected and low-income groups can carry on. The next thing I would do is to look at the health system and take more steps to control COVID. We still haven’t passed a single law in this regard.”
A question was also raised on what conditions the IMF may pose should Sri Lanka turn to the agency for support, including retrenching staff. Wickremesinghe responded that the IMF has never said to reduce workers.
“Because, if you put them on the road, the Government must still support them. They may say not to increase the workforce, which they told us in 2001. That there will be concerns on how you will handle it, but the bigger problem is making Government services efficient and restructuring the economy.”
