No short-term economic miracles

Granting a rare interview to an international news agency recently, President Gotabaya Rajapaksa vowed to finish the remaining two and a half years in his term despite months-long street protests calling for his ouster. In this same interview President Rajapaksa claimed that he “can’t go as a failed president.” There is no reason to doubt that this report accurately captured the sentiments of the President and if so, the statement by President Rajapaksa is both encouraging and troubling.

Self-awareness is a positive trait and those who lack this attribute can do enormous harm when in political power. The fact that President Rajapaksa is acutely aware that he is a failed president is a positive development. From his false assertion that Sri Lanka was one of the best countries in the world to have handled the COVID-19 pandemic to now acknowledging that the economy is in shambles is a steep learning curve. 

Only three months ago in March this year, President Rajapaksa said that the economic woes of the country were “not of his making.” The events since his public address have left no doubt that he is to blame for the catastrophic economic collapse. Incompetence, lack of education, corruption and arrogance have ensured Gotabaya Rajapaksa will be go down in history as the worst President of Sri Lanka to date.

What is more concerning in President Rajapaksa’s assertion that he cannot leave as a ‘failed President’ is the implicit assumption that this economic downfall can be reversed in little over two years. It is in everyone’s interest to comprehend that the abyss to which Sri Lanka’s economy has fallen cannot be rectified any time soon. Managing expectations and preparing for painful yet absolutely necessary reforms is prudent. Even in the best case scenarios where reforms to State sector enterprises are done including shutting down and selling irredeemable entities, curtailing government spending including the reduction of State sector employers and cutting of welfare the recovery will take many years. In the meantime, there could be social unrest as welfare and State sector employment opportunities are reduced. Salaries will not rise to keep up with inflation and skyrocketing cost of living.

A quick glance of countries that had suffered similar economic crises show that it takes at least five years at the very least to reverse such meltdowns. In 2015, Greece defaulted on its debt to the International Monetary Fund, marking the first time in history a developed nation has missed such a payment. With massive assistance from the IMF and the Eurozone economies, Greece showed signs of recovery only in 2020.

Sri Lanka defaulted on its sovereign debt in April 2022. Yet to date there has hardly been any signs of austerity or curtailing of public sector spending. There are also no signs of reforming loss-making State sector enterprises such as the Ceylon Electricity Board, Ceylon Petroleum Corporation or SriLankan Airlines. There are over 450 State sector enterprises that employ over 1.5 million people in an unsustainable economic model. Sri Lanka has not even begun to address the necessary reforms that would be essential for the economic recovery. 

Therefore, it is delusional to assume the economy can recover let alone be thriving in just over two years. President Rajapaksa should be given credit for acknowledging that he has failed. It is also important for him to realise that he is not going to depart as a successful president even if all the reforms that need to be done are carried out. When he and his Government has not even begun the necessary work towards the economic recovery it is rather delusional to have hope of turning the economy around in two years. 

President Rajapaksa will serve his legacy well if he would allow for the necessary political reform and step aside. He has been smart enough to understand that he is a failure, he should equally be smart to realise that he cannot be the solution to the problem he created.