One year since default, zero accountability

In April 2022 the Central Bank announced it would suspend all debt repayment until a negotiated restructuring with its creditors. After a 30-day grace period to pay $ 78 million expired a month later Sri Lanka for the first time in its history was officially in sovereign default. It has been a year since Sri Lanka announced to the world that it was a bankrupt nation unable to honour its debt. 

Sovereign default is the failure by a Government to repay its national debts. Countries are typically hesitant to default on their national debt since doing so will make borrowing funds in the future more difficult and more expensive. Many reasons led to this pathetic situation. The ill-advised tax cuts to the rich implemented by President Gotabaya Rajapaksa as soon as he assumed office in 2019, the mishandling of the COVID-19 pandemic and a series of archaic policies towards import substitution and currency manipulation were the primary factors for the default.

The appointment of grossly incompetent, unqualified and corrupt individuals to key decision-making positions was also a factor in this tragedy. The power grab orchestrated through the 20th Amendment to the Constitution that concentrated executive power with the presidency while eroding the oversight role of the Parliament into the State’s finances and the erosion of the independent public service and the judiciary have contributed in no small measure to the current predicament.

Yet, those responsible for this economic calamity have escaped responsibility. At a bare minimum they should have been held accountable for the criminal negligence of duty. Dr. P.B. Jayasundera who made economic policies in the first two years of the administration, going beyond his mandate as the Secretary to the President, those he appointed to positions of Governor of the Central Bank and the Secretary to the Ministry of Finance have a particular responsibility in setting the stage for this economic disaster. The former Finance Minister Basil Rajapaksa and former Governors of the Central Bank Prof. W.D. Lakshman and Ajith Cabraal should have been held accountable for not taking the necessary corrective measures in the face of the pending disaster. 

The irrational decision to peg the currency to an artificial exchange rate that burnt out much of the foreign reserves while at the same time resulting in the plummeting of remittances by Sri Lankans living and working abroad was a key reason that led to the shortfall in foreign currency to pay creditors. There has hardly been any investigation into the actions and omissions of those who were responsible for handling the country’s economy and no one held accountable for the misery caused to millions of Sri Lankans.

President Ranil Wickremesinghe did inform Parliament that those responsible for the economic crisis must be identified and held accountable but follow up action has been slow. Thus far political expediency has trumped over holding those responsible accountable for their crimes and negligence.

As Sri Lanka marks the gloomy anniversary since its sovereign default in 2022 it is necessary to remember that expecting solutions from the same group of individuals who precipitated this calamity is futile. Until there is a clear understanding of the circumstances and policies that led to the default along with those who were responsible, proper recovery from the crisis will not be possible nor can the nation be certain the crisis will not reoccur.