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Wednesday December 7th, 2022

New twists to Sri Lanka ruling party’s factional theatrics as alliance partners cry foul

The Rajapaksa Brothers, President Gotabaya, Prime Minister Mahinda and Basil at a felicitation

ECONOMYNEXT  – Partner parties of the Sri Lanka Podujana Peramuna (SLPP)-led alliance have issued a joint-statement criticising attempts from within to heap blame for a staggeringly unpopular fuel price hike on Energy Minister Udaya Gammanpila.

In a statement signed by, among others, National Freedom Front (NFF) leader and Industries Minister Wimal Weerawansa and MPs Vasudewa Nanayakkara, Prof Tissa Vitharana and Athuraliye Rathana Thero June 14, eight out of 11 parties representing the government rejected the attempt to blame the decision on their colleague.

SLPP general secretary MP Sagara Kariyawasam on June 12 demanded the resignation of Energy Minister Udaya Gammanpila accusing him of conspiring to bring the party leadership to disrepute by increasing prices.

Related: Sri Lanka ruling party kindles resignation drama over fuel price hike

Criticising the move, the alliance partners said in their statement: “The decision to increase fuel prices was taken by a cabinet sub-committee on cost of living chaired by the president and participated by the prime minister, as recently confirmed by the President’s Media Division. By assigning blame for this “unpopular” decision to Mr Gammanpila, SLPP General Secretary MP Sagara Kariyawasam has thrown the party into an unnecessary crisis before the public.”

The general secretary of the party openly challenging a decision made by the president and the prime minister has led to the public wondering if there is factionalism in the government, the party representatives said.

“We would like to point out that such clannish and immature actions ultimately result in the people losing confidence in the government. It is the duty of the president and the prime minister to to defeat this trend,” they said.

Meanwhile, in a new twist to the saga, State Minister Nimal Lansa has said SLPP architect and national organiser Basil Rajapaksa would not have allowed a fuel price hike at this juncture.

Fielding questions from reporters June 14, State Minister Lansa said people are facing immense difficulties due to the COVID-19 epidemic and the increase in fuel prices couldn’t have had come at a more inconvenient time.

“For about a year and a half people have been facing job losses, pay cuts and inability to pay loans. A hike in fuel prices affects all goods and services. This is not the time for it,” said Lansa.

The government had raised prices in a bid to bolster the cash-strapped state energy firm, ending an election promise to fix oil prices. Gammanpila had said the previous day (11) that the price hike was decided by the cabinet subcommittee as the state-run Ceylon Petroleum Corporation (CPC) had 330 billion rupees of accumulated losses and over 3 billion US dollars in foreign exchange which was in short supply.

“People have gone out from the pan to the fire. They’re already suffering. Though I’m in the government, I must say we interact with people in our communities. Some in Colombo can say various things, but when we go to the village, people tell us they find it difficult to live,” Lansa said on June 14

Asked if Basil Rajapaksa was behind the move to blame Gammanpila for the price hike, the Gampaha district MP said: “Basil Rajapaksa is someone who speaks directly. If he were here, he would not have permitted an oil  price hike. What we ask the energy minister to do is to intervene and reduce prices.”

Lansa claimed Kariyawasam was under pressure to voice the frustrations coming from the party’s lower ranks.

“If Basil Rajapaksa wanted to, he would speak to the president or the prime minister,” he said.

Rajapaksa, younger brother of President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa, is currently on a visit to the US, where he is a citizen.

There had been simmering tensions between Kariyawasam and a faction represented by Gammanpila and Weerawansa.

Gammanipla has gone on record referring to a benign “internal struggle” to course correct the alliance and reverse some of its more problematic decisions.

In April 04, 2021, the minister said there was a conspiracy afoot to undermine President Gotabaya Rajapaksa’s administration and destroy the alliance from within.

“We know there are certain provisions in the 20th amendment to the constitution that go against the mandate. The 20th amendment wouldn’t have come out in the form that it did if the goal was to serve the mandate,” he said.

In his June 12 statement, Kariyawasam alluded to attempts to deliberately sabotage the government to make the party leadership unpopular in the eyes of the public.

Kariyawasam had previously levelled similar allegations at Industries Minister Wimal Weerawansa.

Tensions between Weerawansa and sections of the SLPP can be traced back to early February when he refused to retract a remark he had made to a Sinhala-language weekly on February 7 that President Rajapaksa must lead the SLPP.

His comment drew the ire of Kariyawasam who demanded an apology and a retraction from his colleague.

Previously, on February 2,the SLPP secretary criticised Weerawansa for going public with his party’s opposition to the now-scrapped East Container Terminal deal. His actions, Kariyawasam said, were detrimental to the unity within the ruling coalition. (Colombo/June14/2021)

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Despite losses, Sri Lanka to resume “park & ride” transport after complaints  

ECONOMYNEXT –  Sri Lanka’s state-run Transport Board will resume its loss-making City Bus service from January 15, 2022 Cabinet Spokesman Bandula Gunawardena said, after the service abruptly discontinued with the state-run firm’s director board citing losses.

The City Bus service was introduced in 2021, under the government of former President Gotabaya Rajapaksa, from Makubura to Pettah and Bambalapitiya.

The service was started to reduce the number of automobiles travelling to and from Colombo and suburbs by providing a comfortable, convenient and safe public bus transportation for passengers and riders who use cars and motorcycles as their means of transportation.

During the time period in which the service was initiated, there were 800 hundred vehicles that would be parked and would use the system, Gunawardena, who is also the Transport Minister, said.

The service was later collapsed due to inconsistencies in scheduling and it was completely stopped after

“Without informing the Secretary or the Minister of the relevant Ministry, the Board of Directors have come to a conclusion that this is loss making route and must be halted,” Gunawardena said.

“The users of the City Bus service brought to our notice and therefore I gave the Secretary to the Ministry of Transport the approval to start the City Bus service from January 15.”

“If we stop all loss making transport services then massive inconveniences will occur to the people in far parts of the island.”

The chairman of the state run Ceylon Transport Board has been asked to handover the resignation letter by the Minister Gunawardana citing that the head has failed to implement a policy decision approved by the government. (Colombo/ Dec 06/2022)

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Sri Lanka may see rates falling next year: President

ECONOMYNEXT – Sri Lanka’s interest rates are high and hurting small businesses in particular but interest rates are required to maintain stability, President Ranil Wickremesinghe said.

“One is, all of you want to know what’s going to happen to the interest rates?,” President Wickremesinghe told an economic policy forum organized by the Ceylon Chamber of Commerce.

“I wish I know. The governor has told me that the inflation has peaked. It’s coming down. You all understandably want some relief with the interest rates to carry business on.”

“I understand that and appreciate the viewpoint. It’s not easy to carry business on with such high interest rates. On the other hand, the Central Bank also has to handle the economy. So maybe sometimes early next year we will have a meeting of minds of both these propositions.”

Sri Lanka’s interest rates are currently at around 30 percent but not because the central bank is keeping it up. The central bank’s overnight policy rate is only 15.5 percent but the requirement to finance the budget deficit and roll over debt is keeping rates up.

Rates are also high due to a flaw in the International Monetary Fund’s debt workout framework where there is no early clarity on a whether or not domestic debt will be re-structured.

After previous currency crises, rates come down after an IMF deal is approved and foreign loans resume and confidence in the currency is re-stabilished following a float.

This time however there has been no clear float, though the external sector is largely stable and foreign funding is delayed until a debt re-structure deal is made.

Sri Lanka’s external troubles usually come because the bureaucrats do not believe market rates are correct when credit demand picks up and mis-uses monetary tools given in 1950 by the parliament to suppress rates, blowing the balance of payments apart.

The result of suppressed rates by the central bank are steep spikes in rates to stop the resulting currency crisis.

A reserve collecting central bank has little or no leeway to control interest rates (monetary policy independence) without creating external troubles, which is generally expressed as the ‘impossible trinity of monetary policy objectives’.

However, it has not prevented officials from trying repeatedly to suppress rates, perhaps expecting different results.

After suppressed rates – supposedly to help businesses – trigger currency crises, the normalization combined with a currency collapse leads to impoverishment of the population.

The impoverishment through depreciation leads to a consumption shock, which also leads to revenue losses in businesses.

The suppressed rates then lead to bad loans.

In the 2020/2022 currency crisis the sovereign default has also led to more problems at banks. Several state enterprises also cannot pay back loans.

“…[T]he bad debt that is being carried by the banks is mainly from the private sector or the government sector,” President Wickremesinghe said.

“Keep the government sector aside. We’re dealing with it. How do you handle it? Look, one of our major areas of are the small and medium industries. You can’t allow them to collapse, but they’re in a bad way.”

Classical economists and analysts have called for new laws to block the ability to central bank to suppress rates in the first place so that currency crises and depreciation does not take place in the first place.

Then politicians like Wickremesinghe do not have to take drastic and unpopular measures to fix crises and there will be stability like in East Asia.

Sri Lanka had stability until 1950 when the central bank was created by abolishing an East Asia style currency board. The currency board kept the country relatively stable through two World Wars and a Great Depression.

In 1948 after the war (WWII) was over “we stood second to Japan” Wickremesinghe said.

“But we started destroying it from the sixties and the seventies,” he said. :We started rebuilding an economy, which was affected by a (civil) war, and thereafter the way we went, is best not described here.”

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Crisis-hit Sri Lanka sees recovery in cruise ship tourism from zero

ECONOMYNEXT – Seventeen cruise ships are scheduled to arrive in Sri Lanka next year with
Queen Mary 2, one of the largest and popular ships, Colombo’s harbor master said, as the island nation is looking for alternative avenues to boost its faltered tourism sector.

The rise is expected to bring thousands of high end tourists with higher spending capacity after two years. The island nation saw a record high 54 ships in 2019, rising from the previous year’s 42, Nimal Silva, Colombo Port Harbor Master said.

“The 2019 was one of the best years and in 2020 there were more than 60 scheduled vessels to
call but with COVID pandemic all hell broke loose,” Silva told EconomyNext.

Fourteen cruise ships are scheduled to call from January-May next year and another three are scheduled to arrive in Colombo in November, when the peak tourism season begins.

Cruise tourism cycle begins in Sri Lanka from October to May with a dip during the monsoon
seasons.

Sri Lanka welcomed two cruise ships in November after almost two years.

Three ships are scheduled to arrive in December and Azamara Quest, carrying at least 722 tourists, arrived in Colombo on December 3 and is now heading to Hambantota.

On December 18, Le Champion carrying 264 will arrive in Colombo and depart to Mumbai and the third vessel, Silver Spirit will arrive in Colombo on December 23 carrying up to 648 passengers.

There are two scheduled in January, one in February, and four in March next year, according to the harbormaster.

“Next year more ships could schedule, so far these are the confirmed ones now,” he said.

This also generates income for the port and the prices are charged according to the size of the
vessel.

Silva said the first medium sized-cruise vessel, 229 meters long, generated about 14,000 dollars
for docking in the port for a day.

He said Queen Mary 2, a 325 meter long ship and one of the largest cruise ships in the world, is also
scheduled to call at Colombo in February. It can carry up to 3200 passengers.

Silva said almost all the ships that were scheduled have arrived on the island and therefore, he is
confident all the ships including Queen Mary 2 will arrive in Sri Lanka.

“Only one ship has been canceled thus far. There are no last minute cancellations if there were some they would have informed us by now,” Silva said. (Colombo/Dec07/2022)

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