An Echelon Media Company
Saturday June 15th, 2024

Opinion: Political pressure to revise 20th amendment remains alive

Sri Lanka’s opposition MPs protest the 20th amendment to the constitution last year – File photo

ECONOMYNEXT – It has taken more than a month for the concerns regarding the proposed 20th Amendment that have been expressed by a wide swathe of opposition political parties and non-partisan civil society groups ranging from the clergy to professional associations to find expression within the ranks of the government parliamentarians. Their silence for so long can only be an indication of the dominance of President Gotabaya Rajapaksa who will be the primary beneficiary. In terms of the amendment, the President will be empowered to remove the Prime Minister, a member of the cabinet, any other minister or a Deputy Minister and authority to dissolve Parliament after completion of sittings for a period of one year. This massive transfer of power to the Presidency has been justified to the electorate as stemming from the inability of the previous government to govern effectively under the 19th Amendment to the constitution.

The occasion for the show of dissent came with the seemingly routine release of a suspect detained by the police on suspicion of his involvement in a case but whom the police now claimed no evidence had been found. But the fact that the case involved the suicide bombing that claimed the lives of over 250 persons on Easter Sunday in 2019 and led to the collapse of the country’s tourism sector gave both the arrest and release a significance beyond the ordinary. It is a regular occurrence that people are taken into custody if they are suspected of being involved in a crime, but are released if no evidence surfaces against them. In the case of Riyaj Bathiudeen, however, there was always an element of politics in it. He was arrested a year after the bombings and after there had been a change of government that saw his brother’s political alliance lose power.

At the time of his arrest, the police claimed that Riyaj Bathiudeen was implicated in the Easter bombing and there was evidence that he had close links with the suicide bombers and had met with one suicide bomber at a prior to the attack on April 21. Five other suspects, including lawyer Hejaz Hizbullah who continues to be in detention, were arrested along with him. Even at the time of the arrest, it was surmised that it could have been done with a political motivation of putting pressure on his brother to switch his allegiance to the government. The question is how the evidence that the police claimed was sufficient for an arrest should turn out to be insufficient and why only one person should be released when the others continue to be detained. It is to be noted that the rule of law calls for equity in treatment.

Cardinal Ranjith’s assertion

The most prominent critic of the police reversal has been the Archbishop of Colombo Malcolm Cardinal Ranjith who lost more than 200 of his adherents to the bombing that occurred in two churches within the Colombo diocese. The cardinal has been persistent in his demand that there should be truth, accountability and justice to the victims and their families who hope that their tears will not be in vain. The Easter bombing in 2019 was a complicated terrorist activity with many elements to investigate as is evident in the personal testimonies being provided these days to the Presidential Commission of Inquiry. The cardinal expressed his dissatisfaction on the release of a key suspect in the case and complained that police itself was contradicting their own statements. He also indicated that the sudden release could suggest a political deal.

The political deal in question is to ensure that the government will have a 2/3 majority to pass the 20th Amendment. The cardinal’s concern about a political deal could be a reflection of the difficulty that the government is encountering in mobilizing the 2/3 majority in parliament required to pass the 20th Amendment into law. There have been a few government parliamentarians who have had the courage to state that the 20th Amendment is excessive in its attempt to transfer power from parliament to the presidency. The proposed amendment as it currently stands is an emasculation of the protections available to the people and also to other institutions of state available in the constitution. If even a few government parliamentarians do not vote for the amendment it will fail to achieve the 2/3 mark.

The release of Riyaj Bathiudeen without satisfactory explanation has provided government parliamentarians with a justification to unite openly against any possibility of a political deal. In an unprecedented action 100 of them, which amounts to over 2/3 of the government parliamentarians, have signed a statement calling on the President and the Prime Minister to conduct a full investigation on this act by the police and to re-arrest Riyaj Bathiudeen and enforce the law in a proper manner. While there is no question about Malcolm Cardinal Ranjith’s commitment to getting to the truth of the Easter bombing and ensuring justice to the victims, the interest of the government parliamentarians is likely to be different. They have made it clear that they would not wish there to be any possibility of a deal whereby his brother Rishad Bathiudeen’s party joins the government to make the 2/3 majority in parliament easier to reach.

Reduce Burden

Faced with pressure from religious and civil society, and now his own parliamentarians, President Gotabaya Rajapaksa has hastened to deny that the government has entered into any political deal. He has stated “I am not prepared to hand over the power of arresting or arbitrarily releasing people to politicians, as happened in the past. I will also take actions to rectify any omissions or mistakes made by the relevant authorities or officials.” In an attempt to dispel public perceptions that the government was prioritizing a 2/3 majority in parliament to pass the 20th Amendment he said, “I emphasize that our government has not entered into any political deal with Parliamentarian Rishad Bathiudeen. I assure my citizens that I will not forsake the trust that they have placed in me and I will most certainly continue to work towards strengthening the built trust.”

The real problem is with the 20th Amendment which is akin to the elephant in the room for the government parliamentarians. There is a strong demand from the people for a strong government that does not fail to perform like the previous government where the president and prime minister undermined each other. The current government does not suffer from the same constraint as they come from not only the same party and enjoy a 2/3 majority in Parliament, but also the President and Prime Minister are from the same family. But the proposed amendment is regressive in its focus on empowering the presidency at the cost of all other state institutions, including parliament, the prime minister and ministers, and would reduce them all to a relatively powerless condition.

President Rajapaksa is held in high esteem by his colleagues in government who would not wish to oppose him and want him to succeed in leading the country to development and national reconciliation. In handing down its determination on the 20th Amendment Bill, the Supreme Court has ruled that four clauses need a referendum of the people along with a two-thirds majority in parliament unless suitably revised, while the rest can be passed by a two-thirds majority of parliament alone. Hopefully, the process of revision at the committee stage within parliament will lead to constructive changes in the 20th Amendment so that it does not elevate the presidency and diminish the other institutions too much and not put too heavy a burden on the presidency that no single person can carry.
(Colombo, October 13, 2020)
Edited by Arjuna Ranawana

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka beats key IMF program targets for March 2024 amid rupee stability

ECONOMYNEXT – Sri Lanka has exceeded key quantitative targets set in an International Monetary Fund program for March 2024, based on preliminary data the Washington based agency said in a report.

The March data are not performance criteria on which reviews are conducted but are indicative targets which shows the progress of the program and are a stepping stone for a September review based on June data.

An indicative target for the primary balance (roughly overall deficit minus interest costs), was assessed at 316 billion rupees more than four times the 70 billion rupee target set in the program.

Primary balance can be a big surplus if the interest bill is high and capital expenditure is cut and is a type of crisis management tool after a central bank triggers a currency crisis by cutting rates with inflationary liquidity tools.

However, Sri Lanka’s Treasury has also kept a lid on most current spending. A state salary hike is however due after the currency collapse made life difficult for everyone.

Meanwhile more taxes have been collected from the people to finance the island’s bloated state.

A 750 billion rupees central government tax revenue floor has been exceeded to reach 837 billion rupees.

Central bank credit to government (outstanding stock) has been reduced to 2,691 billion rupees in March compared to a target of 2,800 billion rupees. In December the CB credit was calculated 2,742 billion rupees.

Net international reserves of the central bank were brought up to a negative 1,268 million US dollars exceeding the target of a negative 2,035 by almost 700 million dollars.

In order to collect foreign reserves, which is a type of appropriation of domestic savings of the people by the central bank (taking in deposits) and exporting it to the US and other countries to finance their deficits or by other agency debt in reserve currencies.

In order to collect such ‘deposits’ the central bank has to prevent them from being invested domestically.

It is achieved with deflationary policy through sell-downs of down its Treasuries holding to domestic banks or others, at a market rate, collecting interest from the government or repayments of re-finance credits, subject to any nominal changes in reserve money at a given exchange rate.

In 2024 the central bank allowed the exchange rate to appreciate, which can also reduce prices of traded goods boost real and nominal savings and make it easier to collect foreign reserves.

When domestic credit is weak it is easier to collect reserves. Reduced domestic credit and collection of reserves, including by private banks which then cannot be invested domestically, can push the external current account into surplus.

The central bank also met a 5 percent 12-month inflation target, with an achievement of 4.3 percent.

Sri Lanka’s economy grew 5.3 percent despite reserve collections, amid the stability provided by the central bank.

There were no central bank purchases of Treasuries from the primary market.

However the central bank injected overnight and term money to banks (not on a net basis) showing how easy it is for a rate-obsessed monetary authority to get around the requirement and create external instability again as soon as private credit recovered.

The central bank also allowed excess liquidity from dollar purchase to remain unsterilized for an extended period under its ad hoc pegging arrangement, getting a short term falls in rates, but triggering pressure on the rupee as a result in May and June.

It is not possible to collect reserves with a free floating exchange rate. (Colombo/June15/2024)

Continue Reading

Sri Lanka GDP grows 5.3-pct in first quarter of 2024 amid monetary stability

ECONOMYNEXT – Sri Lanka’s gross domestic product grew 5.3 percent in the first quarter of 2024 data from the state statistics office showed as the central bank continued to refrain from generating monetary instability.

Instead of printing money to cut rates under ‘flexible inflation targeting’ and printing money to boost growth by taking into account ‘potential output’ as permitted by its new monetary law, the central bank ran deflationary policy and also allowed the rupee to appreciate.

“The Sri Lanka economy experienced a more favorable economic condition[s] in the first quarter 2024, when compared to the first quarter in the year 2023,” the Department of Census and Statistics said.

“The high inflation had prevailed in the first quarter of year 2023, gradually reduced to a lower level by the first quarter of 2024 and this low inflation incentivized the economy by providing inputs at [a] much lower price.

The agriculture sector grew 1.1 percent in the first quarter of 2024, after also growing 1.6 percent last year.

Industry grew 11.8 percent in the first quarter, against a 24.3 percent last year.

The economy grew amid falling prices, the statistics office said in sharp contrast to the Anglophone macroeconomic claim that inflation is needed to boost growth, on which Sri Lanka has 5-7 inflation target has apparently been set.

Related Sri Lanka central bank pushing for high inflation target to boost growth

“Among ‘Industrial activities’, coinciding with the decline in input prices, the ‘Construction industry’ grew by 14.2 percent, parallel to this, the ‘Mining and quarrying’ industry too expanded by 18.3 percent during this quarter,” the Statistics Department said.

Sr Lanka’s services sector grew 2.6 percent, against a decline of 4.6 percent recorded last year.

The International Monetary Fund has also urged the central bank to give priority to stability.

Sri Lanka dropped the stability mandate in the earlier monetary law which was violated after the end of a civil war to push the country into serial currency crises especially after the International Monetary Fund gave technical assistance to calculate potential output.

Related Sri Lanka has a corrupted inflation targeting, output gap targeting not in line with monetary law: Wijewardena

Sri Lanka survived a 30-year civil war by giving priority to a stability mandate despite shortcomings in its operational framework but defaulted in peacetime amid activist monetary policy which denied monetary stability to the people. (Colombo/June12/2024)

Continue Reading

Sri Lanka’s NPP notes five-point crisis for economic growth sans details

Former JVP MP Sunil Handunneththi

ECONOMYNEXT — The leftist National People’s Power (NPP) has identified five crises that need resolving for Sri Lanka’s economy to progress, much of which emphasise a production economy targeting export growth though sparse on the detail on resource allocation.

NPP spokesman and former parliamentarian Sunil Handunneththi speaking at an event in Mulaitivu on Thursday June 13 said Sri Lanka is grappling with firstly, a collapse of the production economy, second, a budget deficit, third, a balance of payment crisis which has, fourthly, created a debt crisis, and finally, a resultant gap between haves and have-nots.

“We must first understand the crisis. We reocgnise five main crises that have the same impact irrespective of differences between the north and south.

“The first is the collapse of the production economy. We can see this historically. Agriculture that used to be some 30 percent of gross domestic product (GDP) has now fallen to 8 percent. Essential food is imported. We cannot produce the rice needed for the small population here. Things that can be made here are also imported.

“Second is the income crisis. For the people, their expenses are twice their income. The budget deficit is two or three-fold every day. Banks cannot give loans to businesses and industries because the government takes funds to address the budget deficit. The government takes most of the people’s savings for this,” he said.

The balance of payment crisis Sri Lanka is facing the third crisis, according to Handunneththi, which has triggered a debt crisis, in turn leading to a crisis of income disparity among the people.

“Third is the balance of payments crisis. Imports are two or three fold export income. The government has to take 11 to 12 billion US dollars in loans from foreign countries. When GDP is 80 billion US dollars, debt has gone over 100.”

“All this creates a massive gap between haves and have-nots. Without finding solutions to these crisis, there is no point distributing goods,” he said.

Handunnethi’s remarks appear to be departure from the NPP’s anti-corruption rhetoric which had centred its economic development policy agenda primarily on fighting corruption.

‘Fighting corruption’ and ‘recovering stolen assets’ have been popular slogans since the Aragalaya protests in Sri Lanka and the NPP has made it its central theme in its bid for power. The leftist outfit had also adopted a position that’s cautiously critical of the International Monetary Fund (IMF) and the reforms the international lender has prescribed for Sri Lanka in exchange for a 2.9 billion-dollar bailout.

However, NPP leadership had recently acknowledged the need to continue the IMF programme since the agreement has already been signed.

The Marxist-Leninist Janatha Vimukthi Peramuna, which controls the NPP, though it was never in government barring a brief stint in an Sri Lanka Freedom Party (SLFP)-led coalition in the early 2000s, has been instrumental in driving popular support against privatisation.

Three key policy pillars articulated by the JVP from 2001-2004 and embraced by mainstream politician Mahinda Rajapaksa’s administration in 2005 onward have been highlighted by experts.

From 2005, Sri Lanka halted privatisation, started recruiting tens of thousands of unemployed graduates into the public service every year with lifetime pensions, expanding an already bloated public sector and denying any benefit of a peace dividend to the country.

Sri Lanka also abandoned a price formula for fuel that had helped keep the rupee stable and inflation low from 2001 to 2003 even as global commodity prices went up from the ‘mother of all liquidity bubbles’ fired by the Federal Reserve from 2001.

From 2001 to 2003, state workers fell from 1.164 million to 1.043 million. By 2020, the public sector cadre has grown to 1.58 million with another batch of 53,000 unemployed graduates being paid tax money. (Colombo/Jun14/2024)

Continue Reading