Sri Lanka ex-president slams 2015 populist spending as fuel prices rebound
ECONOMYNEXT – Sri Lanka’s ex-President Mahindra Rajapaksa has slammed populist spending of the first two years of the current administration including a state worker salary hike, rejecting charges that he did not cut fuel prices enough in 2014.
Populist spending by the current administration led to to an economic downturn later, he said.
Sri Lanka raised fuel prices last week as global prices rose and the rupee had also fallen pushing up import costs of fuel.
"Any government can give any concession they like to win elections," Rajapaksa said in a statement.
"What usually acts as a restraint in this regard is the question as to how they are going to find the money to fulfil those commitments after winning.
"The present government thought only of winning the election – not about what happens afterwards.
"Having committed public funds to win elections, this government then began the biggest borrowing spree in Sri Lanka’s history to meet the increased expenditure."
Sri Lanka’s central bank in 2015 triggered a balance of payments crisis by cutting rates and injecting liquidity into the banking system just as a budget deficit and private credit expanded, leading to a balance of payments crisis and the collapse of the currency.
The fuel prices were raised by current finance minister Mangala Samaraweera, who analysts acknowledge as a steady hand.
Already there is acknowledgement that the giveaways in 2015 were imprudent measures made to win ‘applause from the gallery’, Rajapaksa said.
Rajapaksa rejected charges by the current administration that he had not cut fuel prices enough. He says as late as August 2014, oil was at 103 dollars a barrel.
"It was only in the last three months of 2014 that oil prices started declining and by the time the government changed in January 2015, it had gone down to USD 51 per barrel," he said.
The current administration has said that Sri Lanka’s economic problems are partly caused by large volumes of debt taken under Rajapaksa, which were falling due after they took over.
However Rajapaksa says the current administration had also taken consumption loans.
Sri Lanka cannot reduce taxes on fuel because state spending had been rise with the "Treasury as collateral" and it was "the people of the country who will finally have to pay the price." (Colombo/May17/2018)