An Echelon Media Company
Monday December 4th, 2023

Sri Lanka must not allow elections to distract from stabilisation: ex-central bank chief

ECONOMYNEXT – If Sri Lanka allows elections to distract from the path of recovery, stabilisation and growth, the country will be hit by a fresh crisis far worse than any before, former central bank governor Indrajit Coomaraswamy said.

Speaking at a forum organised by Cal, a Colombo-based investment banking group, Coomaraswmay said on Tuesday September 05 that Sri Lanka’s election calendar has historically resulted in the reversal of progress made under the 16 International Monetary Fund (IMF) programmes that the island nation had undergone until the latest extended fund facility (EFF).

“Every single time there has been an election, Sri Lanka’s macroeconomic policies have become indisciplined. We’ve had 16 IMF programmes before the current one. On many of them we did make progress in stabilisation as we have done on this one. But as soon as an election approached, the progress that was made was reversed,” said Coomaraswamy.

“We’re supposed to be having elections next year. I hope we don’t have the same thing again. We must not allow the gains that we have made to be reversed through policy slippage,” he said.

Critics of President Ranil Wickremesinghe and his administration have been demanding elections, but political analysts say there is no likelihood of a major election until the presidential polls due November 2024.

Noting that Sri Lanka has never done well on structural reforms due to lack of political will in the face of the “losers’” being louder despite being fewer in number, Coomaraswamy said such reforms should now be pursued vigorously.

“Unless we do differently this time, we will not be able to get into a sustained recovery,” he said.

“This time around, if we allow elections to distract us from the path of stabilisation and recovery and then sustained growth, the crisis that will hit us will be worse than anything that we’ve had in the past. It will be worse than what we had some 18 months ago. We should remember that,” he said.

The former central bank chief called for a mould where economics is not seriously undermined  by the electoral calendar.

“That has to change. If it doesn’t, we will lose what we have gained so far and the consequences will be far worse than we’ve ever experienced in the past,” he said.

Explaining why the next crisis, if it were to come to pass, would be worse, Coomaraswamy said Sri Lanka would be entering it with a far lower level of resilience, both in the economy and among the people. Next time around, he said, the impact is going to be much more painful.

“The multiple crises of the present have had such a devastating impact that we’ll be at a much much lower level of resilience going into the next one. We need to make sure we never allow that to happen,” he said.

The electoral calendar was among a series of risks that Coomaraswamy identified as possible obstacles to Sri Lanka’s recovery. Other risks he highlighted included climate risks such as the ongoing El Nino phenomenon and elevated geopolitical tensions which demand a more transparent and prudent external relations policy.

“The world has become a more tense place. That will have an impact on global supply chains and commodity prices. We need to be proactive and factor all that in and see how best to have contingency plans to cope with the impacts of this,” he said.

On the domestic front, the senior economist said Sri Lanka must achieve a primary surplus in the budget to keep the debt stock in check and must also work towards a transformation in exports, aiming at a more diversified export basket with a more complex set of products as well as a diversification of markets.

“Those two things will take us out of this twin-deficit category that we have been stuck in for many years, if we do it well,” he said.

Coomaraswamy said the programme now under way to restructure state-owned enterprises (SOEs) is also critical and should ideally move faster.

“We need to use whatever political capital is necessary to give tailwind to this process,” he said.

SEO restructuring has become an increasingly controversial subject, particularly in light of the latest IMF programme. Socialist-oriented opposition parties have been intensifying their campaigns against what they call the “sale” of “national assets”, with the more right-of-centre main opposition Samagi Jana Balawegaya (SJB) also seemingly jumping on the bandwagon. Protests and campaigns led by leftist trade unions and other activist groups have taken an increasingly anti-IMF character in their critique of the Wickremesinghe administration’s reform agenda.

Coomaraswamy went on to say that Sri Lanka needs to move faster in factor market reforms, improving the investment climate and investment promotion. He also called for expediting new free trade agreements (FTAs).

“There are negotiations to convert the Indian FTA into an economic partnership agreement under ECTA (Economic and Technology Cooperation Agreement). Negotiations for an FTA with China are also ongoing, as well as with Thailand. These need to be pushed forward,” he said.

“The revitalisation of the Singapore FTA is a good thing. It will give us opportunities in terms of investment as well as using that FTA to penetrate the ASEAN market, particularly in e-commerce.”

Coomaraswamy commented on President Wickremesinghe’s plans to join the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement among the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.

“I don’t think we’ll be able to do it very quickly. The kind of reforms needed to be able to join RCEP will be quite challenging. But it’s a good aspiration to have and it’s a good signal to give to say that we’re keen on joining,” he said.

On Sri Lanka’s relations with India and proposals for a land bridge and grid connectivity on top of plans to improve sea and air connectivity, Coomaraswamy said Sri Lanka can benefit from increased connectivity with the Indian economy.

“We’ve had proximity [to India] forever but the very poor infrastructure in both countries has made transaction costs for cross border economic activity very high. India also had an inward looking strategy for a long time, but now it has its Neighbourhood First policy and its Made In India policy, all of which will create new opportunities for countries in the region,” he said, noting that transaction costs are in fact coming down with improvements in roads, railways, airports etc in both countries.

“We should make a concerted effort to piggyback onto the Indian story,” he said.

In terms of addressing corruption vulnerabilities, which is a key pillar of the ongoing IMF programme, Coomaraswamy said implementation is key.

“Laws mean nothing unless they’re implemented effectively. So it is to be seen whether the anti-corruption act which is better aligned with UN convention on corruption is implemented,” he said.

“The IMF diagnostic on addressing corruption vulnerabilities has just about been finalised. It should be shared with the government this month. Whether or not the government is serious about addressing vulnerabilities will be demonstrated in how it treats the recommendations of this diagnostics study. It will be a good litmus test for the government’s attitude,” he said.

Sri Lanka saw a 31% surge in poverty over the last four years – from 4 million people in 2019 to 7 million in 2023, according to a study by LIRNEasia – and a number of resorts have come out on increased vulnerability, child malnutrition and other indicators of socioeconomic deterioration. Coomaraswamy, while recognising this, said however that the MF cannot be blamed. The ongoing anti-IMF rhetoric has centred its messaging around the IMF, laying the blame for all of Sri Lanka’s ongoing ills at its door.

“People blame the IMF programme. People who do that fail to take into account that the country was in a very big hole before the IMF came. We had massive shortages of essentials, long queues, etc. Very severe problems. Dollar and LKR illiquidity at the time that was causing all these problems, which have been addressed to a significant extent because of the IMF programme,” said Coomaraswamy.

“So you can’t blame the IMF programme. These problems were there because of the hole we had fallen into and that hole was caused by various things which everybody knows,” he said, declining to elaborate on the causes.

The former central bank governor also called for a strengthened social safety net.

“When you have as big an adjustment as we have to make, when the hole is as big as the one that confronts us, there is a strong case for strengthening the social safety net upfront,” he said, adding that the ongoing Aswesuma programme should ideally have been launched sooner.

“It wouldn’t have done away with the increase in poverty and vulnerability, but it could’ve mitigated it to a significant extent,” he said. (Colombo/Sep08/2023)

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 stocks close up as some investor interest returns

ECONOMYNEXT – The Colombo Stock Exchange closed up on Monday, CSE data showed.

The All Share Price Index was up 0.22 percent, or 23.33 points, at 10,743.59.

The S&P SL20 index was up 0.68 percent, or 20.60 points, at 3,067.73.

Turnover was at 708 million. The banks sector contributed 189 million, while the food, beverage and tobacco sector contributed 176 million of this.

Sri Lanka’s stock market has seen some investor interest return after last week’s news that the country had managed an agreement on a debt restructuring deal with an official creditor committee, and foreign funds for some development projects resumed.

Top positive contributors to the ASPI in the day were Sampath Bank Plc (up at 71.50), LOLC Holdings Plc (up at 379.00), and Commercial Bank of Ceylon Plc, (up at 90.90).

There was a net foreign outflow of 52 million.

Citrus Leisure Plc, which announced that its banquet hall and revolving restaurant at the Lotus Tower would launch on or around Dec 9, saw its share price rise to 6.20 rupees. (Colombo/Dec4/2023).

Continue Reading

Sri Lanka rupee closes broadly steady at 328.10/30 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 328.10/30 to the US dollar on Monday, from 328.00/10 on Friday, dealers said.

Bond yields were stable.

A bond maturing on 01.06.2025 closed at 13.70/14.00 percent from 13.70/95 percent.

A bond maturing on 01.08.2026 closed at 13.90/14.10 percent from 13.90/14.05 percent.

A bond maturing on 15.01.2027 closed at 14.00/14.10 percent from 14.05/10 percent.

A bond maturing on 01.07.2028 closed at 14.20/35 percent from 14.15/25 percent.

A bond maturing on 15.05.2030 closed at 14.25/45 percent, from 14.20/45 percent.

A bond maturing on 01.07.2032 closed at 14.05/40 percent, from 14.00/45 percent. (Colombo/Dec4/2023)

Continue Reading

Gov minister highlights abortion rights, sex-ed for children, and Sri Lanka men killing their women

ECONOMYNEXT – Sri Lanka’s legislators have politicized the topics of rape and violence without addressing the elephant in the room, Jeevan Thondaman, Minister of Water Supply and Estate Infrastructure Development said in parliament on Monday (4).

“All the members here are talking about rape. What happens after that? We must talk about abortion rights. That is not something anyone wants to touch on, and that is why we are in this place right now,” Thondaman said.

“Despite alarming statistics on rape and violence, women are often blamed and punished for it. The criminalisation of abortion is a major example of this.”

Sri Lanka has some of the most restrictive abortion laws in the world. According to a 2016 estimate by the Health Ministry, he said, approximately 658 abortions take place a day, and close to 250,000 a year.

“That’s 250,000 women whose lives you are endangering.”

He added that what was needed at this point in time was comprehensive sexual education (CSE) for children and young people.

“Only through CSE in schools will children and young people develop, accurate, age appropriate knowledge attitude and skills; positive values such as respect for human rights, gender equality, diversity and attitude and skills that contribute to a safe, healthy and positive relationship.”

Thondaman pointed out that CSE plays a pivotal role in preparing young people for a world where HIV, AIDS, sexually transmitted infections, unintended pregnancies, and sexual and gender based violence still pose a risk to their well-being.

“CSE basically empowers children take control and make informed decisions freely and responsibly.”

Thondaman also highlighted the findings of a 2021 study (Fatalities_20211109_UNFPA) by the UNFPA and the University of Kelaniya that showed that a majority of women killed in Sri Lanka were murdered by those close to them.

“62 percent of homicides of Sri Lankan women are committed by either an intimate partner, ex-partner or family member. 84 percent are killed in their own homes by someone they know.”

Police and the judiciary have failed Sri Lanka’s women, the minister pointed out.

“Only 5 percent of these cases, between 2013-2017, were ever concluded. Men claim they were provoked, or are of unsound mind or have mental illness: These have been successful defenses. And the Police often express sympathy to this narrative as opposed to the victim’s.”

“We have a history of protecting oppressors.”

It takes 7-10 years for a child rape case to conclude, he pointed out.

Establishment of child courts are needed, he said, as well as several legislative amendments. “The government is working on a new law to reform the domestic violence act, reform of marriage and divorce laws to ensure there is an easier path to divorce: no one should be forced to remain in a marriage that is either abusive or not healthy.” (Colombo/Dec4/2023)

Continue Reading