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Monday December 11th, 2023

Sri Lanka needs real ministers, a real cabinet and a Prime Minister to play monitor: Bellwether

ECONOMYNEXT – Corruption in Sri Lanka’s governments is partly due to the lack of an independent public service and permanent secretaries, but also due to the structure of the administration where the Prime Minister and President hold key portfolios.

Sri Lanka’s current administration with Prime Minister Wickremesinghe is under fire for corruption in the central bank which is part of his portfolio and for the actions of a dubious gatekeeping committee under him, is a textbook example of how not to run a government.

Class Monitor

In the well-functioning government of a free country in Western Europe such as Britain, the Prime Minister has no significant portfolio. The UK prime minister oversees the civil service, which is an independent service anyway.

In such a government a minister of finance is a ‘real’ minister who is responsible for the Treasury. So are other ministers.

If there is wrongdoing the Prime Minister has to play the role of monitor and take action.

This is a kind of check against corruption that exists in free countries that Sri Lanka no longer has.

Even discounting the fact that there is a President who is the head of the cabinet and a Prime Minister with significant powers in the current coalition administration, the Prime Minister did not take action in the bondscam case when his personal appointee was involved in corruption.

Though there is no excuse for not taking action and bad leadership, it could have been different if the central bank had been under someone else.

The appointment of the Finance Minister in 2015 was the first big mistake of the administration, but it could not have been corrected by taking some institutions away.


The President however did take action, playing the role of the monitor. However the President is also under a cloud over a ship deal for the Navy, and allocating frequencies from the telecom regulatory authority, which is under him.

The regulator should have been under the telecom ministry.

Many of Sri Lanka’s current economic troubles date back to the 2015 and 2016 budgets. They also allowed the President to interfere in economic decision-making further undermining the role of the Finance Minister, even after a new minister was appointed, who made good decisions.

It was Chandrika Kumaratunga who first put the Finance Portfolio under the President, making a top bureaucrat the effective finance minister. That is no way to run a government. Without permanent secretaries, high caliber people are no longer available in any case.

President Mahinda Rajapaska had several portfolios including Finance and top spending highways and the telecom regulator, petroleum and oil exploration under him, giving enormous powers to a presidency that already had excessive powers in the first place.

Such a structure tends to undermine freedoms of the citizens in addition to fostering corruption.

Kitchen Cabinet

Prime Minister Wickremesinghe is also under fire for the actions of the Cabinet Committee on Economic Management (CCEM), which is a body made up of ex-bureaucrats loyal to him and some others.

It effectively serves as a gatekeeper to vet and block projects. Others say once an initiative goes to the committee, various power bases within the government tries to extract rents or push their interests.

As a result critics say the CCEM has become a body which tend to foster corruption.

The next big looming controversy in this regard may be the ‘take-or-pay’ liquid natural gas deal that is on line.

Ideally any policy gatekeeping should take place in the cabinet, where the Prime Minister could object to any project or initiative which was not in accordance with overall policy. No CCEM is needed.

Sri Lanka’s last real cabinet was probably under President J R Jayawardene. Now there are so many ministers, that the cabinet is virtually useless as a policy making and governing body.

As a result a kind of ‘kitchen cabinet’ was operating, making policy and decisions, both during President Kumaratunga’s time and President Rajapaksa’s time, which is dangerous for freedom. Nobody is accountable for such decisions and the cabinet becomes a rubber stamp.

Public Service

The lack of an independent public service, with permanent secretaries is a key cog in the wheel of corruption.

When Sri Lanka got independence the ministry secretary was permanent. The ministries were also permeant. But the 1972 Republican constitution broke the civil service with the cabinet appointing outsiders as ministry secretaries, which started the rot.

Under the system inherited from the British a civil service commission appointed, transferred or took disciplinary action against secretaries.

The 1979 constitution completed the task by making President the sole authority in these matters. The system survived for a time, because men from the earlier stucture were in service.

What happened then was that any impermanent secretary who questioned a bad decision of a minister that undermined freedom and equality (a politically biased or revengeful move) or a corrupt decision would be sent to the ‘pool’.

The current administration before its term ends should at least bring law to make the Constitutional Council responsible for ministry secretary appointments. The Constitutional Council one of the good deeds of the current administration, though much weakened than originally expected.

This will enhance freedoms of the people and reduce corruption.

Police State

The Yahapalana administration had also laid the foundation for a police state by bringing an electronic ID card law (E-Nic) where the Defence Secretary can monitor private citizens’ data without a court order.

The E-Nic law should be rolled back or amended forthwith.

In free countries most freedoms were brought in by civil society organizations.

In the UK free trade was brought by the Anti-Corn Law League, probably the originally effective NGO or civil society organization.

Slavery was abolished worldwide including Sri Lanka by the actions of the Abolition Society and Africa Society.

This administration has also brought a draft law to control civil society organizations (Voluntary Social Services Organizations Act) that can foster freedom and move action against corruption fi they are allowe to operate freely. The VSSO Act along with the E-NIC law will further advance a police state.

By controlling civil society organizations, voices of the people, particularly those who are apolitical, the state will be strengthened against the people.

It must be noted that Hitler closed down all NGOs and civil society organizations, except the Catholic and Lutheran Churches. Later they were also severely controlled.

In Sri Lanka, the constitution and the cabinet, is already stacked against the freedom of the people and their economic progress, while promoting corruption.

The central bank which generates inflation and depreciates a currency which is de facto pegged, is also stacked against the people.

By muzzling civil society organizations this administration will also kill the voices that can advance economic or civil freedoms and reduce corruption.

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Sri Lanka rupee opens at 327.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee opened at 327.00/50 to the US dollar on Monday, from 327.00/30 Friday, dealers said.

On the Colombo Stock Exchange, both indices opened up: The All Share Price Index 0.28 percent at 10,823, and the S&P SL20 0.35 percent at 3,113.85.

Bond yields were up.

A bond maturing on 01.08.2026 was quoted at 14.05/20 percent from 14.05/15 percent.

A bond maturing on 15.01.2027 was quoted at 14.05/20 percent from 14.10/25 percent.

A bond maturing on 01.07.2028 was quoted at 14.20/50 percent from 14.20/35 percent.

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Sri Lanka promoting Buddhist tourism from Vietnam, ASEAN

ECONOMYNEXT – Sri Lanka is planning to boost Buddhist tourism by linking temples in the country with those in East Asia, Foreign Minister Ali Sabry said after to welcoming a delegation of monks from Vietnam.

President Ranil Wickremesinghe, and Minister Sabry have initiated a temple-to-temple program where 100 Sri Lanka temples will be linked with counterparts in the Association of South East Asian Nations region.

“Tourism development will get a lot of growth with the temple-to-temple program,” Minister Ali Sabry said.

Along with the delegation of monks, five travel agents from Vietnam were also invited.

Under the first phase of the Temple-to-temple programs, several monks from Sri Lanka had received invitations from Indonesia, Malaysia, South Korea and Vietnam the Foreign Ministry said.

The Temple-to-Temple diplomacy program will be extended to Singapore, Japan, Thailand and Cambodia during the second phrase of the program.

Sri Lanka is targeting 2.3 million tourists in 2023, after getting about 1.5 million this year. (Colombo/Dec10/2023)

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ADB $200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”

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