SPECIAL REPORT : Part 434
For the first time in parliamentary history, the Central Bank of Sri Lanka has issued a dire warning to Parliament and political parties therein over the responsibility on their part to ensure financial stability and discipline. Their failure to do so would trigger public protests again, they were told. There hadn’t been such a public warning. The warning was issued by no less a person than Dr. Nandalal Weerasinghe, Governor of the Central Bank, when he dealt with ‘Sri Lanka’s current economic situation and way forward’ on Aug 31.
By Shamindra Ferdinando
The Government of Japan, on August 22, conferred ‘The Order of the Rising Sun,’ Gold Rays with Neck Ribbon’ on Deshamanya Prof. Weligamage Don Lakshman, former Governor of the Central Bank (Dec 2019-Sept – 2021). Prof. W.D. Lakshman received the Japanese honour at a ceremony held at the residence of Japanese Ambassador Mizukoshi Hideaki. Kalyani Siriseeli Lakshman, the spouse of the emeritus professor, was conferred ‘The Order of the Rising Sun, Gold Rays with Rosette.’
The Japanese Embassy declared they were honoured for their distinguished contribution in promoting mutual understanding and friendship between Japan and Sri Lanka, through education.
‘The Order of the Rising Sun’ is awarded by the Emperor of Japan to foreign nationals who have made a distinguished contribution to enhancing friendly relations with Japan. The Japanese Embassy statement, dated August 22, also made reference to his tenure as the Governor of the Central Bank.
Before The Island dealt with Prof. Lakshman’s CBSL leadership, it would be pertinent to mention that Sri Lanka’s diplomatic relations with Japan suffered irreparable damage during this tenure when the former unilaterally cancelled the Tokyo-funded Light Rail Transit (LRT) project, after much groundwork had been completed. Dr. P.B. Jayasundera, the then Secretary to President Gotabaya Rajapaksa, in September 2020, just weeks after the UPFA scored a landslide victory at the last general election, issued instructions to terminate the Japan International Cooperation Agency-funded LRT on the grounds that it was ‘very costly and not the appropriate cost-effective transport solution for the urban Colombo transportation infrastructure.’
Recently, the former Chairman of the Committee on Public Enterprises (COPE) Prof. Charitha Herath, MP, asserted, in Parliament, that the cancellation of the LRT project still remained a mystery. The SLPP rebel alleged that even the person (Dr. PBJ) who issued instructions, in that regard, is silent over the circumstances leading to the cancellation of the project. Did President Gotabaya Rajapaksa, the Cabinet-of-Ministers, the Finance Ministry, or Dr. PBJ, who functioned as the President’s chief advisor on economic affairs, consult Prof. Lakshman and then Attorney General Dappula de Livera, PC, before rushing to that decision?
The Governor of the Central Bank heads the five-member Monetary Board. At the time Dr. PBJ issued instructions, as regards the termination of the project, the Monetary Board consisted of Governor Prof. W.D. Lakshman, S.R. Attygalle (both ex-officio), Sanjiva Jayawardena, PC, Dr. Ranee Jayamaha and Samantha Kumarasinghe.
During the COPE proceedings, in May this year, chaired by Prof. Herath, the parliamentary watchdog committee established failure as well as the responsibility on the part of the Monetary Board, Prime Minister Mahinda Rajapaksa (he held the finance portfolio at that time), the Cabinet-of-Ministers, and Dr. PBJ, for the current crisis. The incumbent Governor, CBSL didn’t mince his words when he, in response to questions posed by Prof. Herath and opposition SJB lawmakers, Patali Champika Ranawaka and Dr. Harsha de Silva, named those responsible. Soft spoken Dr. Weerasinghe didn’t hesitate at all when he identified Dr. PBJ as the one who blocked an early agreement between the government and the International Monetary Fund (IMF).
Of course reform medicines, that the Fund prescribes, are very bitter to swallow for those seeking its assistance and it is not short of critics around the world. And many of its patients, especially in Latin America and Africa, are yet in dire straits after swallowing its medicines for years, if not decades. Many of those countries have got some glimmer of hope only after countries like China came forth with generous aid projects, especially in the form of massive infrastructure developments, like railways, housing, etc., often criticized by the West.
Playing politics with a bankrupt economy
Recently some members of Parliament demanded an inquiry into the failure on the part of Dr. Weerasinghe to inform Parliament of the status of the economy. They found fault with him for declaring Sri Lanka’s inability to service foreign debt before bringing it to the notice of the House.
A section of the media reported that Dr. Weerasinghe is in a soup for not duly informing Parliament about the ground situation. Perhaps, the lawmakers had conveniently forgotten that the then President Gotabaya Rajapaksa had requested Dr. Weerasinghe to take over the leadership of the CBSL after the country became virtually insolvent, even unable to pay for basics from abroad. At the time Dr. Weerasinghe retired, in January 2021, he held the post of Senior Deputy Governor and received the top post on April 08, about a month before a humiliated Mahinda Rajapaksa quit the premiership. Just 72 hours later, the UNP leader succeeded Rajapaksa. Less than two weeks later, Wickremesinghe secured the finance portfolio, too.
In fact, by the time Prof. Lakshman quit, in September 2021, to pave the way for Ajith Nivard Cabraal, who previously served as the Governor CBSL from 2006 to 2015, to return to the same top post, the economy was in tatters. Cabraal’s much publicized six-month roadmap didn’t change a thing. The ruling SLPP continued to engage in silly propaganda as the situation deteriorated, rapidly; by the time President Rajapaksa’s government approached Dr. Weerasinghe in Australia, the crisis was beyond control.
The retired political appointee Prof. Lakshman cannot absolve himself of causing unprecedented destruction and current turmoil though he simply succumbed to political pressure. What Prof. Lakshman actually did was the overseeing of the destruction of the economy in his capacity as the Governor and head of the Monetary Board.
Of course matters were exacerbated by some unforeseen events, beginning with the unprecedented terror attacks by Islamic terrorists here on Easter Sunday 2019, supposedly in retaliation for terror attacks on Muslims, in places like Christchurch, New Zealand, that delivered a body blow to the vital tourism industry here. Then before we could recover from that, there came the pandemic fear from the beginning of the following year with resultant lockdowns that also crippled the entire economy. To the credit of our rulers, we did weather the pandemic storm better than most countries, including India, where unknown numbers perished. We were also hit, like every other country, by the war in Ukraine, which could have been easily defused, like the 1962 Cuban missile crisis involving the then two super powers as now. But in our opinion what reduced us to being international beggars was the almost successful shutting down of our last lucrative foreign exchange earner, the remittances of our expatriate workers by illegal underground money transfer schemes, known as Hawala and Undiyal.
It was also the fault of the authorities, going back to possibly the 1990s, for allowing private foreign exchange traders to operate with hardly any controls that led to the bleeding of vital foreign currencies from the country. It has been a known fact that proceeds from the lucrative drug trade had been easily repatriated abroad by drug dealers, thanks to the free availability of foreign currency with those dealers, where no questions are asked. We wonder whether such anti-national decisions were taken at the behest of economic hitmen at the IMF and the World Bank.
Combination of these situations led to the country being reduced to an international beggar.
Hell-bent on appeasing his political masters, Prof. Lakshman, well past his prime, merely followed instructions. Those who remained as Monetary Board members, under Prof. Lakshman’s leadership, cannot absolve themselves of the responsibility for the current crisis. Had Jayawardena, a highly successful lawyer, and Jayamaha, a retired top Central Banker, and even headed private banks, were so concerned and opposed the conduct of Prof. Lakshman and Treasury Secretary Attygalle, they should have quit the outfit. Instead, they remained. And they continued to do so. Their declarations at the COPE proceedings of their failed bids to influence Prof. Lakshman cannot justify their failure.
Of course, the Japanese Embassy, in Colombo, shouldn’t be faulted for recommending the Order of the Rising Sun for Prof. Lakshman in the evening of his life for services rendered during better days. However, the Japanese Embassy caused quite a stir when Senior Professor Sampath Amaratunga, Chairman of the University Grants Commission (UGC) was conferred ‘The Order of the Rising Sun’ twice.
The academic received the award on 14 October 2021 from the then Japanese Ambassador in Colombo, Akira Sugiyama, at his official residence. For the second time, the UGC Chief received the same at Dharmavijayaloka Vihara in Rukmale in Pannipitiya at an event organized on January 22, 2022. The incumbent Japanese Ambassador Mizukoshi Hideaki and the then President Gotabaya Rajapaksa were present on the occasion.
Ali Sabry, PC, had the guts to defend Dr. Weerasinghe in Parliament. In fact, both Dr. Weerasinghe as well as Sabry, in his capacity as the Finance Minister squarely blamed those who had advised President Gotabaya Rajapaksa for the economic meltdown. Having held talks in Washington with the IMF and the World Bank in late May, Sabry, in an exclusive interview with Swarnavahini in early June disclosed how the advisors (Dr.PBJ, Governors of the CBSL, Treasury Secretary et al) deceived the President and the Cabinet-of-Ministers until it was too late.
No one challenged Sabry over his shocking declarations. Actually, Sabry basically repeated what Dr. Weerasinghe told the COPE.
Formidable challenge
Dr. Weerasinghe, obviously has earned the wrath of some lawmakers/political parties for taking an uncompromising stand against irresponsible governance. Addressing the Mps, on the invitation of Speaker Mahinda Yapa Abeywardena, in Parliament, the day after President Wickremesinghe, in his capacity as the Finance Minister presented an interim budget, Dr. Weerasinghe warned that the whole exercise, involving the IMF, could collapse if political parties didn’t change their strategies. Dr. Weerasinghe demanded a genuine acceptance of the agreement or warned political parties to prepare to face the consequences. Had the Parliament met its two primary obligations, namely financial responsibility and enactment of laws, the Speaker wouldn’t have found any justifiable reason to invite the Governor who indicated he would not stand any nonsense under any circumstances.
Whatever some unscrupulous politicians say, the vast majority of the public appreciated senior officials taking such a stand. It would be pertinent to mention the circumstances Dr. Weerasinghe received a six-year term on June 30 as the Governor, CBSL. Dr. Indrajith Coomaraswamy, who succeeded Arjuna Mahendran in June 2016, in the wake of the second far bigger Treasury bond scam, was unceremoniously asked to leave after Gotabaya Rajapaksa’s triumph at the Nov 2019 presidential election. Those who managed the President’s diary almost succeeded in depriving Dr. Coomaraswamy an opportunity to pay a courtesy call on the President before his retirement. Dr. Coomaraswamy’s six-year term was shared by Prof. Lakshman, Cabraal and Dr. Weerasinghe. Now that Dr. Weerasinghe has received a fresh six-year term, the government is not in a position to remove him, unless he left voluntarily.
At last a Governor of the CBSL has dared to take a principled stand vis-a-vis political interference. An utterly corrupt and reckless and irresponsible lot had been told in no uncertain terms that a bankrupt country couldn’t continue the way, those who represented the legislature wanted to exploit the electorate at the expense of the national economy.
The culpability of Cabraal, who represented Finance Minister Mahinda Rajapaksa cannot be disregarded. As the State Finance Minister for Money and Capital Markets and State Enterprise Reform (Aug 2020 to Sept 2021) Cabraal played a significant role in the overall financial management. Dr. Harsha de Silva has repeatedly raised Cabraal’s culpability as regards the current financial turmoil.
Reappraisal of perks and privileges
As the country struggles to come to terms with the growing difficulties, the government in consultation with all political parties represented in Parliament and trade unions representing key sectors should review the national economy. The need to reexamine and take tangible corrective measures cannot be delayed any further. Perks, privileges granted to all sectors, should be reviewed. If they are genuine, the issuance of much abused duty free vehicle permits can be examined as part of the overall measures to save foreign exchange. Thanks to anti-corruption campaigner, controversial Attorney-at-Law Nagananda Kodituwakku, the country got to know how our lawmakers brazenly abused the duty free permits. They had an absolutely wonderful scheme (wonderful to them and their associates) which allowed them to sell the ownership of the duty free vehicles imported by them to those not entitled to that facility the same day the vehicles were registered in their names.
Nagananda Kodituwakku has not been successful in his attempts to move Court against those lawmakers engaged in a lucrative trade/massive scam with the blessings of Parliament whoever won the general election. Only a few declined the offer to obtain a duty free permit for the sole purpose of financially benefiting at the expense of the national economy.
At the onset of the financial crisis in 2020, the Finance Ministry submitted a Cabinet paper to import duty free vehicles for all MPs. The move was later shelved amidst growing public resentment. Over the years, successive governments mercilessly exploited the country until the national economy deteriorated to such an extent, violent public protests erupted on March 31.
Incumbent CBSL Governor warned political parties represented in Parliament that public protests could erupt again if they repeated their habitual political strategies meant to win elections at any cost.
Dr. Weerasinghe quite cleverly used his speech to highlight how all political parties shamelessly undermined the national economy by promising relief in spite of the government whoever was in power lacking the financial strength to do so. The lawmakers were warned against undermining the economy by electioneering based on promises. There had never been such a fiery speech delivered by an outsider to members of Parliament since the shifting of Parliament, from Galle Face to Sri Jayewardenepura, 40 years ago. Members of Parliament, past and present would have been humiliated and ashamed of the way they managed the national economy, especially since 1977.
The Parliament released the link that gave access to Dr. Weerasinghe’s full speech. President Ranil Wickremesinghe, Prime Minister Dinesh Gunawardena, the Cabinet-of-Ministers, leaders of political parties represented in Parliament, the media and the civil society should pay attention to the Governor’s talk. The Executive, the Legislature and the Judiciary should heed the concerns raised by the Governor. There had never been such a straightforward criticism of an utterly corrupt system that thrived at the expense of the public.
Dr. Weerasinghe response to reckless, corrupt and irresponsible system can be examined against the backdrop of advice given by Dr. Coomaraswamy several years ago. In Nov 2018, Coomaraswamy advised the electorate as regards parliamentary elections. Dr. Coomaraswamy made the appeal before the Presidential Commission of Inquiry (PCol) on irregularities at SriLankan Airlines, SriLankan Catering and Mihin Lanka.
Dr. Coomaraswamy told the PCol almost prophetically that the country was facing a non-virtuous cycle of debt and it was a very fragile situation which could even lead to a debt crisis. “Of course my colleagues in the debt department have plans and capability to manage it. But it’s the duty of every citizen to act responsibly as regards the government policy”, he told the PCol. Dr. Coomaraswamy emphasized that people should elect MPs who were prudent enough to handle fiscal and monetary matters of the country. “I am not referring to any government, but it’s been the case ever since Independence”.
Obviously, the electorate didn’t heed Dr. Coomaraswamy’s call. Those who won the next general election in Aug 2020 simply allowed things to slip out of control. They couldn’t have done so without the support of those who managed the economy. Two of Dr. Coomaraswamy’s successors, Prof. Lakshman and Cabraal are under fire for their role in the current crisis. The Court has been moved against Cabraal.
Dr. Coomaraswamy is on record as having said that the failure on the part of successive governments to manage expenditure since the country gained Independence has caused the current economic instability.
Months later, in response to The Island query, Dr. Coomaraswamy declared Sri Lanka had been plagued by a toxic combination of populist politics and an entrenched entitlement culture among the people.
“Time and again, the electoral calendar has undermined fiscal discipline,” Dr. Coomaraswamy asserted.
