SPECIAL REPORT : Part 448
Regular revelations, pertaining to high profile scams that had undermined revenue collection, underline the pathetic failure on the part of Parliament to ensure financial discipline. The Central Bank, five-member Monetary Board, Cabinet of Ministers and Parliament as an institution should accept the responsibility for the current crisis. The likes of Bandula Gunawardena continue to pursue an agenda, beneficial to them, or they are simply clueless about how such rip offs are staged, in spite of their self-proclaimed economic wizardry. And only now they are awakening to what happened. But luckily for the country in the case of the Central Bank bond scams, those who staged it could not hoodwink everyone at the CB. Political expediency is the name of the game as the country plunges deeper into economic quagmire.
By Shamindra Ferdinando
Alleging the Wickremesinghe-Rajapaksa government planned to appoint altogether 70 ministers (30 Cabinet and 40 State Ministers), Samagi Jana Balavegaya (SJB) lawmaker Dr. Harsha de Silva recently challenged the government to name a country that sustained such a top-heavy administration, during an economic crisis.
The Colombo District MP gave the challenge on Dec. 09, the day after Parliament overwhelmingly endorsed the 2023 Appropriation Bill, with a majority of 43 votes – six more than at the Second Reading, on Nov. 22. The outcome is nothing but extraordinary as President Ranil Wickremesinghe, leader of the UNP, who presented the Budget on Nov. 14, in his capacity as the Finance Minister, had only one UNP MP in Parliament.
Having been rejected by the Galle District electorate, at the last General Election, in August 2020, Wajira Abeywardena entered Parliament, in July this year, after the Sri Lanka Podujana Peramuna (SL)) elected UNP National List MP Wickremesinghe as the eighth President. The UNP managed to secure only one seat at that election, through its national list, after the country, as a whole, rejected all its candidates. In addition to the UNP, eight other recognised political parties won one seat each, both elected and appointed.
Against the backdrop of former Finance Minister, SLPP strategist Basil Rajapaksa’s declaration that the UNP leader was the most suitable to succeed his brother Gotabaya Rakapaksa, in July this year, amidst violent protests orchestrated by interested parties, there cannot be any dispute over the ruling party’s support to Wickremesinghe’s agenda. In spite of the breakup of the SLPP, into at least three factions, it remains a formidable political force, with its largest group unquestionably loyal to Basil Rajapaksa/Mahinda Rajapaksa.
Therefore, the appointment of Ministers, and State Ministers, as demanded by the SLPP, is a necessity, regardless of the economic catastrophe facing the country. That is the political reality. Dr. Harsha de Silva cannot be unaware of that certainty. Having entered Parliament, on the UNP National List, in 2010, after a successful career in the private sector, De Silva, who had an opportunity to receive the Finance portfolio in the current government, choose not to do so.
The former UNPer, who had served as Wickremesinghe’s deputy on economic affairs, during the Yahapalana administration, questioned the rationale behind such a large number of ministers at a time of an unprecedented political-economic-social crisis. In addition to being the Prime Minister, Wickremesinghe held the Cabinet portfolio for National Policies and Economic Affairs in that government.
The one-time yahapalana non-Cabinet ranker compared the massive allocation of public funds for Ministers, and the controversial new tax structure that had influenced professionals, including doctors, engineers, academics and IT professionals, to leave the country. The economist called the new tax structure unjust. Having voted against the Appropriation Bill, Dr. de Silva declared that daunting challenges, faced by the country, couldn’t be addressed by more ministerial appointments. Reference was made to 10,000 IT professionals leaving the country since the change of government, in July, this year.
The developing crisis should be examined, taking into consideration how successive governments obtained assistance from the International Monetary Fund (IMF) on 16 previous occasions. In other words, Sri Lanka had continuously experienced balance of payments problems, during the war, and thereafter. The IMF ‘interventions’ had been almost routine and never really attracted public attention, or never being an issue at an election. In fact, IMF ‘interventions’ and the Yahapalana administration securing USD 12.5 bn in International Sovereign Bonds (ISBs), within four years (2015-2019), and nothing to show in terms of successful development projects, when compared with Mahinda Rajapaksa taking USD 3 bn (2007-2014) with many a feather in his cap. The UNP owed an explanation why such a huge amount in ISBs was taken. Perhaps the Yahapalana Finance Minister, Ravi Karunanayake (2015-2017), and State Minister, Eran Wickremaratne, MP, or Dr. de Silva, can explain the circumstances leading to the procurement of such a massive amount of ISBs, during that time, and nothing tangible to show in return, unlike the Rajapaksas, who carried out many development projects, while prosecuting a crippling war to a successful conclusion against the contrary advice of so-called experts.
Therefore, the ongoing negotiations with the IMF, and Sri Lanka’s bilateral donors, meant to pave the way for USD 2.9 bn Rapid Financial Instrument (RFI), shouldn’t be considered something extraordinary. The UNP’s track record, pertaining to managing the national economy, too, is dismal. Can the UNP and its offshoot the SJB absolve themselves of responsibility for the 2015 and 2016 Treasury bond scams and the dilution of the Exchange Control Act in 2017? (State Finance Minister Ranjith Siyambalapitiya recently told the writer that the weakening of the Exchange Control Act meant clipping the Central Bank of its regulatory powers.)
All SJB MPs, including its leader Sajith Premadasa, served the Yahapalana administration, and the break-up of the UNP happened in early 2020. Had the then President Gotabaya Rajapaksa’s government negotiated with the IMF, in early 2020, as advertised by the lending body, perhaps the much respected wartime Defence Secretary could have avoided his calamitous exit. Dr. de Silva had been one of those who repeatedly pushed the Rajapaksa administration to seek the IMF’s intervention or face the consequences. But those who had the ear of President Gotabaya Rajapaksa, ensured the government refrained from seeking the IMF’s assistance, until it was too late.
Perhaps those at the helm would have expected both China and India, in competition, to throw lifelines to rescue Sri Lanka, but with Basil increasingly sailing the Lankan ship of state towards US and West in lockstep with New Delhi, Beijing literally called it quits. But now with India clearly showing the West that it is no vassal of any power bloc, may be both China and India can help stabilise and strengthen Sri Lanka. In fact, solid Sri Lanka will be an asset to New Delhi with our historic cultural, linguistic and religious links with the sub-continent.
However, no less than the Governor of the Central Bank, Dr. Nandalal Weerasinghe, told Parliament how the then Prime Minister Mahinda Rajapaksa, who also served as the Finance Minister, ignored warnings of the impending financial crisis of unprecedented magnitude.
The disclosure was made during the proceedings of the Committee on Public Enterprises (COPE) on May 25, 2022.
Dr. Weerasinghe didn’t mince his words when he told the parliamentary watchdog committee how the then Governor, Prof. W.D. Lakshman, and Treasury Secretary, S.R. Attygalle, received warning from the IMF that Sri Lanka couldn’t procure assistance unless the government undertook an immediate debt restructuring programme. Dr. Weerasinghe declared that the IMF made its position clear after quite rightly asserting that Sri Lanka lacked debt sustainability. The CBSL Chief’s revelation prompted the then COPE Chairman Prof. Charitha Herath to call the government’s failure a crime.
Having received his letter of appointment, on April 07, 2022, Dr. Weerasinghe, over the past eight months ,laid bare the truth. Appearing before the parliamentary watchdog committees, on several occasions, and a special talk delivered on August 31, after Wickremesinghe, in his capacity as the Finance Minister, presented an interim budget, the intrepid official told lawmakers what no one had dared to tell them before.
His message was clear. Political parties have collectively ruined the economy. Recognise the failure on their part without further delay, take immediate remedial measures or face the consequences. Dr. Weerasinghe warned that the next round of protests could be far worse than the first that forced Gotabaya Rajapaksa to give up his presidency.
A negligent Parliament
Declarations made in Parliament, when examined against the backdrop of an utterly corrupt political party system, can help the public to comprehend how those who had the ear of the powers that be exploited even the revenue gathering mechanism.
Media and Transport Minister Bandula Gunawardena should be urged to disclose those who perpetrated the massive sugar tax scam that actually caused a catastrophic impact on Gotabaya Rajapaksa’s administration. It simply ruined the President’s reputation.
What the former Trade Minister revealed in Parliament, on Dec. 09, pertaining to the sugar tax scam (reduction of duty on sugar imports) implicated the then President in a horrendous fraud that deprived the Treasury of billions of rupees in taxes. Even Gunawardena, too, should be held responsible as he, as the Trade Minister and a member of Gotabaya Rajapaksa’s Cabinet, cannot absolve his culpability. Why did he wait so long to tell the truth?
Let me repeat what Minister Gunawardena told the House on the particular day. Former much-sought-after economic tuition master underscored the need to identify ‘economic assassins’ without pointing the finger at Presidents Gotabaya Rajapaksa and Mahinda Rajapaksa. The Colombo District lawmaker said that there was no point in holding ministers responsible for the ruination of the economy. Gunawardena stressed the need to ascertain what really happened to the country.
Obviously, the lawmaker is making a fool of himself. How can the President, who is the constitutional head of the Cabinet-of-Ministers absolve himself of ill-fated decisions? Having first entered Parliament, in 1989, on the Mahajana Eksath Peramuna (MEP) ticket, and later having crossed over, served in the UNP-led government as the Finance Deputy Minister (2001-2004), lawmaker Gunawardena, too, must admit he is part of the corrupt system.
Referring to those who held the Finance portfolio, over the years, Minister Gunawardena said: “Ministers simply read out what was provided by officials (at the Finance Ministry). People think Ministers can decide on anything. But, that is not the reality.”
Speaking of the sugar tax scam, perpetrated in Oct. 2020, Minister Gunawardena said that he was at the Narahenpita Abhayaramaya when he heard the decision to reduce the tax on a kilo of imported white sugar, from Rs. 50 to 25 cents. In spite of being the Trade Minister at that time, lawmaker Gunawardena hadn’t been aware of the move until the media made the announcement. “During Cabinet proceedings, I strongly opposed the reduction of the sugar tax. I insisted the reduction of the sugar tax to 25 cents was wrong. But, President Gotabaya Rajapaksa was told by his advisors not to rescind that decision. Regardless of my opposition, they urged the President to stand by the reduction of the sugar tax to 25 cents.”
Minister Gunawardena looked quite silly repeating what Health Minister Keheliya Rambukwella said about the role played by R. Paskaralingam and Charitha Ratwatte during the previous administrations.
Minister Gunawardena said: “The people do not know the truth. SLFP General Secretary, Dayasiri Jayasekera, MP, reminded Minister Gunawardena how he, as a member of the then Joint Opposition, vigorously opposed the tax formula implemented by the Yahapalana administration. Having worked overtime to sabotage the revenue collection process, Gunawardena was now singing a different tune, MP Jayasekera declared.
What Minister Gunawardena didn’t say in Parliament, on that day, was that Finance Minister Mahinda Rajapaksa, too, had been with him when the media announced the slashing of sugar tax to 25 cents. When inquired, Mahinda Rajapaksa, too, has claimed he hadn’t been aware of the move. On the advice of Bandula Gunawardena, a Trade Ministry official has phoned the Secretary to the Treasury, S.R. Attygalle, to inquire about the development. Attygalle has promptly confirmed the decision.
Now that President Wickremesinghe has suggested an inquiry to ascertain the economic meltdown, sugar tax scam, too, can be examined. A Presidential Commission/Parliamentary Select Committee can question Minister Gunawardena regarding the sugar tax scam.
The following are some pertinent questions (1) If Mahinda Rajapaksa hadn’t been aware of the sugar tax reduction, who ordered the issuance of gazette. dated Oct. 13, 2020, pertaining to the sharpest ever decline in duty? (2) Had that been effected, without Finance Minister Mahinda Rajapaksa’s approval, why didn’t he reverse it? (3) Would Bandula Gunawardena name those who advised President Gotabaya Rajapaksa to maintain duty at 25 cents a kilo of white sugar (4) Did Bandula Gunawardena, at least, privately brief the then Chairman of Public Finance Committee, Anura Priyadarshana Yapa, of the sugar tax scam? (Gunawardena couldn’t have been unaware of the public condemnation of the sugar tax scam by lawmaker Yapa.) And (5) did Gunawardena criticize the issue at hand before his Dec. 09 speech in Parliament? And, perhaps, lawmaker Gunawardena can honestly explain his stand on his former Cabinet colleagues, Vasudeva Nanayakkara, Wimal Weerawansa and Udaya Gammanpila moving the Supreme Court against the New Fortress Energy deal, finalised on the night of Sept. 17, 2021, during Basil Rajapaksa’s tenure as the Finance Minister (June 2021-April 2022).
In spite of the summary dismissal of the case, the former ministers proved a point. Having turned a blind eye to years of skullduggery (condoned waste, corruption, irregularities and deliberate mismanagement), they had finally realised the ugly truth. The Cabinet-of-Ministers is not infallible. It can be corrupted.
The sugar tax scam and New Fortress Energy deal are just two of the high profile ‘transactions’ that received the blessings of the executive.
Perhaps State Finance Minister Ranjith Siyambalapitiya should look into Minister Gunawardena’s Dec. 09 declaration. Having vowed to recover the losses caused by the sugar tax scam, the SLFPer cannot ignore the accusations made by President Gotabaya Rajapaksa’s advisors. Was Bandula Gunawardena also referring to those who had been faulted by the then Finance Minister, Ali Sabry, PC, for the economic ruination? In an interview with Swarnawahini, in early June, this year, following his return from Washington where he led the delegation for talks with the IMF, the outspoken Minister alleged the Secretary to the Treasury, Governor of the Central Bank, and senior economic advisor/advisors to the President, misled the Cabinet-of-Ministers as regards the economic situation.
Prof. W. A. Lakshman (Dec. 2019-Sept 2021) and Ajith Nivard Cabraal (Sept. 2021-March 2022) served as Governors of the CBSL, S.R. Attygalle served as Secretary, Ministry of Finance (Nov 2019-April 2022), whereas veteran financial wizard Dr. P. B. Jayasundera functioned as Secretary to the President (Nov. 2019-Dec. 2021).
Exactly a month before Bandula Gunawardena’s Dec. 09 disclosure, State Minister Siyambalapitiya told Parliament that he would recover 30 percent of the Rs 16 bn loss in tax revenue, suffered as a result of sugar tax scam. The Kegalle District lawmaker assured Parliament that hereafter one person wouldn’t be allowed to take such decisions. Was Siyambalapitiya referring to the Finance Minister or Secretary to the Treasury or someone else?
Siyambalapitiya is on record as having told Parliament that 10 sugar importers benefitted from the tax reduction. One of them imported 45 percent of the total sugar imports and during the period of the tax relief received, the largest beneficiary increased sugar imports by a staggering 1,220 percent. The Minister also revealed that in spite of the tax relief state-run Sathosa (under Bandula Gunawardena) suffered losses that ran up to Rs 10 bn by procuring sugar at a higher cost.
Media Minister Bandula Gunawardena should be questioned on this. In spite of knowing the sugar scam, did Bandula Gunawardena allow Sathosa to cause a further loss of Rs 10 bn? The writer was among the journalists the Criminal Investigation Department (CID) wanted to question over the disclosure of a massive garlic racket exposed at the onset of the Gotabaya Rajapaksa administration. Instead of punishing the wrongdoers, the government felt it could suppress the reportage of the fraudulent transactions. At the end, the entire Cabinet-of-Ministers, including the President ended up with egg on their faces.
