Govt. responds in kind to Thuyacontha’s salvo

 SPECIAL REPORT : Part 463

Published

  2023/03/29

AVM Thuyacontha commands the Commander's Parade on Sept. 18, 2020 at the Katunayaka air base, about a year before his retirement. At that time Air Marshal Sumangala Dias served as the Commander of the Air Force (pic courtesy SLAF)

At the behest of the then late President Ranasinghe Premadasa way back in 1989, the then Election Commission recognised the PFLT (People’s Front of Liberation Tigers) as the political arm of the LTTE. The late Gopalswamy Mahendraraja aka Mahattaya, the LTTE Deputy Leader was its founding leader (He was executed in Dec 1994 on the orders of LTTE leader Velupillai Prabhakaran after being in captivity for 16 months). The then government was ready to give the LTTE an opportunity to contest elections.

By then all other Indian trained Sri Lankan terrorist groups had entered mainstream politics. Fisheries Minister Douglas Devananda (EPDP leader) is just one of them.

The UNP brought him to politics. In fact, the UNP brought several other ex-Tamil terrorist groups, including the PLOTE into mainstream politics. The PLOTE received international attention when it mounted an abortive bid to seize control of the Maldives in early Nov 1988. It too, is represented in parliament today.

The parliament during Mahinda Rajapaksa’s tenure had no qualms in accepting LTTE battlefield commander Karuna Amman responsible for the deaths of thousands of soldiers. Karuna also received a top position in the SLFP while his associate another ex-terrorist Pilleyan serves as a Deputy Minister now.

The JVP itself was allowed to re-enter mainstream politics regardless of its murderous past. Therefore, why consider a retired AVM a threat to national security?

The issue at hand is that those who governed this country in the past three decades had caused so much destruction, they fear the emergence of a political power other than them.

That is the crux of the matter.

By Shamindra Ferdinando

On behalf of the Wickremesinghe-Rajapaksa government, State Defence Minister Premitha Bandara Tennakoon last Friday (24) reacted to accusations over the blacklisting of retired Air Vice Marshal Sampath Thuyacontha.

The Matale District MP declared that Air Force headquarters had no other option but to resort to legitimate counter measures against the threat posed by AVM Thuyacontha.

The officer concerned also served as Sri Lanka’s Defence Attaché in Islamabad after the successful conclusion of the war in May 2009, retired in Nov 2021. His retirement took place a few months before public protests erupted against the then President Gotabaya Rajapaksa over disruption of essential supplies consequent to an unprecedented debt and balance of payment crises.

The former Lieutenant Col. Rajapaksa was caught up in the crisis that had been caused by mismanagement of the economy over the years and especially during the tenures of President Chandrika Bandaranaike Kumaratunga (1994-2005) and she left office leaving a negative growth rate, Mahinda Rajapaksa (2005-2015) and Maithripala Sirisena (2015-2019). However, during the Yahapalana administration the finances were under the UNP control.

Gotabaya Rajapaksa contributed to the calamity by slashing taxes, including VAT with the idea of encouraging growth, but at the worst possible time in the aftermath of debilitating suicide attacks by terrorists on Easter Sunday 2019 and the onset of the COVID pandemic, stubbornly failing to seek IMF help with clear signs of economic trouble and ruination of the agriculture sector by his hasty decision to ban the import of chemical fertiliser and other agro chemicals. The 2019 Easter Sunday carnage debilitated the vital tourism sector and covid-19 pandemic caused further deterioration. However, to be fair to President Mahinda Rajapaksa he achieved much during his tenure. In addition to winning the 30-year war, which many pundits said was something our security forces were incapable of achieving, he successfully embarked on a series of massive development projects with Chinese assistance, including building expressways as never before, an international airport, etc., while fighting the costly war to a finish.

Tennakoon, the youngest ever to serve as the State Defence Minister found fault with the SLAF veteran for causing dissent among the SLAF. The State Defence Minister is an SLPP Matale District MP and one-time minister Janaka Bandara Tennakoon’s son.

Premitha Bandara Tennakoon received ministerial appointment from President Ranil Wickremesinghe on Sept. 08, 2022.

The bone of contention is a fiery speech the AVM delivered on March 05 in Gampaha. Referring to the debarred SLAF officer’s previous speeches, the State Minister declared the Gampaha speech was not acceptable at all.

The State Minister discussed how the retired officer’s actions were in line with the overall JVP-led Jathika Jana Balavegaya (JJB) political strategy that could cause further turmoil in the country by inciting hatred on the government.

MP Tennakoon dealt with the issue at hand against the backdrop of the overthrowing of President Gotabaya Rajapaksa following unprecedented mob violence, which were painted as peaceful protests by interested parties.

The State Minister in particular pointed to the culpability on the part of the JVP in inciting the public against the then government and security forces. The State Minister was responding to JVP leader Anura Kumara Dissanayake, who raised the issue at hand. Let me leave the JVPer’s rhetoric and just concentrate on the primary issue. The Colombo District MP essentially asked whether ex-military personnel could engage in politics only if they aligned with the incumbent government or those acceptable to the regime.

The JVPer also questioned restrictions imposed on Maj. Gen. Aruna Jayasekera, who led the group of ex-military personnel affiliated to the JJB.

Lawmaker Dissanayake challenged the government over the degrading treatment of a retired senior officer while comparing the latest development with the high profile role played by Defence Secretary Kamal Gunaratne in the run-up to the 2019 presidential election and war winning Army Commander Field Marshal Sarath Fonseka’s role.

Obviously that is the bone of contention. A decorated pilot, who commanded the celebrated No 09 Attack Helicopter Squadron, Thuyacontha is the senior most retired SLAF officer to declare his support directly to the JVP. The move may have caused alarm among the top government leadership as well as the intelligence community in light of the fact the JVP had been responsible for two abortive violent rebellions in the country and both of which had to be crushed by the elected governments then in power after much bloodletting. That is an undeniable fact. Directorate of Provost, SLAF, in a confidential missive, dated March 10, 2023, addressed to all stations blacklisted four personnel (three retired, including Thuyacontha and one discharged). In addition to the renowned pilot, the other blacklisted were Warrant Officer R.H.A. Indika, Sergeant H.A.U.A. Premaratne and Corporal W.A.P.C. Perera. The JJB has vowed to move the Supreme Court against the government move.

Unfortunately, the issue erupted during a UN inspection of the Sri Lankan Army’s capacity to enhance its deployment in Mali, a landlocked country in West Africa.

Restrictions imposed on war winning Sri Lankan military leadership by the UN as well as individual countries such as travel ban on General Shavendra Silva should be examined alongside the other contentious matters. Foreign Minister Ali Sabry, PC, is on record as having said (in response to a query raised by the writer at a Foreign Ministry media briefing) that entire fighting divisions had been targeted by the international community, meaning the Western camp led by the US.

Nalin Siriwardhana formerly of the Navy in a Facebook post strongly backed measures taken against AVM Thuyacontha on the basis that those serving and retired officers engaged in politics for their personal benefit.

Australia-based dual citizen Siriwardhana without hesitation declared that the likes of AVM Thuyacontha should engage in politics without wasting time in a bid to deceive the public. One-time Sri Lanka Telecom employee emphasised that the officer concerned couldn’t have been unaware that such disciplinary measures were routine in the case of those retirees who engage in politics.

Siriwardhana stressed that as there couldn’t be any exceptions, the AVM shouldn’t expect special treatment under any circumstances. The Commander-in-Chief, in this instance, President Ranil Wickremesinghe who also holds defence portfolio enjoys the right to appropriately respond to such unacceptable conduct on the part of retired officers and men.

Retired Lieutenant Siriwardhana figured in a previous Midweek piece (A forgotten episode: Black Sea Tiger raid on Colombo port, published on Oct 12, 2022 /https://island.lk/a-forgotten-episode-black-sea-tiger-raid-on-colombo-port/).

The former Navy officer’s stand should be carefully examined taking into consideration the duplicitous response of successive governments to military men dabbling in politics. That was the issue raised by the JVP leader in Parliament. Before that let me briefly discuss Thuyacontha’s contribution to defeat the LTTE.

A daring pilot

The Aerial Tribute: The Role of Air Power in Defeating Terrorism in Sri Lanka authored by Dr. Nirosha Mendis at the request of Air Marshal H.D. Abeywickrama

(Feb 27, 2011-Feb 27, 2014). Without doubt, Dr. Mendis’s work is the only available complete account of SLAF’s role in the war with excellent analysis of the role played by different formations and units. The author skillfully dealt with the No 09 Attack Helicopter Squadron and the overall impact the daring unit had on the war.

One of the most thought-provoking brief episodes mentioned therein is serious battle damage suffered by Mi-24 helicopter gunship piloted by the then Wing Commander Thuyacontha, the daring Commanding Officer of the No 09 Squadron, headquartered at Hingurakgoda. This was during Close-Air-Support (CAS) mission over the LTTE stronghold of Mulliyaweli, Mullaitivu during the final phase of the offensive action.

Thuyacontha’s fighting machine was hit 32 times during that battle, one of the fiercest during the Eelam War IV. On the paqrticular day the daredevil CO of the No 09 Squadron flew on the mission from China Bay, Trincomalee and found it difficult to return to the base due to heavy battle damage. Thuyacontha told The Island: “We were short of rockets, therefore Mi-24s couldn’t engage targets from somewhat a safe distance but move closer to engage targets with guns.”

Having received the command of the elite Squadron in 2005, the year before the Eelam War IV erupted with simultaneous LTTE offensives in the North and East, Thuyacontha relinquished command in Sept 2009.

Ex-military role in GR’s strategy

During yahapalana dispensation (2015-2019), ex-military officers openly campaigned for Gotabaya Rajapaksa. Initially, the wartime Defence Secretary didn’t have the anticipated support from some sections of his own family as well as the SLPP but gradually he turned around the situation. Retired officers played a significant role in the overall campaign, but to varying degrees. The writer wouldn’t under any circumstances deny backing the high profile campaign from the very beginning. The yahapalana government never tried to dissuade ex-military personnel from campaigning for Gotabaya Rajapaksa.

Maj. Gen. G.A. Chandrasiri and Rear Admiral Mohan Wijewickrema went a step further by launching a book titled ‘Conflict and Stability’ in support of Gotabaya Rajapaksa. The book launch organised by Gotabaya Rajapaksa’s brainchild Viyathmaga was held in Nov 2016. One-time Northern Province Governor Chandrasiri received the appointment as Chairman, Airport and Aviation Services on Dec 18, 2019. Among those present on that occasion were Vice Admiral Mohan

Wijewickrema, Air Chief Marshal Roshan Goonetileke and Anura Fernando (Later received appointment as Sri Lanka’s Counsel General in Shanghai, China).

Wijewickrema assumed duties on June 12, 2020 as Sri Lanka’s High Commissioner in Pakistan whereas Roshan Gunatileke received appointment as Governor, Western Province on March 24, 2020.

Retired Maj. Gen. Kamal Gunaratne, who made a valuable contribution to Gotabaya Rajapaksa’s campaign, received appointment as Secretary to the Ministry of Defence on Nov 19, 2019.

The author of Road to Nanthikadal spearheaded the propaganda campaign with appearances on television as well. Gunaratne, the former General Officer

Commanding (GoC) of 53 Division was re-appointed Defence Secretary by President Ranil Wickremesinghe.

Former Army Chief of Staff Nanda Mallawarachchi, too, received an appointment from President Gotabaya Rajapaksa while ex-Army Chief Daya Ratnayake was appointed Chairman Ports Authority (SLPA). Post-war commander Ratnayake was unceremoniously removed from that post in June 2021.

Former Navy Commander Admiral Jayanath Colombage received appointment as Secretary to the Ministry of Foreign Affairs in August 2020. Currently, the post-war Navy Commander is Sri Lanka’s Ambassador in Indonesia, while retired SLAF Commander Air Marshal Sumangala Dias serves as Sri Lanka’s top envoy in Malaysia.

It wouldn’t be realistic to list all ex-military personnel who received government appointments both here and overseas.

After Sri Lanka’s triumph over LTTE terrorism in May 2009, the then Mahinda Rajapaksa government opened the doors for more-ex military personnel to enter politics. The government brazenly exploited the situation to its advantage. The UNP-led Opposition, too, likewise, brought in the then General Fonseka into the political ring in late 2009. Fonseka received the backing of a coalition that included both the JVP and the TNA, despite it having recognised the LTTE as the sole representative of Tamil speaking people way back in 2001 and then having blamed Fonseka and his war winning army of committing war crimes after the crushing defeat of the Tigers.

The UNP led move received the blessings of the US. Thanks to revelations made by the Wikileaks, the direct US involvement in the project that brought forward Fonseka as the common presidential candidate cannot be denied.

The US intervened on behalf of Fonseka after he was incarcerated. Sustained US pressure contributed to Fonseka’s subsequent release but he couldn’t come to terms with the UNP subsequently though he received their support at the 2010 presidential poll.

Washington well-known for playing Dr. Jakyl and Mr. Hyde roles world over to maintain its world hegemony, it would be interesting to know the US reaction to the Thuyacontha affair, particularly against the backdrop of perceived US readiness to work with the JVP too. US Ambassador Julie Chung paid a rather unusual courtesy call on JVP leader Dissanayake, MP, and Vijitha Herath, MP, at their Bataramulla headquarters on May 14, 2022. That visit was made at a time when President Gotabaya Rajapaksa was struggling to regain control of the rapidly deteriorating situation. The US Ambassador had no qualms in meeting JVP leaders in spite of accusations the party influenced the campaign directed against the President Gotabaya Rajapaksa, the military and the ruling party.

State Defence Minister Tennakoon didn’t mince his words when he questioned the JVP’s role in May’s gory violence in the aftermath of a SLPP goon attack launched from Temple Trees on protesters outside it and at Galle Face.

Recent declaration made by Tourism Minister Harin Fernando in Badulla that UNP leader Ranil Wickremesinghe spearheaded the campaign at the Presidential Secretariat (old parliament), too, cannot be ignored.

President Wickremesinghe has lambasted Frontline Socialist Party (FSP) for being responsible for violence, a charge vehemently denied by the breakaway JVP faction.

Wickremesinghe went to the extent of naming FSP General Secretary Kumar Gunaratnam as the mastermind in the violent political project.

JJB makes headway

AVM Thuyacontha’s unexpected move received quite a significant public response. The government and the main Opposition still appeared to have failed to comprehend why the public appears to be increasingly appreciative of the JJB. Actually, the JJB with just three MPs including one National List MP in the current parliament is politically insignificant in terms of parliamentary strength. Having ruined the economy over the past several decades leading to declaration of bankruptcy early last year, the major political parties should accept responsibility for creating a perfect environment for the JJB. The JVP/JJB had never been attractive to the military or ex-military though perhaps just an insignificant number of officers and men may have sympathized with their cause.

AVM Thuyacontha or Maj. Gen. Jayasekera wouldn’t probably at least considered voting for the JVP/JJB if not for the ruination caused by major political parties.

Instead of taking remedial measures, at least now, the government has decided to confront the perceived threat from the growing opposition.

The composition of parliament possibly doesn’t reflect the present public sentiment at all. The unceremonious exit of Gotabaya Rajapaksa in last July may have proved that the electorate no longer respected the two mandates received by the ruling SLPP at Nov 2019 presidential and August 2020 parliamentary elections. But the question is whether the entire ouster was instigated and executed from scratch by the West with the help of local quislings as has happened in so many other countries where they have successfully instigated regime changes or attempted them from Chile to Bolivia, Iran, Libya, Syria etc, etc. And they have the audacity to threaten regime change even in Russia!

In spite of incumbent President Ranil Wickremesinghe being legitimately elected by parliament in last July, discontent among the electorate is growing as claimed by the opposition. A major propaganda effort to depict the finalisation of the USD 2.9 bn and the immediate availability of USD 333 mn as a massive victory for the government went awry when State Finance Minister Ranjith Siyambalapitiya admitted that within 24 hours USD 121 mn was paid to India. The government seems to be trapped in its own propaganda and being silly.

Those who are rattled by the JVP/JJB drawing support of the ex-military should pressure the government and the main Opposition to address issues at hand. The only way to thwart the JVP/JJB is to take tangible measures to drastically curb waste, corruption, irregularities and mismanagement. If they bother to peruse proceedings of

Parliamentary watchdog committees, COPE, COPA and COPF, action could be initiated to reverse the situation. Unfortunately, the government and the main Opposition seemed to be driving more people to the JVP/JJB by giving corruption a free hand.

Growing foreign dependency and India’s USD 4 bn lifeline

 SPECIAL REPORT : Part 462

Published

  2023/03/22

Baglay on an inspection tour of the State Printing Corporation

By Shamindra Ferdinando

The Japanese embassy and UNICEF (United Nations Children’s Fund, previously known as United Nations International Children’s Emergency Fund), on 16 March, 2023, issued a joint statement that dealt with the impact the developing political-economic-social crisis is having on the poor in Sri Lanka.

The statement focused on the suffering of the children and measures taken by UNICEF, in consultation with the Governments of Japan and Sri Lanka, to provide relief to the needy.

However, what really captured public attention was the declaration made by the Japanese Ambassador, in Colombo, Mizukoshi Hideak, that with the latest contribution, amounting to USD 1.8 mn, the total Japanese financial assistance, provided through UNICEF alone, exceeded USD 3.8 mn, since the beginning of last year. That is definitely a significant package provided through a single UN agency, particularly against the backdrop of the unceremonious cancellation of the Japan- funded Light Rail Transit (LRT) project, in late Sept., 2020, by the Gotabaya Rajapaksa Government.

The directive, in this regard, was issued on 21 Sept., 2020, by Dr. P. B. Jayasundera, in his capacity as Secretary to the President, to the then Transport Secretary, Monti Ranatunga. That move ruined Sri Lanka’s relations with Japan.

Whoever advised the then President Gotabaya Rajapaksa to terminate the project, without consulting Japan, as head of the Cabinet-of-Ministers, he couldn’t absolve himself of the responsibility for the ruination of vital relationship with Tokyo. Had it not been the case, Japan, most probably, would have delivered a substantial assistance to Sri Lanka, at the onset of the ongoing unprecedented crisis.

Sri Lanka made a failed bid to secure as much as USD 3.5 bn loan from Japan, during the tenure of Sanjiv Gunasekara as Sri Lanka’s Ambassador in Tokyo. Gunasekara, a close associate of President Gotabaya Rajapaksa, resigned in the wake of the 09 May, 2022, violence, that gave a turbo boost to the campaign against his government.

Unlike Japan, India provided direct aid in various forms to Sri Lanka, struggling to cope up with what became an insurmountable crisis to overcome on our own. India has repeatedly declared that the continuing assistance is in line with Premier Narendra Modi’s much touted ‘Neighbourhood First’ policy. Sri Lanka received concessional credit facility, amounting to USD 1 bn, in March last year. In addition to that, by the second week of March this year, Sri Lanka received other lines of credit, worth over USD 3 bn. Therefore, the total Indian assistance is worth over USD 4 bn, a staggering amount as Sri Lanka’s debt before the Japanese and Indian interventions stood at over USD 53 bn. Indian intervention cannot be compared, under any circumstances, with assistance provided by any other country.

The Indian assistance is of immense importance as the International Monetary Fund (IMF), after much deliberation, promised USD 2.9 bn over a period of four years. The delay on the part of China to provide an assurance as regards debt-restructuring support, hindered the finalization of the tripartite agreement involving Sri Lanka, creditors and IMF. Finally, China gave that assurance, in writing, early this month.

Indrajit Coomaraswamy

The situation was so precarious, Sri Lanka couldn’t have even provided the free text books that have been given, annually, to the student population ,from the time of the JRJ regime. Those who had been at the helm of political power, over the past three decades, to varying degrees, ruined the economy, and, by 2021/2022, Sri Lanka was unable to provide even the basic requirements, like cooking gas, kerosene, petrol, etc., as even remittances from our expatriate workers, which in the past amounted to about seven billion dollars per year, dropped drastically due to the illegal underground banking system, hawala/undiyal, hijacking much of it from the normal banks. The government didn’t have the means to provide school text books for the 2023 academic year. In consultation with India, of the USD 1 bn concessional credit facility, over USD 10 mn was utilized by the State Printing Corporation, and private importers, to procure printing paper and other material from India. India met 45% (four mn students) of the total requirement. Indian High Commissioner Gopal Baglay visited the SPC, on 09 March, 2023, to dispatch a consignment of textbooks to schools. Education Minister Dr. Susil Premjayantha joined Baglay. The Indian High Commission statement, issued two days later,, was aptly titled ‘India’s support for text books investment in Sri Lanka’s future.’

The government and the Opposition should be ashamed of their failure to provide for the children’s need.

Perhaps, a Parliamentary Select Committee (PSC) should be appointed to examine the circumstances leading to Sri Lanka’s bankruptcy status. Decades of utterly irresponsible management of the economy, coupled with an explosive mixture of causes – waste, corruption and irregularities – caused the current crisis.

Political parties, represented in Parliament, are responsible for the continuing crisis, to varying degrees.

Controversy over ISBs

The Island discussed some of the issues at hand in last week’s midweek piece, headlined ‘All praise for Lanka’s saviours!

What Dr. Coomaraswamy didn’t say was that as the CB Governor, he was also directly responsible for the Yahapalana government borrowing a record USD 12.5 bn from the international bond market, at high interest rates, from private lenders, primarily in the West. So what did that government achieve with such huge borrowings? All that the Yahapalana regime achieved, with all that money, we cannot see, except to lay the foundation for the current debt crisis?

Our comment on the basis of recent claims that the Governor of the Central Bank, Dr. Coomaraswamy (2016-2019), only told one side of the truth, attracted responses from several parties, including the Central Bank.

Consequently, the writer discussed the borrowing of USD 12.5 bn, and related matters, and was told the following: First, it is important to point out that the Governor, Central Bank, has no authority to approve or undertake any borrowing on behalf of the government. The borrowing limit, in any given year, is set by Parliament. Therefore, the government cannot borrow beyond the limit set by Parliament. In addition, all external borrowing has to be approved by the Finance Minister, and the Cabinet of Ministers. The Governor and the CBSL only have an advisory role. On ISBs, they have marketing and issuance as additional responsibilities once the Cabinet approved the transaction.

It is also important to recognize that ISBs are only one channel for external commercial borrowings. Others include short-term SWAPs, foreign term loans/syndicated loans and external flows into government rupee securities. The article dealt with only one instrument, having ignored the switching that was undertaken during 2015-19 to increase the maturity and reduce the cost of foreign borrowing.

As regards the USD 10 bn increase in ISBs outstanding during 2015-19, USD 5 bn of this increase can be attributed to switching away from shorter term (one year or less) and more expensive SWAPs and highly volatile foreign portfolio investment (hot money) in Government rupee securities to longer term (5 and 10 years) and less costly ISBs. SWAPs were reduced from approximately USD 2.5 bn to USD 500 mn.

Volatile and foreign investment in government rupee securities was reduced from USD 3.5 bn to USD 600 mn. In addition, during the course of 2019, a second ISB of USD 2 bn was issued to create a stronger buffer of external reserves to address the inevitable increase in uncertainty going into elections due shortly thereafter. (The money required for 2019 had been raised through an ISB, issued in March 2019.)

So about USD 7 bn of the USD 10 bn increase in the stock of ISBs outstanding, during 2015-19 may be attributed to increasing the stability and reducing the cost of the ISBs outstanding by switching instruments and raising the buffer provided by external reserves prior to a period of uncertainty, associated with elections.

The remaining increase of USD 3 bn may be partly attributed to the fact that borrowing incurred earlier had not resulted in a sufficient increase and/or saving of foreign exchange. Hence money had to be borrowed to repay debt incurred earlier. In fact, Verite Research found that 89 percent of external debt, repaid during 2015-19, could be accounted for by liabilities incurred prior to 2015.

The adverse debt dynamics were recognized and the Medium Term Debt Management Strategy was published in April 2019 to chart the way to sustainability. In addition, the Active Liability Management Act (2018) was introduced to expand the tools available to the CBSL for managing external debt sustainably. The CBSL, as the economic adviser to the Government, also advocated that there should be a primary surplus in the budget and that non-debt creating inflows (such as exports, remittances, tourism proceeds, FDI, inflows into the CSE and government securities) should be increased to enhance the capacity to service debt while supporting the level of imports necessary to achieve the growth potential of the economy.

They also pointed out that only one of the ISBs, issued during 2015-19, has been settled to date. This amounted to USD 500mn. They expressed the view that it is not possible to sustain the argument that servicing ISBs, incurred during 2015-19 ,led to the standstill in debt repayments in April 2023.

Treasury bond scams and tax cuts

The US embassy released this picture of
Ambassador Chung at an event in
Colombo where the second shipment of
36,000 metric tons of Triple Super
Phosphate (TSP) was handed over to Sri
Lanka. It brings the total of USAID-supported
TSP and urea fertiliser to more than
45,000MT, over the last year.

Sweeping tax concessions to the rich and reduction of VAT, that had been introduced by President Gotabaya Rajapaksa’s government to encourage business in 2019/2020, escalated the financial crisis, leading to the declaration of the state of bankruptcy, two years later. No one in the Gotabaya Rajapaksa’s cabinet dared to challenge such far reaching tax concessions and VAT reduction.

How the loss of as much as Rs 600 bn in revenue, as alleged by the Opposition ,due to tax concessions and reduction of VAT, contributed to the current crisis, should be examined, also taking into consideration (1) Treasury bond scams perpetrated in Feb, 2015 and March 2016 at a time the CBSL has been under the then Prime Minister Ranil Wickremesinghe, in his capacity as Minister of Policy Planning and Economic Affairs (2) Enactment of new Foreign Exchange Act in 2017 in the wake of Treasury bond scams. Critics say the repealing of time-tested exchange control law that has been in place for decades paved the way for exporters to ‘park’ export proceeds overseas. Of the 225 MPs, 94 voted for the new law whereas 18 voted against. In spite of Justice Minister, Dr. Wijeyadasa Rajapakse, PC, taking up this issue, both in and outside Parliament, remedial measures hasn’t been taken, to date. The Finance Ministry owed an explanation as to how it intended to compel the exporters to bring back export proceeds (3) Continuing public-private sector partnership in corrupt practices, particularly mis-invoicing (under invoicing and over invoicing of imports/exports) (4) Pivithuru Hela Urumaya leader Udaya Gammanpila, MP, has moved the Supreme Court against the Central Bank Bill. The Attorney-at-Law alleged that the new law violated Article 3 and 4 of the Constitution hence needing the approval of the people at a referendum. In addition to Gammanpila, Dr. Gunadasa Amarasekera and Jathika Nidahas Peramuna leader Wimal Weerawansa, too, moved the Supreme Court in terms of the Article 121 against the Bill titled ‘Central Bank of Sri Lanka.’ Former JVP MP Wasantha Samarasinghe, on behalf of the Jathika Jana Balavegaya (JJB), too, moved the Supreme Court in this regard.

A warning from Hanke

The country is in a bind. In spite of the execution of the agreement with the IMF later this month, the situation remains dicey. The absence of economic recovery plan continues to cause further instability.

Therefore, the government and the Opposition should seek a consensus on a national action plan, even if Local Government polls cannot be conducted in late April, regardless of the Supreme Court intervention.

Steve Hanke, Professor of Applied Economics, at Johns Hopkins University, in the USA, recently issued a dire warning to Sri Lanka. Appearing on CNBC’s ‘Squawk Box Asia,’ Prof. Hanke declared Sri Lanka needs institutional reforms in order to achieve long-term debt sustainability.

Referring to Sri Lanka and what was described as emerging markets (Argentina and Montenegro), where he played a key role in establishing new currency regime, former economic advisor to US President Ronald Reagan warned “Unless you change the institutions and the rules of the game, governing these countries, they’re always going to remain in the same … situation that they’ve been in for a long time.”

Prof. Hanke added: “In fact, most of the personalities, involved in Sri Lanka ,at the high level, are exactly the same as they’ve been for years. So nothing has changed.”

In other words, those who have ruined Sri Lanka are spearheading the economic recovery process. The American is spot on. Sri Lanka is in a pathetic situation. Those who had systematically brought Sri Lanka to its knees, by pursuing ill-fated policies, emerged as its saviours. That is the bitter truth. The role of the executive, legislature, and judiciary, needs to be examined. Those who have moved the Supreme Court against the Bill, titled ‘Central Bank of Sri Lanka,’ have quite conveniently forgotten how the Yahapalana government, and Central Bank, twice perpetrated Treasury bond scams. What would have Prof. Hanke said if CNBC raised Treasury bonds scams during ‘Squawk Box Asia.’

If not for Deepa Seneviratne, the then head of Public Debt Department, Governor Arjuna Mahendran’s role couldn’t have been proved. Former Auditor General Gamini Wijesinghe said so at an event organized by the Colombo Municipal Council years ago.

Sri Lanka cannot forget Prof. Hanke’s remark in the CNBC programme. “You have to remember that we have a country that since 1965 has had 16 IMF programmes and they’ve all failed. You get temporary relief in anticipation of a bailout. But in the long run … none of these IMF programmes work.”

It would be pertinent to briefly examine how interested parties brazenly protected perpetrators of the Treasury bond scams.

Having named Mahendran as the Governor, regardless of the opposition from President Maithripala Sirisena, those planning to commit the first daylight robbery of the Central Bank moved Deepa Seneviratne to the Public Debt Department as its head, in spite of her not having had any previous experience in the particular division. It seems they had obviously felt comfortable in having a lady officer there they thought they could manipulate her to suit their need. But Seneviratne turned tables on the bond thieves by putting up a note to register her strong opposition to Mahendran’s move. She should have been rewarded for her fearless stand with at least a national honour if not an international one, even from bodies like the UN, the Transparency International, Amnesty International, etc. But it seems that even these international busy bodies have their own political angles.

It would be of pivotal importance to keep in mind that President Sirisena appointed a Commission of Inquiry (CoI) in January 2017, about 10 months after the second robbery, and two years after the first.

The Commission comprised Justice K.T. Chitrasiri, the late Justice P S Jayawardena and retired Deputy Auditor General V. Kandasamy. Sumathipala Udugamsuriya functioned as its Secretary. CoI issued a devastating report that implicated Perpetual Treasuries Limited (PTL) in the Treasury bond scams.

President Sirisena went to the extent of dissolving Parliament, in June 2015, to prevent the Committee on Public Enterprises (COPE) tabling its report on the first bond scam. SLFP leader Sirisena owes an explanation. Justice Chitrasiri’s CoI didn’t inquire into that aspect. Sri Lanka’s response to waste, corruption, irregularities and mismanagement is baffling. Let me end this piece reminding how the Bar Association of Sri Lanka (BASL) secured a substantial sponsorship from Perpetual Treasuries Limited (PTL) deeply mired in a bond scam, in 2016, for the Law Asia Conference during the tenure of its then President Geoffrey Alagaratnam, PC. The BASL never explained why it obtained PTL sponsorship even after the exposure of Treasury bond scams. That partnership also escaped the CoI. The rest is history.

Knowing what is now happening to the US economy with a string of bank failures and unprecedented bailouts, especially due to hoodoo economics it introduced in recent decades, like repeated quantitative easing (blindly printing trillions of dollars leading many to say the dollar is now only good as toilet paper) that has been practiced to ensure its world hegemony, the whole world might be hit with bank failures and even by a depression worse than the one that befell with the stock market crash of 1929. Already the contagion has spread to Europe with some leading banks there also requiring help.

Washington’s debt now stands at USD 31 trillion and climbing, but our own debt burden is still under USD 55 billion. So if we can get our exporters, who have stashed export earnings abroad, to bring them back, the picture here will not be as scary as it is made out to be. Even Minister Wijeyadasa Rajapakse has said that our export proceeds that have been parked overseas is in the region of USD 55 billion.

Soonwe will start receiving the IMF bailout, but our economic whiz kids have not done anything to plug the massive foreign exchange leak that has been freely draining foreign currency from the country, since the nineties, by way of private foreign exchange dealers who have been allowed to sell foreign exchange to any Tom, Dick and Harry, including drug dealers, to take their sales proceeds out of the country!

We would also like to ask the relevant authorities what they have done to recover monies stashed abroad by Lankans illegally that were exposed in great detail by the likes of Panama Papers and Pandora Papers.

All praise for Lanka’s saviours!

 SPECIAL REPORT : Part 461

Published

  2023/03/15

Julie Chung with Ranil Wickremesinghe, a week after Parliament elected him President

By Shamindra Ferdinando

President Ranil Wickremesinghe, who is also the Finance Minister, recently named three persons – all women -whose intervention supposedly brought relief to bankrupt Sri Lanka.

UNP leader Wickremesinghe paid glowing tributes to Indian Finance and Corporate Affairs Minister Nirmala Sitharaman, US Secretary of State Janet Yellen, and IMF Managing Director and Chairman of the Executive Board Kristalina Ivanova Georgieva-Kinova. The IMF Chief is Bulgarian.

Wickremesinghe declared that Sri Lanka would have experienced extreme difficulties if Sitharaman, Yellen and Georgieva-Kinova had not thrown their weight behind Sri Lanka.

The President said so at an event held at the Waters Edge Hotel, Battramulla, on March 08 to mark International Women’s Day.

It would be pertinent to mention that Sitharaman, Yellen and Georgieva-Kinova are all economists. The Indian Minister, and the IMF Chief, received top posts, in 2019, before the economic crisis gripped Sri Lanka, whereas Yellen was sworn in as US Treasury Chief, on January 26, 2021. Yellen is the first person, in American history, to have led the White House Council of Economic Advisors, the Federal Reserve, and the Treasury Department.

Wickremesinghe attended the event, on the invitation of actress turned lawmaker Geetha Kumarasinghe, Minister of Women and Child Affairs. Kumarasinghe successfully contested the Galle District, at the last parliamentary elections, on the SLPP ticket, after she was previously ousted from Parliament on the basis that she was a dual citizen. Kumarasinghe thereafter gave up her foreign citizenship, which she had obtained when she was married to a foreigner.

Wickremesinghe declared that Sitharaman loaned Sri Lanka USD 3 bn in spite of Colombo being declared bankrupt. in April 2022. Wickremesinghe described Sitharaman’s response to the Sri Lanka crisis as very brave. The UNP leader said that there was a need for him to explain the situation on the ground because if India didn’t make available USD 3 bn, within three to four months, our country would have simply collapsed.

US Ambassador, in Colombo, Julie J. Chung, whose interventions in not so ‘mysterious ways’ in support of a high profile protest campaign, that led to President Gotabaya Rajapaksa’s ouster, on July 14, 2022, was among the guests. Wickremesinghe succeeded Premier Mahinda Rajapaksa on May 12, three days after the latter resigned. Wickremesinghe received appointment as the Minister of Finance, Economic Stability and National Policies, on May 25. We will give the benefit of any doubt we now have about New Delhi being aware of the not so mysterious interventions here, by Washington, as we are almost certain that mandarins in New Delhi would be naturally aware how gleefully the West is looking forward to a bust up between China and India as it would be like disposing two their certain successors in the world

The US support for Sri Lanka, at the IMF, seems natural against the backdrop of the Central Intelligence Agency (CIA) Director William Joseph Burns’s recent clandestine visit to Colombo, in the dead of night. The US group flew in two C 17 Globemasters iii, on February 14, around 7-7.45 pm, and departed on the following day, around 3-3.40 pm. But the country is still in the dark as to what was unloaded from those two giant flying Trojan Horses, just as much as the human cargo. Beware when Americans bear gift horses!

The continuing foreign exchange crisis is broadly attributed to flawed policies, such as tax cuts, debt monetization, banning fertiliser and agrochemical imports, real appreciation of the exchange rate, etc. However, the issues at hand can be also characterized as a liquidity trap in the foreign exchange market, enforced by the economic structure and exploitative market structure, in the import and export sector of the economy, in the long run.

Wickremesinghe’s references to Sitharaman, Yellen and Georgieva-Kinova should be examined, taking into consideration early Indian and US support for the USD 2.9 bn IMF bailout package for Sri Lanka. All stakeholders made such a noise, over the IMF facility spread over a period of four years, that some ordinary people may have felt the country was down on its knees, before the Washington-based lender, for the first time.

In fact, we have secured IMF packages on 16 previous occasions and could have avoided the crisis if President Gotabaya Rajapaksa took the warning signs seriously and the plotters, surrounding him, had not overwhelmed him with the help of outside evil forces. Unfortunately, the wartime Defence Secretary, who handsomely won the November 2019 presidential election, allowed the deterioration. The sharp drop in tourist arrivals, in the wake of the April 2019 Easter Sunday attacks, and the overall shrinking of the global economy, due to the Covid-19 pandemic, made matters worse for Sri Lanka.

What may have sealed his fate must have been how those conveniently called peaceful protesters, by the likes of Julie Chung, and local NGO quislings, etc., went on the rampage across the country, with meticulous intelligence, from the evening of last May 09, targeting Opposition politicians and their supporters. In fact that afternoon/evening, the US Ambassador even issued a media release, literally ordering the armed forces and the police not to touch those “peaceful protestors”. How convenient?

This also brings us to the question whether our comrades, too, had done a deal with the real devils in Washington. Can anyone imagine how these comrades, who literally burnt down the country, in the wake of the JRJ government, under military pressure from Delhi, signed the Indo-Lanka Accord that brought in the controversial 13th Amendment, are now pretending to be innocent babes and got their proxy Harini to say it is alright to fully implement that piece of legislation, almost in unison with Ranil Wickremesinghe!

And who could have furnished so many foot soldiers to cause so much spontaneous havoc across the country and, especially, against government politicians, many of whom have still not recovered? We do accept the fact that like all politicians in general they were no angels, either, but they had come up playing the available corrupt system through legitimate elections.

Dr. Indrajit Coomaraswamy, one-time Governor of the Central Bank of Sri Lanka (July 2016-Dec 2019), blamed the current crisis on the failure on the part of successive governments to manage the expenditure since the country gained Independence. Sri Lanka had been plagued by a toxic combination of populist politics and an entrenched entitlement culture among the people, Dr. Coomaraswamy told the writer, in response to a query posed during Gotabaya Rajapaksa’s presidency. Dr. Coomaraswamy added: “Time and again, the electoral calendar has undermined fiscal discipline.”

However, according to critics Dr. Coomaraswamy only told one side of the truth. What he didn’t say was that as the CB Governor, he was also directly responsible for the Yahapalana government borrowing a record USD 12.5 billion from the international bond market, at high interest rates, from private lenders, primarily in the West. So what did that government achieve with such huge borrowings? All that the Yahapalana regime achieved, with all that money, we cannot see, except to lay the foundation for the current debt crisis?

Central Bank Governor, Dr. Nandalal Weerasinghe, too, delivered a lecture, to the members of Parliament, on the same lines. Dr. Weerasinghe launched a no holds barred attack on the irresponsible political party system, several weeks after Wickremesinghe succeeded Gotabaya Rajapaksa.

Pointing out that measures that had been taken by the Yahapalana government (2016-2019), following an agreement with the IMF, were disregarded by those who regained power, in 2019/2020, Dr. Weerasinghe said if the government/Opposition reneged on the latest arrangements, the country would face a similar crisis, in three years. Dr. Weerasinghe issued the warning on August 31, 2022, in the presence of Speaker Mahinda Yapa Abeywardena.

A fraudulent partnership

President Wickremesinghe has now appreciated the role played by three economists in Sri Lanka’s economic recovery. The President should also take tangible measures to investigate political parties, and individuals, responsible for the economic meltdown.

A group, representing trade union and civil society, collective, recently raised quite an important issue that had been largely ignored by successive governments, over the past decades. They called for tangible measures to tackle the well-organized influential public–private sector partnership engaged in ‘over invoicing’ and ‘under invoicing’ of imports/exports, with the blessing of successive governments.

Their invitation for a discussion with the print and electronic media didn’t attract sufficient attention. The briefing, and discussion, at the Centre for Society and Religion, Maradana, Colombo, attracted just a few journalists. However, economic analyst Dhanusha Pathirana, civil society activist Tharindu Uduwaragedara and Attorney-at-Law Lakmali Hemachandra explained how ‘over invoicing’ and ‘under invoicing’ contributed to the economic crisis.

They didn’t mince their words when they discussed the ongoing high profile operation that involved both the private and the public sector.

Pathirana asserted that a sharp reduction of capital, as a result of mispricing by importers, in respect of duty/tax free goods and taxable imports, was far more serious than the parking of funds overseas by exporters.

The group underscored the need to examine capital flows, through four forms of trade mis-invoicing, namely import over-invoicing and under-invoicing and export over-invoicing and under-invoicing.

Responding to queries raised by the writer, they alleged that regulatory mechanisms were not being implemented, regardless of the continuing economic decline. The failure on the part of the government to act on such disclosures is really disturbing. The country is in such a precarious state, those having regulatory powers should go flat out against the culprits, unless they were part of the fraudulent capitals flows.

Pathirana was adamant that absolutely nothing had been done so far to address the issue at hand.

Culpability of Cabinet

The Parliament continues to ignore extremely serious disclosures, pertaining to economic mismanagement. Shocking revelations that had been made before the Committee on Public Enterprises (COPE) in late May, last year ,hadn’t been investigated at all. Instead, the Wickremesinghe-Rajapaksa government has sought to manipulate the parliamentary watchdog, much to the dismay of the public. In fact, the powers that be had no qualms in interfering in all three watchdog committees, especially the Committee on Public Finance.

The COPE, during the courageous leadership of Prof. Charitha Herath was told how the then Prime Minister Mahinda Rajapaksa, who also served as the Finance Minister, in spite of receiving warnings in March-April 2020, on the impending financial crisis of unprecedented magnitude, chose to ignore the advice.

Mahinda Rajapaksa held the Finance portfolio till early July 2021. By the time Basil Rajapaksa succeeded, the economy had suffered irreparable damage.

The parliamentary watchdog was told how the International Monetary Fund (IMF) had warned the then Governor of the Central Bank, Prof. W. D. Lakshman, and Treasury Secretary S.R. Attygalle, of the country’s inability to procure loans, unless the country undertook debt restructuring, immediately.

The COPE members received a briefing, on the circumstances leading to the crisis, when senior officials of the Central Bank appeared before the all-party body. CBSL Governor Dr. Weerasinghe declared that the IMF warning hadn’t been heeded at all.

The COPE received confirmation of what has been widely speculated, hours after Wickremesinghe was sworn in as the new Finance Minister.

Janakantha Silva, Director Legislative Services/Director Communication, Parliament, quoted Dr. Weerasinghe as having told COPE that following technical talks held in terms of the Finance Act, pertaining to the IMF’s stand, recommendations were made to the then Premier and other senior officials. Dr. Weerasinghe has stated that the relevant decisions should have been made by the Premier, in his capacity as the Finance Minister and the entire Cabinet of Ministers.

The IMF has made its position clear after having asserted Sri Lanka lacked debt sustainability.

Asserting the failure on the part of those who managed the economy for causing a massive crisis, Prof. Charitha Herath called it a crime. The first time entrant to Parliament recommended the setting up of a Special Parliamentary Select Committee to probe those who neglected their responsibilities, thereby causing the current debilitating crisis. Prof. Herath blamed those few who managed the economy during that period.

But, absolutely nothing has been done. The disclosures before COPE had been quite conveniently forgotten.

SLPP National List MP Basil Rajapaksa succeeded Mahinda Rajapaksa, in July 2021, as the Finance Minister, whereas President Gotabaya Rajapaksa brought in SLPP National List MP Ajith Nivard Cabraal as the Governor of the Central Bank, in Sept 2021. Cabraal quit in March, 2022 to pave the way for Dr. Weerasinghe, the former Bank Deputy Governor, to return from retirement in Australia, as its new Governor.

Dr. Harsha de Silva has repeatedly pointed out how the then Finance Minister Mahinda Rajapaksa delegated his responsibilities to the then State Finance Minister Cabraal, who refrained from briefing the Parliament as regards the actual situation. Dr. de Silva is on record as having said that the IMF’s declaration of debt sustainability should be examined against the backdrop of the revenue cut imposed on the recommendation of the then Secretary to the President and one time Central Banker and Treasury Secretary Dr. P.B. Jayasundera that deprived the Treasury of Rs 600 mn in taxes.

Dr. de Silva asked who decided on the tax cut in spite of the IMF specifically advising the government not to do so. The top SJB spokesperson has asked who decided on such a reckless course of action.

When the COPE raised a contentious issue of the Central Bank wasting precious funds to prevent depreciation of the Sri Lanka Rupee, Dr. Weerasinghe said this was the responsibility of the Monetary Board, comprising five persons. The then Monetary Board member Dr. Ranee Jayamaha has revealed that the then Governor Prof. W.D. Lakshman, Treasury Secretary S.R. Attygalle, and nominated member Samantha Kumarasinghe, decided on that course of action in spite of her and Sanjiva Jayawardena, PC, opposing them. They had registered their protest in writing.

However, can Dr. Jayamaha and President’s Counsel Jayawardena absolve themselves of the responsibility? They remain members of the Monetary Board.

The proposed Special Parliamentary Select Committee should have also summoned Dr. P.B. Jayasundera, deposed President’s Secretary. But, the Yahapalana decision to repeal the time-tested Exchange Control Act No 24 of 1953 remains a mystery. A section of the Opposition alleges enactment of Foreign Exchange Act, No. 12 of 2017, during Wickremesinghe tenure as the Prime Minister, facilitated ‘parking’ of export proceeds, overseas, to the tune of billions of USD. Justice Minister Dr. Wijeyadasa Rajapakse, PC, is on record as having said that well over USD 50 bn had been stashed overseas. But what has he done to convince the Cabinet-of-Ministers to restore the repealed Act.

Former State Minister Jayantha Samaraweera (National Freedom Front) recently told this writer that Basil Rajapaksa, in his capacity as the Finance Minister, rejected their leader Wimal Weerawansa’s proposal to restore the old Act.

The Yahapalana government passed the new Act on July 25, 2017. The Samagi Jana Balavegaya (SJB), as well as the SLFP, voted for the new Act. Altogether 94 voted for the new Law, whereas 18 voted against. Then Speaker Karu Jayasuriya certified the new Act.

Contrary to reports, the new Act was brought in during the late Mangala Samaraweera’s tenure as the Finance Minister. Samaraweea succeeded Finance Minister Ravi Karunanayake, on May 22, 2017.

Another matter that needed attention is Sri Lanka’s International Sovereign Bonds (ISBs) as of USD 15.5, USD 12.5 had been obtained during the Yahapalana administration (2015-2019) or, in other words, in Wickremesinghe’s tenure as the Prime Minister.

In late January, 2022, the then Governor Ajith Nivard Cabraal told US-based CNBC that Sri Lanka had to pay USD 12.5 bn of debt in ISBs’ over the next seven years. Cabraal resigned three months later.

The country is in a catch-22 situation. Caught up in US Indo-Pacific strategy, the political leadership here is struggling to avoid the scheduled Local Government polls for obvious reasons. Contrary to the US call for holding of LG polls, the superpower perhaps may facilitate their overall strategy. A certain defeat at the mini-polls is sure to weaken Wickremesinghe’s hold, hence the decision to sabotage the polls. Regardless of the Opposition efforts to galvanize public protests to pressure the government over the LG polls, the incumbent administration seems confident a gradual turnaround of the economy may facilitate its efforts to keep the situation under control, for the time being.