SPECIAL REPORT : Part 461
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.
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.
