Sri Lanka’s Road to Recovery: A call for Progressive Leadership

 

In the wake of a devastating economic collapse, Sri Lanka found itself in the midst of an unprecedented crisis, leaving its citizens grappling with despair and uncertainty. Long fuel queues, bare shelves in food stores, and fiery protests painted a heart-wrenching picture of the nation's struggles. While superficial improvements may offer temporary respite, the underlying issues persist, threatening to push millions further into poverty. Reputed organizations like the World Bank's published reports reveal that over 30% of the population lives below the national poverty line, with rural areas bearing the brunt. This dire situation demands a bold and decisive solution - it demands a government that is unwavering in its commitment to progressive change.

*Unmasking the Fragile Recovery*

The emergence of a new government in May 2022 under the leadership of Ranil Wickremesinnghe brought hope, but signs of relief remain precarious and deceptive. Reports from respected research agencies, both local and international, expose the reality of economic challenges when seeing long queues in places like Divisional Secretariats and government banks to collect their social security payment confirmation letters and to open bank accounts to receive funds. Rural areas are hit particularly hard, exacerbating the hardship for vulnerable communities. We cannot afford to be complacent; meaningful reform and accountability are the need of the hour.

*The High Cost of Survival*

As the cost of essential commodities skyrockets, the plight of millions in lower-income groups worsens. Basic necessities like food, fuel, electricity, and medicines slip out of reach for those who need them most. The World Bank's published statistics reveal that over 20% of Sri Lanka's population is undernourished, and the specter of malnutrition haunts our children. Families are forced to make agonizing choices between food, utilities, and healthcare, compromising their very survival.

*The Bitter Pill of Economic Reforms*

Sri Lanka sought a lifeline through a bailout package from the International Monetary Fund (IMF). However, the conditions attached to this aid have only burdened an already suffering population. Higher taxes, deep cuts to government spending, and welfare program reductions have intensified the hardships faced by the vulnerable. Essential services like education and healthcare have borne the brunt, with public hospitals and schools facing crippling funding cuts. The World Bank's published data confirms that these measures have led to an alarming increase in school dropouts, perpetuating the vicious cycle of poverty.

*The Way Forward: Hope Amidst Uncertainty*

Sri Lanka stands at a critical juncture, in dire need of a transformative path to recovery. Our nation yearns for true political change, transparency, and a brighter future where the welfare and prosperity of every citizen are prioritized. To achieve sustainable development, we must revitalize key sectors like ICT, export agriculture, value-added exports of mineral products, tourism, and more. But beyond that, we must address the deep-rooted structural issues and tackle corruption head-on, as underscored by the agencies like Transparency International and Global Financial Integrity, a Washington based reputed think tank. Now is the time for bold steps and unwavering dedication.

*Embracing a Progressive Leadership*

Sri Lanka's journey to recovery is an arduous one, demanding bold and resolute leadership. Our nation cannot afford to falter in the face of adversity. As it stands today, only a progressive leadership can offer the most compelling and forceful solution to our country's challenges. Let us unite, not just in hope but in action, as we embrace a government that will steer Sri Lanka towards a brighter tomorrow - a government that is unyielding in its commitment to the welfare and well-being of its people. Together, let us rise and build a prosperous and equitable Sri Lanka, under the banner of inclusive governance.

*Conclusion*

Only a truly progressive party can lead Sri Lanka towards a comprehensive and inclusive solution to its pressing economic and social problems. The educated civil society in the country firmly believes in the essence of this vision. The majority of university academics and professional bodies in the country recognize a party that is committed  to equitable growth through a production economy, poverty reduction, and social welfare for the most vulnerable citizens. With a dedication to sustainable economic reforms and transparent governance, this progressive movement offers Sri Lankans a beacon of hope and a path to an equitable and prosperous future.

Polito

Read More

Sri Lanka’s Austerities Unveiled by President’s Actions

 

Economic reforms, implemented under IMF guidance and touted as the solution to Sri Lanka's woes, have yielded apparent short-term gains. However, beneath the surface lies a nation grappling with the weight of austerities inflicted by President Wickremesinghe and his UNP-SLPP allies. Despite the reduction in electricity tariffs, gas prices, and inflation, an alarming number of citizens are being pushed towards or below the poverty line, leading to a growing malnourishment crisis, inadequacies in public healthcare, and an unprecedented exodus of people seeking a better future elsewhere.

*Disinflationary Policy as a Fragile Crutch*

The stability and progress observed so far are a result of a deliberate disinflationary policy. However, this policy's efficacy has its limits, and debt restructuring with foreign creditors looms ahead, potentially burdening the nation's treasury further. As certain restrictions on imports, capital transfers, and currency transactions must be lifted, Sri Lanka faces an uncertain economic landscape, where IMF's austerity measures continue to disproportionately impact the vulnerable strata of society, further deepening the economic disparities

*The Cancer of Corruption Eroding Progress*

Despite the touted reforms, a pressing issue continues to undermine any meaningful progress - corruption. Rampant and deeply ingrained within the nation's governance, corruption hampers the effective implementation of progressive legislation, rendering many measures ineffective in practice. From the tax administration's inefficiency to notorious corruption within non-ministerial departments and questionable deals made by politicians, this institutionalized corruption plagues Sri Lanka's political culture, obstructing any hope of real economic reform.

*Ethnic Reconciliation and Elusive Accountability*

Sri Lanka's post-independence ethnic discord, born out of an aggressive Sinhala Buddhist majoritarian democracy, presents another obstacle to progress. With ethnonational democracy enabling corruption to flourish, the issue of ethnic reconciliation remains unresolved. The alleged All Party Conference (APC) which was held on 26 July at the President’s Secretariat was another disguised attempt by the Selected President Ranil Wickremesinghe to deceive the Tamil vote base in the Northern and Eastern districts and at the outset it raised doubts about his true intention to address the core issues. Without genuine efforts to achieve ethnic reconciliation and tackle corruption at its roots, long-term economic development and prosperity will remain elusive.

*NPP’s Ray of Hope for a Changing Political Culture*

In this landscape of challenges, only the National People's Power (NPP) party seems to recognize the urgent need for a change in the nation's political culture. Their aspirations to combat corruption and achieve true ethnic reconciliation offer a ray of hope for a brighter future. As Sri Lanka stands at a crossroads, the question remains whether the nation will embrace this opportunity for transformation and grant NPP the chance to shape a new and prosperous path forward.

Polito

Read More

Sri Lanka's Debt Restructuring: Fairness at Stake and an Uncertain Future

 

In a dramatic turn of events, Sri Lanka's Central Bank and Finance Ministry have finally unveiled their long-awaited plan for domestic debt restructuring—a vital step in achieving debt sustainability as demanded by the IMF. However, as Governor Nandalal Weerasinghe reluctantly announced the move, it became apparent that the burden of this restructuring would not be shared equally. The preferential treatment given to foreign investors and a few selected domestic creditors raises questions about fairness and the potential repercussions for the economy.

*The Unequal Burden: An Unbalanced Approach*

Governor Weerasinghe, who had staunchly opposed domestic debt restructuring in the past, now argued for locals to share the burden, citing the 30 percent reduction in the value of sovereign bonds demanded from foreign creditors. While commercial banks have been exempted from the restructuring, reducing concerns of a bank run, this selective approach violates the principle of treating all creditors equally.

Under the Domestic Debt Optimization (DDO) plan, bonds held by pension funds, including the significant Employees Provident Fund, will face extended tenure and reduced coupon interest rates. Meanwhile, bonds held by banks, a few primary dealers, and selected high-net-worth investors remain untouched, creating an imbalance in the impact on different bondholders.

*Focusing on Sri Lanka Development Bonds (SLDBs)*

The restructuring primarily targets dollar-denominated SLDBs, leaving holders facing a potential 30 percent reduction in value. The remaining amount will be locked in for six years, earning a meager 4.0 percent interest. Alternatively, bondholders may exchange their dollar bonds for depreciated rupees, with a slightly higher interest rate than the central bank's policy rate, but with the funds locked in for a decade.

Governor Weerasinghe argues that these measures will improve the balance sheets of commercial banks, as they have already been asked to account for a 35 percent reduction in the value of SLDBs. While this may provide some relief, concerns linger about the overall impact on the banking sector and the potential consequences for investors in the stock exchange.

*The Fallout: Disproportionate Impact and Lingering Doubts*

The political consequences of the debt restructuring are expected to hit the Employees Provident Fund (EPF) the hardest. While the Central Bank guarantees that the EPF and other pension funds will receive 12 percent interest on their government bonds until 2025, and thereafter 09 percent, doubts arise about the value of assurances from a government already in default. However, currently, the weighted average for investment funds is 13.5%, and with the proposed step-down approach, the EPF would lose over three trillion of rupees by the end of the extended term of maturity.  

The burden of the restructuring disproportionately affects low-income earners, as the EPF, by law, primarily invests in government securities. The government's previous questionable investments and involvement in scams further exacerbate the situation, as taxpayers are once again burdened with revitalizing a bankrupt nation.

While the government has a parliamentary majority to push through the debt restructuring, legal challenges from EPF members and SLDB holders may arise. However, such proceedings could only prolong the pain.

Given the projected shortfall in state revenue and the narrow scope of the proposed DDO strategy, doubts persist about whether it provides enough flexibility for the government to regain control of the fragile budgetary situation. The burden ultimately falls on general taxpayers, particularly members of pension funds, further impacting low-income earners.

As Sri Lanka navigates its precarious budgetary situation and the looming specter of financial collapse, the government's controversial debt restructuring plan raises serious concerns. With an unequal distribution of the burden and a lack of transparency, the hardships faced by vulnerable sectors of society could worsen. Urgent action is needed to pursue a fair and sustainable path forward, ensuring a brighter future for all citizens and the economy as a whole.

By Polito

Read More

Domestic Debt Restructuring: Unveiling the Hype, Lies, and Neglect

 *-The Government's Attempt to Clarify Domestic Debt Restructuring Falls Short of Reality-*

In the ongoing discourse surrounding Domestic Debt Restructuring (DDR), the government has made strenuous efforts to downplay its impact on the general population. However, recent revelations and developments tell a different story. It is becoming increasingly clear that the proposed DDR, under the guise of "optimization," poses a significant threat to the living standards of the people.

Initially, assurances were given that there would be no DDR, designed to alleviate concerns of an economic meltdown. Yet, it has come to light that key stakeholders were not entirely truthful about the matter. A Cabinet paper revealed the imposition of a precondition by International Sovereign Bondholders, indicating the necessity of DDR to facilitate negotiations with external debtors. The government's attempts to deny the imminent possibility of DDR were thus exposed.

Of utmost concern is the treatment of the Employees' Provident Fund (EPF), the country's largest private pension fund. Shockingly, the EPF management was left completely unaware of the details of the DDR process, learning about their inclusion through social media. This neglectful approach is reminiscent of past instances where vested interests manipulated the EPF for personal gain. The absence of representation from the contributory body raises serious questions about the management of the fund and the protection of the interests of its 2.5 million hardworking contributors.

Furthermore, the proposed DDR seeks to limit interest payments to a mere 9% for the next 16 years, significantly lower than the current average interest rate of around 13.5%. This move puts immense pressure on individuals who rely on their EPF savings for a secure future. Hardworking private sector employees, unlike their public sector counterparts, cannot simply rely on a pension after 20 years of service. The reduced returns on their EPF investments threaten their ability to make ends meet during retirement.

The DDR's impact extends beyond the EPF and directly affects the wider population. As the government assures us that the DDR will not affect local bank accounts, it conveniently omits that nearly half of these accounts consist of loans, leases, advances, or overdrafts. Many individuals are already struggling to meet their financial obligations. By neglecting to address the restructuring of these debts under the DDR, the government is putting the burden squarely on the shoulders of the working class.

It is essential for people to understand that the proposed DDR poses a real threat to their living standards. The government's promises of minimal impact on the population must be met with skepticism. It is our collective responsibility to voice our concerns and demand accountability to protect the interests and well-being of hardworking individuals and their families. We cannot afford to let the DDR erode the progress we have made and undermine the future prospects of our nation. It is time to stand up, raise our voices, and advocate for a fair and equitable approach that prioritizes the well-being of all Sri Lankans.

By Polito

Read More