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Sri Lanka’s First Firm Steps at Economic Reforms


Overview


President Ranil Wickremesinghe took tentative steps to bring a semblance of orderly governance during the month. He ended the month presenting an interim budget to stabilize economic growth with the aim to create a surplus by 2025. After the exit of the Rajapaksa’s, the hopes of Wickremesinghe restoring democratic governance were belied when the government used the Prevention of Terrorism Act (PTA) to rounded up the Aragalaya leaders, drawing severe criticism from civil society and the UNHRC. There is a sense of disappointment among the people to see parliamentarians reverting to riding their hobby horse - jockeying for power, tinkering with legislation in the name of curbing executive powers of the president and endlessly talk of the elusive “all party government”.


On the positive side, the young energy minister Kanchana Wijesekara seems to be making honest efforts to tame and rationalise energy pricing and distribution. The talks with the International Monetary Fund (IMF) have progressed, though efforts to reschedule creditors is making halting progress, with China playing truant. President Wickremesinghe seems to have succeeded in his tightrope act in foreign policy so far, despite the India-China differences coming alive over China berthing its spy ship in Hambantota port in spite of India’s security concerns.


Interim budget and economic reforms


Presenting the Budget, President Wickremesinghe said the government’s aim is “to create a surplus in the primary budget by the year 2025.” The Daily FT listed six salient aspects of the budget. These included the announcement on billions of rupees-worth social safety measures, quit notices to public servants over 60, restructuring for key 50 state owned enterprises (SOE), measures to kickstart revival in agriculture, industry and tourism, write off default loan of farmers and announcement of wide-ranging revisions to many existing legislations. Every Sri Lankan would agree with his remark that the country “can no longer be a nation dependent on loan assistance, we can also no longer be used as a tool of interference by other countries with strong economies. All our collective vision should be to make our country strong and stable, in order to stand independently.”


However, Wickremesinghe’s reiteration of the call to political parties to join the “All Party Government” probably has only some cosmetic value to the political discourse as the APG is a non-starter. While this may be the need of the hour, much will depend upon how the political cookie crumbles. As he said, if Sri Lanka “miss these opportunities, we will be marginalized globally.” But the credibility of his remarks is weakened as the same tainted political class is still calling the shots in the present government. There is talk of former president Gotabaya Rajapaksa returning home on September 24 from his self-exile in Thailand. If that comes true, Wickremesinghe should get ready to handle the unsavoury task of yet another socio-political turbulence.


The main opposition Samagi Jana Balawegaya (SJB) has welcomed the budget. SJB MP and economist Dr Harsha de Silva saw it as an attempt by the President to change the course of the country into a ‘modern productive enterprise’ by undertaking serious reforms to stabilise and restructure the economy. To achieve this, the President has proposed the introduction of new laws like the Public Finance Management Act to run the affairs of the government and amendments to the Monetary Law Act to reduce the pressure on the Central Bank from Treasury and reduce money printing. The introduction of the new laws will have a more disciplined system of governance.


Well entrenched political and trade union interests in SOE and among public servants, Wickremesinghe is likely to face a tough task at every step in fulfilling this part of the agenda. As Dr de Silva pointed out “They (SLPP) opposed every type and every time reforms were brought up for four decades. It is a quirk of circumstances and fate almost that is them who will have to do these reforms now.” The state-owned Sri Lankan airlines is a case in point. It has accumulated a staggering $ 1 billion debt and dues comprising of $ 175 million government guaranteed international bond, $ 380 million payable to state banks, BOC and Peoples Bank and $ 80 million loan taken from BOC by mortgaging shares of Sri Lankan Catering. The government can no longer fund the national carrier given the country’s financial, forex and economic crisis.


However, the privatisation of this white elephant is going to be an uphill task, as leftist trade unions rule the roost in most of the SOEs and see a red flag in any talk of privatisation. Already, there are protests voiced against the proposed privatisation of retail distribution of fuel. Ultimately, when IMF’s structural reforms come into full play, Sri Lankans will have no option but to corral and weed out 60 odd white elephants of SOE. As PM in the Sirisena-Wickremesinghe government, Wickremesinghe had co-sponsored the UNHRC Resolution 30/1 adopted in 2015. To retain his international credibility, he will have to bring the issue to a logical conclusion by establishing a credible judicial process to bring to book alleged right abusers. This is a humongous task as the President is dependent upon the SLPP support.


The first step in improving the government’s accountability process would be to abolish the PTA “one of the key enablers of arbitrary detention for over decades” as described by a UN body. Unfortunately, the government has used it to arrest Aragalaya protestors. Instead of doing away with PTA, the government efforts are on subsume its provisions in a National Security Act (NSA). This could only bring international criticism to the government, when it is trying to maximise its economic support. Of course, the larger question of implementing 13th Amendment in full is still lingering and this is yet another pressure point.


China’s Wolf Warrior diplomacy in action


China’s “spy ship” Yuan Wang-5 docked in Sri Lanka’s Hambantota port from August 16 to 22 disregarding the security concerns of both India and the US and turning down Sri Lanka’s request to defer the visit. The research ship belonging to the PLA’s 5th branch – the Strategic Support Force (PLASSF) - created in December 2015, can carry out space, cyber and electronic warfare. It also has the capability to assist PLA’s land-based stations in tracking satellite, rocket and ICBM launches within a range of 750 km. There is more to China’s insistence on docking Yuan Wang-5 in Hambantota port than refuelling and replenishment.


China was testing the depth of India-Sri Lanka relations which have become closer than ever before. It is also a strong affirmation of China’s influence on Sri Lanka and the Indian Ocean Region. This was indicated in an op-ed the Chinese ambassador to Colombo Qi Zhenhong wrote in Sri Lanka media. Hinting at India, he warned “any infringement on the national sovereignty, independence and territorial integrity of Sri Lanka shall not be tolerated” (obviously by China). He further added, “External obstruction based on the so-called ‘security concerns’ but without any evidence from certain forces is de facto a thorough interference into Sri Lanka’s sovereignty and independence.”


The Chinese ambassador also reminded Sri Lanka of the 51st session of the UN Human Rights Council to be held in Geneva where human rights issues of Sri Lanka might be stirred up, where China could help. India took strong exception to the Chinese envoy’s article. The Indian High Commission in Colombo departing from the norm, let loose broadsides on the article saying, “His violation of basic diplomatic etiquette may be a personal trait or reflecting a larger national attitude.” It added, “His views of Sri Lanka’s northern neighbour may be coloured by how his own country behaves. India, we assure him, is different. His imputing a geopolitical context to the visit of a purported scientific research vessel is a giveaway.”


It is evident, India is not prepared to tolerate any more needling from China. External Affairs Minister Jaishankar during his South American tour explained that the relationship (with China) cannot be a one-way street. “They are our neighbour, and everybody wants to get along with their neighbour…But everybody wants to get along with their neighbour on reasonable terms. I must respect you and you must respect me.” He stressed that each one will have their interests and we need to be sensitive to what the concerns are of the other party.


Tail piece: Yuan Wang-5 is currently 400 nautical miles South-Southeast of Dondra Head at the southernmost tip of the island nation. It is a matter of detail that the vessel is mapping the ocean bed in an area close to the US military base in Diego Garcia.


[Col R Hariharan, a retired MI specialist on South Asia and terrorism, served as the head of intelligence of the Indian Peace Keeping Force in Sri Lanka 1987-90. He is associated with the Chennai Centre for China Studies. Email: haridirect@gmail.com Website: https://col.hariharan.info]

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