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Economic crisis: Political leaders brainstorm

30 Jan 2022

  • Government approach condemned 
A group of leaders from over half a dozen key political parties in Sri Lanka held a closed-door meeting last Thursday (27) to brainstorm ways to tide over the economic crisis facing Sri Lanka, in the backdrop of their responsibility towards the people. “Sri Lanka is in the midst of an unprecedented economic crisis, causing severe hardship to all segments of our society, especially our working people and the poor. Undoubtedly, the Government has a daunting task ahead, and as a country there is a need for us all to come together to overcome this challenge,” asserted Tamil National Alliance (TNA) MP M.A. Sumanthiran, issuing a collective response yesterday (29) following the meeting. At the meeting the political leaders had noted that the crisis was of historically unprecedented proportions for many reasons. Firstly, it had been noted that the ratings had fallen to the level of being blacklisted in international credit markets, with Sri Lanka being locked out of borrowing using International Sovereign Bonds (ISBs) in the international market since April 2020. Secondly, that repaying of US Dollar debt in this context meant that the usable foreign reserves were down to below one month of imports – the lowest on record since independence. Thirdly, that the ratio of interest on debt to Government revenue was above 70% in 2020, a historical high for Sri Lanka, and amongst the highest in the world. Fourthly, that the ratio of public debt compared to the value of Sri Lanka’s Gross Domestic Product (GDP) was also the highest on record, at 120%, skyrocketing by almost 25 percentage points in the last two years. The collective statement issued by Sumanthiran noted that the Government’s approach to resolving the crisis had raised some serious questions, with its focus almost solely on meeting foreign debt obligations, draining the country of dollars needed for importing essentials for the people. “The Government’s emphasis on avoiding a default at any cost appears to be downplaying a fundamental question – can our people eat? After all, a country’s pride rests not only in repaying its loans, but also in ensuring no citizen goes to bed hungry,” Sumanthiran emphasised. Referring to the four key points, Sumathiran asserted that each of these situations by themselves would have spelled a serious economic challenge, but occurring simultaneously, they threatened Sri Lanka’s future in both the short-term and long-term. The statement noted that the Central Bank’s policy had been to hoard the scarce dollars to pay creditors in full and on time, fuelling a shortage of dollars for the needs of Sri Lankan people and reducing imports of essential items such as food, medicines, and fuel. “We see the shortage manifesting in long queues for essential items and frequent power outages. The situation will only worsen over the year, if the Government does not urgently shift gears and ensure adequate dollars are available to the Sri Lankan economy.” The statement pointed out that the Government’s rash chemical fertiliser policy had already impacted farmers across Sri Lanka, leaving the country with an imminent food crisis. “The Government’s current policy path on debt management, as it was in the case of fertiliser policy, is exacerbating the crisis, without a sensible or viable solution in sight,” it added. The meeting had provided a platform for the political leaders to share the concerns of their constituencies and identify the critical issues that require urgent attention. There had been wide acknowledgement that the Central Bank hoarding dollars to make lump-sum debt payments was leading to a shortage of dollars to procure essential supplies within the country, “resulting in severe economic hardships for the people of Sri Lanka and long-term damage to the economy, while providing windfall gains to the holders of Sri Lanka’s Sovereign Bonds”. “We agreed that Sri Lanka should take immediate measures to protect the poor from the adverse impact of this economic crisis and postpone repaying its debt as a first step. Participating MPs also felt that we need sound reform to the national economic policy to address root causes of the crisis and ensure sustainable solutions. This group of political leaders agreed to continue engaging and working together towards ensuring justice for the people of Sri Lanka, through solutions that are sustainable. We must steer the country out of this unprecedented economic crisis, and forge an equitable and just future for our future generations,” the statement noted. To call the meeting, Sumanthiran had approached parliamentary colleagues and party leaders in his capacity as a former Chairman of the Committee on Public Finance in Parliament. “MPs came together in the knowledge that Parliament is expected to have full control of public finance, and that each MP, therefore, also has a fiduciary responsibility to ensure the proper management of public finances in Sri Lanka.”  


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