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Political and economic crisis: RW joining SLPP Government doesn’t bring legitimacy: Dr. Harsha de Silva

22 May 2022

  • Government calls to form unity govt. not credible
  • Current Govt. ruled by Rajapaksa proxy
  • Broad political convergence necessary to move forward
  • A govt. that commands stability and legitimacy is need of the hour
  • Timeline for President to step down is important 
  • Plans to establish Research Unit and Independent Budget Office
  • Need strengthening of safety net for low-income communities
  • No confidence in Govt. attempts to investigate 9 May assaults; questions why no action on MR
  • Greater civil unrest and possible looting if key issues not addressed
By Asiri Fernando  Sri Lanka needs to forge a convergence of political will to establish a government that brings both stability and legitimacy, which will enable the country to negotiate with key international stakeholders to restructure external debt, former Minister of Economic Reform and Public Distribution and Samagi Jana Balawegaya (SJB) Parliamentarian Dr. Harsha de Silva told The Sunday Morning. According to the Opposition MP, the Sri Lanka Podujana Peramuna (SLPP)-Ranil Wickremesinghe Government in its current form lacks legitimacy and is a proxy for continued rule by the Rajapaksas. Dr. de Silva argues that the current Cabinet (19 May) has no desire to bring about the political and economic reforms that are needed to ensure Sri Lanka can navigate out of its present crisis. In an interview with The Sunday Morning, the economist-turned-policymaker highlighted the need for evidence-driven analysis, transparency, and a broad debate on how State funds are raised and utilised. He warned that difficult measures may be needed to move towards recovery in the future, which may affect low-income communities, necessitating the strengthening of the social safety net. Following are excerpts from the interview: Sri Lanka is struggling to find political stability, which is needed to address the worsening economic crisis. A new Government has been appointed. Do you think it is credible in its claims about forging a unity approach – a unity government – to address the economic crisis?  No, I don’t think so. This is essentially the Pohottuwa (SLPP) and their allies coming together to work with Ranil Wickremesinghe (RW). Even if some in the Opposition leave and join the Wickremesinghe-led Government, they will do so as independent members and not as members of our party (SJB). When you want an all-party government, you need to get the support of the parties in Parliament, not just the support of individuals. Therefore, I do not see this as a unity government.  How confident are you that Sri Lanka can overcome this crisis and how long do you think it will take? First of all, we need to realise that this is not an economic crisis by itself. It is a socio-political and economic crisis. Therefore, you need to address it that way. You need to find a solution to address this crisis in a holistic way. I doubt very much that there can be any significant movement towards a stable path ahead, without a political solution. I am sure we can get a little money from here, or a little from there, to pay for an oil shipment today or a gas tanker tomorrow or the day after, but that’s not what we are looking for. We want a concrete, stable, and legitimate government. This problem cannot be addressed in a way that it ought to be without a political convergence, which I don’t see happening at this moment. If you look at the basic conditions put forward in the proposals made by professional groups like the Bar Association of Sri Lanka, or even from the Aragalaya movement, the common denominator is that the President must give a timetable to bring in the necessary constitutional amendments to abolish the Executive Presidency and he must step down. It doesn’t have to be today or tomorrow, but there has to be an undertaking and a timeline. Without that, I don’t see how this can be resolved. Do you think that the current Government is a rule by proxy of the Rajapaksas? Yes, absolutely, because RW cannot operate without the support of the Pohottuwa (SLPP) MPs. This was made clear yesterday (17 May) in Parliament when MP Rohini Kaviratne’s name was proposed for the post of deputy speaker. The request for a female member to take the deputy chair was essentially made by Ranil Wickremesinghe. Also, the Caucus of Women MPs unanimously endorsed Rohini for the position. What happened was something that RW never expected. Behind the screen, it was Basil (Rajapaksa) who created divisions and moved to get his man nominated and Rohini defeated. Clearly that was not what RW expected and his first proposal as PM in Parliament was defeated. You have offered to take over duties as chairman of the Committee on Public Finance (CPF) in the Parliament. Can you explain why you made such a decision and what impact you can have on State revenue by heading the CPF?  There was a general consensus among a fair segment of society that I should take up the Ministry of Finance. In fact, the invitation was made both by the President and the Prime Minister. I genuinely believe that I have a role to play. I have a conscience and I need to do what is right. But the issue is that, without any firm undertaking by the President to a timeline on any of the proposals and changes to issues that resulted in this crisis, there is really no way for me to be part of what I feel is an attempt that is not genuine. That is why I said: ‘If you can’t give undertakings and form an all-party government, if I come in as the chairman of the Committee on Public Finance, I will try my level best to form an all-party economic revival committee in Parliament and start working on an economic revival plan’. At the end of the day, it is Parliament that has full control over public finance, under Article 148 of the Constitution. No finance bill can come to the chamber or be tabled without the prior approval of the Committee on Public Finance. If you think about why the committee exists, it is not a committee that looks at past accounts, it is not a backward-looking committee, it is a forward-looking committee. The committee looks at how Government revenue and expenditure is managed. In that sense, I think there is a lot that I can do. I plan to work with the Government, the Ministry of Finance, the Central Bank of Sri Lanka (CBSL), independent think-tanks and professionals, and try creating what the people at the Aragalaya are asking for. That is to use the knowledge and experience of those outside the parliamentary 225 to better manage the future of our finances. The CPF will allow me to create that platform and I plan to revolutionise the committee and do things that have not been done before to address the issue at hand. Prime Minister Wickremesinghe said it would be a great pleasure to work with you if you took the post of CPF chairman. Do you think that the SLPP-majority Government will allow you the necessary space to carry out the duties of the CPF and support you if you take up the post? Yes, the PM spoke to me about it at length afterwards and so did Leader of the house Dinesh Gunawardena, Nimal Siripala de Silva and others. I feel that I have 100% backing of almost everyone, I don’t think anyone will try to scuttle it. I feel that everyone is relieved that I have proposed this. I think I will have the backing of all parties in Parliament, which is what I want. That is the way we can come up with a real plan. As a democracy and for things to move forward for a very difficult reform agenda, we have to have the support of everyone. We need the support of every party, including independent groups. We need a collection of political views and ideologies. I think I will be able to come up with something that has broad support within Parliament, which I doubt very much the Government can forge at this stage through the Ministry of Finance, so I am looking at this very positively, I am trying to do something which is out of the box. Economists and policymakers have predicted that Sri Lanka will have to endure more hardships and austerity measures as we chart our way out of the economic and debt crisis. Given the stark choices at hand, do you think the political will exists to provide some form of relief for the public who remain under significant strain due to supply and cost of living issues? That is a real question. People will also have to survive through the difficult period, which is why reform is necessary. It is not possible for a Government that consists of the same members who created this mess to bring change. Except for the Prime Minister, even when the Cabinet is established, except for a very few who may join for privileges, the Cabinet will likely be made up of the same people. They don’t believe in reforms. They don’t appreciate the need for reforms, and they never understood the crisis.  I was the first person to sound alarm bells in Parliament about the impending crisis in late 2020, so the reason why they (the Government and SLPP) are looking at me for help is perhaps because they realise that they were wrong. But to do the necessary reforms, it has to come from within, you have to believe in them. There is no point in agreeing to undertake reforms to just get over a short-term period. I know that RW believes in those reforms. I doubt that anyone else in the Cabinet as of now (18 May) believes in reforms other than RW, so it is going to be extremely difficult for the reforms to go through unless we create a conducive environment inside Parliament for the reforms to be implemented.  Once the reforms are implemented, many in the low-income communities may be seriously impacted. Budgetary allocations will have to be made, cash transfers will have to be done. The safety net for such communities will have to be strengthened. I am optimistic that this Government can get it done. Why I am saying that is because our creditors, the debt restricting mechanism, the IMF, and others will look for not just a stable government, they will look for a government with legitimacy.  You can get stability by showing 113 votes in Parliament. Both are very important – stability and legitimacy. One of them by itself will not be enough. I can see some stability with the Pohottuwa (SLPP) getting into bed with RW, but that will not bring legitimacy. Without that, I don’t see how we can be successful. The need to increase State revenue and significantly curtail expenditure has been emphasised by many. In your opinion, what measures can the CPF, Treasury, Inland Revenue Department and the Central Bank implement to achieve this goal? One of the biggest contributors to the irresponsible policymaking that got us here is that there is no analysis when you make policies or change taxes. They made changes to taxes, concessions, allocations, and policies without any analysis on its impact. When I was in the State Ministry of National Policies, I created an Analytics Unit and we recruited graduates, got the necessary software, and started looking at data analysis. As a member of the CPF, I have seen the Central Bank sending a statement saying ‘we will be increasing this tax’ or ‘we will be giving this concession’ without a single sentence on analysis of the impact the decision will have. If I chair this committee, I will not allow any decision to be made without proper analysis. They will have to run models and show what impact it will have on the economy and on the specific sector. They will have to show the evidence. I am a data-centric and analytical person. I know why we ended up here – most of the decisions taken were political ones and there was no analysis done on them. The tax cut of December 2019, was there a single model that was run? Was there any analysis that was done on its impact? No. Even the decision on fertiliser was the same. We need smart governance, evidence-based governance. I will make everyone know the impact; we will be transparent. If we increase VAT from 8-10% or 8-12%, what is the expected impact? If the officials don’t know how to do it, we will hire the experts who know how to do it. We need to establish an independent budget office in Parliament and staff it with capable people. Then there will be a proper debate on policy and changes inside and outside the Parliament. I plan to do this if I take over as the chair of the CPF.  I will also open public finance to the media and there will be transparency. The SJB has pledged to support policies of the new Government which will help address the economic crisis. As a former Minister of Economic Reform and Public Distribution, what key priorities do you think the Government should address urgently? The emergency issue is to be able to obtain funding to purchase essential medicines, gas, fuel, and things like that. We also need to find ways to strengthen the social safety net, otherwise people may riot and break into markets and homes if they are unable to find food. That would be chaotic and we need to prevent that. Thirdly, we need to ensure that the banking system is stable. We can’t afford to have any breach of the banking system as it would cause unprecedented chaos.   Then, we need to immediately move forward with debt restructuring negotiations with our financial and legal advisors and simultaneously with the IMF based on the debt sustainability analysis. Then we have to figure out what kind of new equilibrium we can create. That is the amount of the ‘haircut’ and the restructure will depend on the Government’s fiscal programme, so they are interrelated. Then, the medium- to long-term approach will include structural reforms: State-Owned Enterprises, institutional reforms, energy and utilities pricing, subsidy structures, and social safety nets. What key changes would the SJB have wanted carried out to address the economic crisis and ensure availability of essential supplies to the public if the SJB had formed an all-party government last week? The economic crisis is embedded in a political crisis. What RW and the SLPP are trying to do now is to address the economic crisis and not the political crisis. Our suggestion was to address both concerns. So along with the economic measures I mentioned before, we would have had to address the political issues relating to the concentration of power, Executive Presidency and the need to strengthen Parliament.  If we had formed an all-party government, we would have pushed the political reforms as well as the economic reforms. I think we had a broad consensus, almost every political party was ready to join us. The JVP was uncertain, but I don’t think it would have scuttled the reforms.    The PM and Opposition Leader have found common ground to address critical shortages of lifesaving medications. Do you think that further collaboration while being in Opposition is possible? If, so what areas do you think can be addressed?  What we saw today, the friendly banter and the request by the PM to the Opposition Leader, was very positive. That is what we need now. That is what we need to move towards, we need some political convergence.  Not just on medicines, the Opposition Leader also moved to address international leaders. He said ‘come visit our country’ and he asked our expat workers to try and send as much remittances as possible through official channels. There may be various criticisms about the Opposition Leader, but what we see is that he is trying to work together and that is very positive.      Do you think the way the Government approached the appointment of the deputy speaker builds confidence in its request to form a unity government? It went against the request. It should never have been done. But that is the politics that the Rajapaksas are playing. It is unfortunate that RW went in (to take up PM post) without any undertaking on political reforms. How confident are you that the Government will move effectively to bring to book the mobs who attacked peaceful protestors at Galle Face and those who damaged State and private property across the country during and after 9 May? As everyone saw, the whole thing started inside Temple Trees, so Mahinda Rajapaksa himself is at the centre of it, but we don’t see even a mention of him in relation to the investigation. So if the Government and the SLPP are not even willing to mention him, how can we expect proper justice? If the Government attempts to ‘buy’ or effect defection of Opposition MPs to bolster its numbers, wouldn’t it be ‘back to business as usual’ – a political culture that the public has rejected?   Yes, because if they start poaching, it doesn’t indicate a genuine desire to collaborate. I hope they don’t do it. All the political leaders have told the PM not to allow poaching, because you risk Opposition collaboration when it’s most needed. We’ll have to see. Are you concerned that if a genuine effort is not taken to address the demands of the public regarding accountability of policymakers and public officials, the next wave of frustration and civil unrest could escalate? Yes, I am extremely worried about that risk, because that would spell catastrophe. It would derail all that we are trying to do.  

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