The late author Christopher Hitchens recounted the story of telephoning his friend, Israel Shahak, a Polish Holocaust survivor and political dissident who lived in Jerusalem. When Hitchens had asked, “How are the Politics looking?” Shahak had replied: “There are encouraging signs of polarisation.”

Sri Lanka’s political and economic commentary is currently brimming with well-intentioned, if incoherent, strategies to exit this cycle of economic despair.

A recent interview in The Sunday Morning newspaper with the University of Colombo Department of Economics Head Prof. Sirimal Abeyratne produced an eye-catching quote: “We can’t have Scandinavian-type welfare on an African-type tax system” – a perfect encapsulation of a major structural weakness in Sri Lanka’s economy.

The rhetoric of the International Monetary Fund (IMF) clearly acknowledges the need to protect the poorest in Sri Lanka, hence the call for targeted cash transfers and social protection nets. Unfortunately for a majority of Sri Lanka’s poorest, these cash transfers have not been forthcoming and social protections had been deteriorating for many years prior to the collapse. 

My critique of the commentary stems not from their details or proposals, some of which are quite reasonable, but from what the commentary emphasises. 

Prof. Abeyratne, for example, made the following observation: “In the targeting of the poor for relief and targeting taxpayers, we have a problem. Also, targeting corruption vulnerabilities is a challenge for us.”

These two issues – targeted relief and corruption “vulnerabilities” – represent what should be the organising principle of Sri Lanka’s economic recovery. 

In an ideal democracy, all policy would be focused on alleviating the hardships of the lowest income deciles; all policy prescriptions should be considered from the point of view of protecting people. 

Corruption, on the periphery of the conversation and little more than lip service between Government officials and the IMF around review meetings, should also be front and centre, especially considering its ability to add balance to the burden that inevitably falls on the working people of Sri Lanka. 

Broadly bipartisan 

In explaining the difference between IMF programme #17 and #16, Prof. Abeyratne noted that there were a number of stakeholders for Sri Lanka to contend with this time around, including “other countries – China, Japan, and India… multilateral donors who are concerned about the debt restructuring… private lenders… We have the international community watching over us…” 

All the essential stakeholders were name-checked except for the internal stakeholders – the Sri Lankan people who will foot the bill for all of the painful reforms necessitated by the policy failures of the political class.  

Prof. Abeyratne was also asked whether the IMF agreement should receive bipartisan support; the question itself is strange considering that agreements of this nature during periods of extreme economic hardships seldom produce bipartisan support.

The belief that the agreement requires bipartisan support is also misguided in that it assumes the IMF programme is equitable in its treatment of various stakeholders and thus why should there not be bipartisan approval? If only politics were so malleable. 

Not only is Sri Lanka in the grip of a once-in-a-generation economic collapse, there is also a Government which has lost its mandate led by a President that never received a mandate to begin with. 

There is also a rise in subscription to the Marxist-Leninist Communist National People’s Power (NPP) led by the Janatha Vimukthi Peramuna (JVP), a party and an alliance that is growing in stature due to the very fact that many more Sri Lankans view the status quo as being against their own personal interests. 

That such a wide cross-section of the commentariat hopes for bipartisan support for the IMF programme reveals a dangerous obsession with consensus. A broad consensus is not the same as a strong consensus and this is an important distinction which better illuminates the spectre created by the recent vote in Parliament on the IMF question.

On the one hand, there exists a broad consensus that an IMF programme must pave at least part of Sri Lanka’s path to recovery; on the other, there is no strong consensus on what that path should entail. 

A lack of consensus may have bled into the main Opposition party, the Samagi Jana Balawegaya (SJB), which took significant criticism from the commentariat for its absence in Parliament during the vote on the IMF agreement, seen by some as a mere formality. 

The hedge position

There is a fundamental confusion about the strategy adopted by the SJB. On the one hand, the SJB and especially its economic troika have been forthright about the need for reforms, many of which headline the IMF agreement. 

One option was for the SJB to vote ‘yes’ for the IMF agreement while passionately reiterating its calls for stronger social safety nets, a more equitable tax structure, and a less severe adjustment timeline. This would represent continuity with the party’s rhetoric over the last year while assuring the public that it is engaging in good faith with multilateral institutions; it also signals to the institutions themselves that the SJB is able and willing to work with them while having a distinct grasp of how an IMF agreement negotiated by an SJB-led government might differ from that which is on offer. 

Should the party have rejected the IMF agreement with a ‘no’ vote in Parliament? It is an interesting dilemma and one that also reveals the nascent SJB’s on-going identity crisis. The SJB has sought to project a more populist ideology than the United National Party (UNP), much to the chagrin of the Sri Lankan centre-right that generally distrusts anything akin to populism. 

The economic troika of MPs Dr. Harsha de Silva, Eran Wickramaratne, and Kabir Hashim have all attempted to moderate themselves to appeal to pragmatism, as has Leader Sajith Premadasa. Whether it is Premadasa stating that his team would have delivered a better deal or Dr. Harsha de Silva insisting on greater social protections, the SJB represents a hedge position. 

In the case of the IMF vote in Parliament, to vote ‘no’ would have inserted the SJB within a nexus that includes the Freedom People’s Congress (FPC) and the NPP. The FPC has worked hard to create a niche within Sri Lanka’s politics; yet the party consists of personalities with substantial baggage. 

MP Dullas Allahapperuma was closely associated with the Rajapaksa enterprise and had to battle perceptions of being a Sinhala chauvinist due to his dalliances with a very specific type of Sri Lankan flag. Prof. G.L. Peiris is a long-serving establishment politician with decades of connections to multiple power centres. 

It also hosts a number of candidates that were very recently fully-fledged members of the Sri Lanka Podujana Peramuna (SLPP) and it is these ties that bind the FPC to the Rajapaksas and thus makes it hard to imagine there being public buy-in for this particular grouping at this moment.  

The NPP’s rhetoric, though at times bathed in moderation by some of its members, is ultimately cloaked in the ideology of its forefathers and thus represents a maverick option; an option that has gained significant ground since the collapse. Should the SJB have risked its moderate qualifications by voting ‘no’ and joining the FPC and the NPP? 

Time will tell, though one must surmise that being absent, abstaining in essence, was a play-it-safe option that may reap dividends in the future, depending on how much of the electorate still desires moderation, which in itself is dependent on how long it is before this fragile sense of stability begins to tear at the seams. 

Who am I?

Then the opposite dynamic is worth considering. The Parliament can be broadly divided into an anti-Rajapaksa camp and a ‘pro-Rajapaksa’ camp. Whatever his surrogates may say, the President is in the ‘pro-Rajapaksa’ camp; he cannot depend exclusively on their majority and claim otherwise. 

Likewise the SLPP is still very much the party of the Rajapaksas’ and the FPC consists of many Rajapaksa loyalists. Many of the FPC were also major supporters of the ‘Gotabaya Project,’ from its style and template to its manifesto and policy protocols. President Gotabaya Rajapaksa’s manifesto is virtually an internet meme at this point, a reference point for political failure and policy incoherence. 

The FPC is represented by many who had very little to say during a time when there was much that could have been said and done to challenge 2019’s dangerous consensus that brought about the tax cuts and banning of chemical fertiliser. Their silent subordination to the Rajapaksa establishment and the policies that so dramatically destroyed Sri Lanka’s economy and social fabric will count against them.  

From the moment Sajith Premadasa crossed the divide and commenced the ‘SJB Project,’ there was always going to be another moment of reckoning whereby the SJB must reconcile its own existence and face the question: is it a protégé of the UNP or a new evolution of what the UNP used to represent?

At its very inception, the SJB was a shot across the bow to Ranilism, an attempt to reconstruct what the UNP used to be – a party of the people: reasonable, popular, and populist, while anchored by something more than just the pursuit of power through consensus. 

The SJB must reflect a new citizen’s front; and in this regard, all the ingredients – popularity, populism, and pragmatism – that exist within it only require the right alchemy to bring it to boil.  

In this post-Aragalaya period, there is another consensus that is forming, it emphasises a very specific fissure in Sri Lanka’s reform efforts; casting the trade unions as the villain of the piece. It is quite a well-defined and socially-accepted attitude, almost a trope that springs from conflating the need for reform of State-Owned Enterprises (SOEs) with trade unions being obstructionist, connecting neatly with the narrative of politicalisation of recruitment to the State sector and so forth. 

It is almost futile to resist this narrative. The commentary must grasp the fact that trade union action reflects the same consciousness that has driven the surge in popularity of the NPP-JVP. It remains to be seen if the masses of crowds on May Day, social media traffic, and opinion polling translate into votes for the NPP at the next General Election.

What it most definitely translates to is that the JVP is enjoying an extended moment in the political sun due to it seizing a different narrative; one that is better understood in rural Sri Lanka than in the business press. 

This narrative does not imagine worker movements as being obstructionists to reform. First, it recognises that at the heart of worker movements is what Prof. Guy Standing has observed to be a growing social group called the ‘Precariat’ – a class of workers that are constantly insecure about their livelihoods and under constant pressure to find work that pays. 

Second, it views the people of Sri Lanka as being in conflict with the political establishment which, despite their own bravado and the bluster of their surrogates in the media, is still a Government that is metaphorically bunkered-up in a constitutional safe house, sustained by the 2019 majority and protected by the President.  

It is a simple narrative but it holds the most weight. There has never been a reconciliation between the forces that conceived, organised, and implemented the ‘Vistas’ manifesto, those who stayed silent for years until it destroyed the fiscal equation along with Sri Lanka’s credit-worthiness and credibility.

The private sector and various institutions including business chambers and commentators all hailed the Gotabaya Rajapaksa manifesto almost as a revelation. ‘Vistas’ was described by the Ceylon Chamber of Commerce (CCC) as ‘business-friendly, production-oriented, and demonstrative of policy continuity’. 

Falling short

Sri Lanka has always struggled to match its income peers in generating adequate tax revenues. A 2016 World Bank report noted (1) the need for fiscal consolidation through increased revenue and (2) that successive tax structures were generating an imbalanced ratio of direct to indirect taxation. 

The report observed that “the proposed strengthening of indirect taxes while relaxing income taxes seemed to deviate from the announced government policy”. 

The report concluded that Ranil Wickremesinghe’s Budget for 2016 would increase both the deficit and the debt: “Although the Prime Minister announced that the current ratio of indirect-to-direct taxes of 81:19 was expected to change to 60:40 in the medium term, the Budget plans would have led to a ratio of 85:15 for 2016. The Budget proposed to raise the Personal Income Tax (PIT) threshold from Rs. 500,000 to Rs. 2.4 million while unifying the rate at 15%. The new threshold would be about five times the per capita income, and as such it could further erode the tax base of PIT. The changes to Corporate Income Tax (CIT) were also expected to reduce revenue.”  

Thereafter, successive IMF annual reviews cited the exact same set of challenges. The June 2018 review called for “further revenue-based fiscal consolidation”. 

During a subsequent review in May 2019, the IMF stated that the Government of Sri Lanka had fallen short of the Indicative Targets (IT) on revenues but succeeded in improving the primary balance. The “shortfall reflects weaker growth, the delay in implementing the 2018 Budget measures, and an underperformance in trade tax collections due to import duty waivers.” 

In November 2019, the IMF once again reiterates: “Fiscal policy will remain geared towards revenue-based consolidation in 2020 to place the still-elevated public debt on a downward path.”

How did several years of successive reports from multilateral agencies insisting on “revenue-based fiscal consolidation” translate into the 2019 tax cuts? How did the Gotabaya Rajapaksa Election Manifesto and his Government’s 2020 Budget win such wide acceptance amongst the political and intellectual classes? 

The Sri Lankan political class and bureaucracy must acknowledge the hubris of 2019 and consider the failures of the commentariat and of wider society, including institutions from the media to the corporate citizenry.

The consensus that generated the 6.9 million base, that sustained the administration despite very early signs of the adverse impacts of the tax cuts or the chemical fertiliser ban, has objectively proven to be the most dangerous consensus we have ever experienced in Sri Lanka’s history.

Whatever the drama surrounding this Government’s efforts to water-cannon and tear-gas protestors and vilify union leaders, it should not distract from the very clear failures of a political establishment that left the country adrift at sea while they were asleep at the wheel; an authentic, real name-no gimmicks consensus that the public can believe in but also vote for.

(The writer has over a decade of experience in the banking sector after completing a degree in accounting and finance. He has completed a Masters in International Relations and is currently reading for a PhD at the University of Colombo. He is also a freelance presenter, writer, and researcher and can be contacted via email: kusumw@gmail.com and Twitter: @kusumw)