The internal circuitry of the Government’s decision-making process was laid bare for the world to see last week when the National Operations Centre for the Prevention of Covid-19 Outbreak (NOCPCO) overruled a decision of the Finance Minister who also happens to be the country’s Prime Minister. The matter in question was the approval of online sales of liquor. In a classic bureaucratic manoeuvre akin to a robust game of rugby, it was the Department of Excise that first mooted the idea of permitting online sale of liquor based on what it called “requests” from various quarters.
Having taken cognisance of the matter and recommending online sales, they passed the ball on to the Finance Minister who, according to the statute books, is the designated authority in approving such a recommendation. The Finance Ministry then proceeded to issue its approval. But epitomising the confusion that seems to pervade most government decisions these days, the Prime Minister’s decision was shot down by the Covid Task Force. The underlying message was that decisions made by statutory authorities or even the top most rungs of government could be overruled on the whims of a presidential task force, of which there are many these days.
This episode came on the back of the controversial fuel price hike where again it was the Finance Ministry that really should have been in the eye of the storm even though it was the Energy Minister who was compelled to take the flak. Here, for the first time, in the open at least, the public witnessed a phenomenon usually associated with the Opposition – infighting – with the General Secretary of the ruling alliance calling on the Energy Minister, under whose purview the Ceylon Petroleum Corporation operates, to resign over the fuel price hike. Many are the theories that abound on how an insignificant party secretary could have the gumption to order a powerful minister to resign, pointing to backstage powerplays.
The under-fire Minister lost no time in hitting back, pointing out that it was the collective decision of a cabinet sub-committee of which both the President and Prime Minister were members. This was followed by a statement from the President no less, standing by the decision to raise prices, insisting that the price hike was in the interest of the public. How that conclusion was arrived at is unclear, as the price hike pushed the average citizen from the frying pan into the fire. The last we heard of the matter was also from another minister, who hinted that the price hike was likely to be reviewed in the coming days. Important decisions being announced and then revoked is becoming somewhat of a joke, leading one to question as to whom exactly is calling the shots and whether too many cooks are spoiling the soup.
The Government’s operational procedure these days seems to be one step forward and two steps back, pointing to systemic confusion that seems to have set in at the highest levels. At a time when the Government is valiantly attempting to portray itself in a professional light, ready to do business with the world, these unnecessary sideshows have undermined those efforts, and in the process, made life harder for itself.
The backlash on fuel price revision was to be anticipated given the circumstances in which the move was made with the pandemic-battered people struggling to make ends meet. That the Government could be so insensitive to the issues faced by ordinary folk has underlined its disconnect with the masses in the recent past, primarily owing to a soaring cost of living on the one hand and its obsession with grandiose projects at tax payers’ cost on the other.
That the economy is at a crossroads is now a foregone conclusion. Just a cursory glance at the numbers will confirm that. We now have a situation where total foreign reserves have dwindled to just over $ 4 billion, adequate for three months of imports, while foreign debt repayments in the year ahead are almost double that amount. The Energy Minister is now on record admitting that the Treasury is finding it difficult to meet fuel import bills and has pleaded with the public to use fuel sparingly, reminiscent of the Sirimavo Bandaranaike era of the 70s.
Resorting to the fallback method of borrowing to pay back is becoming increasingly difficult with debt-to-GDP running at over 100% and rating agencies reinstating sovereign status to junk. It is clear that the main reason for the fertiliser import ban, which is causing havoc in the agriculture sector, from consumption crops to export crops, and other import restrictions, is primarily the forex crisis.
The economic crisis has been further exacerbated by tax cuts that have deprived the Treasury of nearly one-third of its revenue. This counterproductive tax policy coupled with heavy taxation of consumption goods including fuel, and pandemic-induced mobility restrictions have resulted in widening income inequality while raising unemployment to its highest level in a decade. To put this in perspective, the national poverty level has shot up by 2.5% in one year, from 9.25% in 2019 to 11.7% in 2020, with the worst yet to come. The lopsided taxation policy adopted by successive governments further highlights the fact that 20% of the richest in the country enjoy 50% of household income while on the other extreme, 20% of the poorest enjoy just 5% of household income, according to a World Bank study.
Shrinking revenue streams as a result of the pandemic will only add to the problems. The ban on liquor sales is costing the Government over Rs. 1.5 billion a month. Foreign remittances are on the decline while export revenue is barely hitting targets with tourism still a long way from any resemblance of normalcy. Given the financial strangulation, the quickest way to fill up the coffers would be to jack up fuel prices, which of course comes with the inevitable political fallout and a rising wave of dissent.
The Government’s antidote to quell the dissent has been to focus on the fuel formula of the Yahapalana regime, maintaining that had the formula been in place, the current prices would be much higher. But it seems nothing is going right for the Government these days. It now appears that if the fuel formula had in fact been applied today, the price of 92 octane petrol would be around Rs. 140 a litre. With that misfiring, plan B, it seems, is to create a split in the Opposition. The success of that endeavour is yet to be seen.
Given the dire state of the economy, the Government should reconsider its game plan with the public. It should instead focus less on the diversionary drama and focus more on getting the people on board to brace for the hardship that lies ahead, in return for better times in the mid to long term. It remains to be seen whether the crisis at hand will be the watershed that compels the leaders of this country to be upfront with the public, something that has eluded the nation for 70-odd years.
Should such an outcome come about, it would have to be attributed to the positive aspect of the pandemic, where our leaders, however unpleasant it may be, were compelled by circumstances to get used to the idea of telling people the truth. Therefore, the Energy Minister’s public confession last week on the actual state of the economy is a step in the right direction. The sooner the rest follow suit, better the chances of avoiding an administrative implosion. Until such time, confusion will continue to be the order of the day.