Peace for the World

Peace for the World
First democratic leader of Justice the Godfather of the Sri Lankan Tamil Struggle: Honourable Samuel James Veluppillai Chelvanayakam

Tuesday, September 25, 2018

Extra-ordinary times warrant extra-ordinary measures

" Agriculture has the potential to increase the GDP in the short run. At present 60 percent of the agricultural produce is lost due to wastage and attacks by animals. Transport and processing costs should be lowered by the application of new technology and other means to give relief to both the producer and the consumer. For example, the gap between the cost price of the paddy farmer and the buying price of rice of the consumer is too great. Perhaps the traders and processing entrepreneurs may be reaping possibly a super profit"


Jayatilleke de Silva-Tuesday, September 25, 2018

The Sri Lankan Rupee is sliding. It is Rs. 170 to a dollar at the time of writing this column. It may slide further by the time you read it. On January 1, 2018 it was only Rs. 150 to a dollar. That means a 13.3 percent devaluation in the last 8 months. It is apprehensive to speculate on when and at what point it would stabilize.

External causes are mainly responsible for this situation. The trade war initiated by the United States against China, EU, Canada and Mexico has caused the commodities produced by these countries more expensive and US goods relatively cheaper. Besides the United States has imposed sanctions on Iran and Russia and it penalizes even third countries for trading with those countries. Thus, the rule-based international trading system is disturbed. The demand for the dollar has increased causing it to appreciate vis-à-vis other currencies.

In addition, Sri Lanka’s trade deficit has widened on account of the value of imports exceeding that of exports. In 2017 Sri Lanka’s trade deficit reached US $ 9.4 billion. It is expected to be around US $ 10 billion this year. This is despite a slight increase in exports. The volatile situation in the Middle East and sanctions on Iran have caused world oil prices to swell. It is another factor pushing up import costs.

Expatriate workers

Trade deficit is mainly responsible for the weak balance of payments. The decrease in remittances from expatriate workers in the Middle East also contributes to this situation.

In this context it is obvious that our economy is in dire straits. Added to all these woes is the debt burden. Sri Lanka has to spend almost 90 percent of its income to pay foreign debts. Thus, almost the entire surplus product of the country is spent on debt payment and debt servicing. Next year when the grace period of several large loans expires it will increase exponentially.

Whatever benefits we accrue from export orientation are absorbed by the donor countries and agencies and we remain a pauper as before. Without replenishing our external reserves, without increasing domestic production and savings it is difficult to prevent the slide of the Rupee by temporary measures.

The devaluation of the Rupee is accompanied by a meteoric rise in the cost of living where the lower income population will find it difficult to make ends meet. The middle classes would slide down into indebtedness.

This is an unprecedented and an extra-ordinary situation. Unfortunately, its gravity has not being understood by the Government and political leaders.

They are merrily engaged in comic soap operas oblivious to the impending disaster. They are fighting over language and religion when the very physical existence of the poor is threatened with death by starvation, deprivation, want and curable diseases. They are like crabs dancing in the boiling water.

Extra-ordinary times warrant extra-ordinary measures. Sri Lanka should negotiate and attract FDI selectively and invest them in productive industries leaving aside cosmetic and some infrastructure projects for the time being. For example, the Kurunegala - Habarana new railway project could be postponed. Priority should be given to projects to overcome harmful effects of drought and floods and develop food production. Similarly, the destructive proposal to build a leisure zone for foreigners and the local rich and the novae rich by reclaiming a large area from the sea from Colombo to Ratmalana should be abandoned. Much more urgent is to eradicate or reduce alarming malnutrition among children under five years which has increased on a mass scale.

All non-essential imports should be curtailed or heavily taxed. This should include first of all motor vehicles for personal use. The same goes for gold imports. Fruits and vegetables that are imported could be discouraged. As far as possible import substitution industries should be started selectively without considering it a dirty practice as defined in the neoliberal lexicon.

Agriculture has the potential to increase the GDP in the short run. At present 60 percent of the agricultural produce is lost due to wastage and attacks by animals. Transport and processing costs should be lowered by the application of new technology and other means to give relief to both the producer and the consumer. For example, the gap between the cost price of the paddy farmer and the buying price of rice of the consumer is too great. Perhaps the traders and processing entrepreneurs may be reaping possibly a super profit. Improving communications and knowledge among the farmers could help reduce the seasonal gluts and scarcities in the vegetable market. A wide agricultural extension service could help in this matter.

Essential goods

A safety net should be provided to the low-income groups by way of a package of essential goods including, rice, coconuts, dhal, dried fish etc. at a subsidized price under a ration system. Rationing, subsidies etc. are emergency measures to be resorted to in emergencies. Economic planners should find out ways and means of finding the extra money needed by suitable income tax and saving measures.

We often hear of appeals to the public to tighten their belts. Unfortunately, it goes with the rich and the powerful fattening themselves through opulence. There is no equitable distribution of sacrifice. While working people are asked to bear difficulties with existing low salaries, proposals were mooted to increase those of the parliamentarians. While people suffer from deprivation Provincial Councillors decide to use chairs worth more than Rs. 800,000 to cushion their posterior. Cabinet and other Ministers number more than 100 and new ones join them at regular intervals heaping an enormous maintenance expense on the public. Yet often the House is adjourned for want of a quorum.

Extra-ordinary measures do not mean declaring a State of Emergency or mobilizing the armed forces (regular as well as voluntary) for active service. On the other hand, it means mobilizing the masses for the implementation of the extra-ordinary measures.