Gotabaya Churns While Modi Turns

By Ameer Ali –NOVEMBER 22, 2021

Dr. Ameer Ali

After nearly one year of protest by Indian farmers against free market reforms in Indian agriculture, and with 660 deaths in the course of it, mainly due to extreme heat and cold, Prime Minister Narendra Modi has backed down, withdrawn the reforms and apologized to the farming community. This was a political move indeed to win that community’s votes in the most populous Uttar Pradesh state. In contrast, President Gotabaya Rajapaksa is churning the farming community here with his idealistic commitment towards regenerative farming. This commitment is part of his so-called alternative path to economic development, supported by a few sycophants in Viyathmaga and the Central Bank chief.

Unlike India, where the industrial sector could supply enough foreign exchange to overcome food shortages, Sri Lanka with $4.3 billion debt to repay in 2022 and only $2.3 billion foreign exchange in hand at the end of October, has no choice but to face food shortage, and in the extreme case starvation, if the Maha season fails. The farming community’s protest against the blanket ban on chemical fertilizer, will gather its full momentum when the plantation sector also begins to experience falling output. Unlike rice farmers and vegetable and fruit producers, tea and rubber plantations earn the greatest share of the country’s foreign exchange. Over sixty years of export diversification, tea still remains the leading earner of foreign exchange. Given the challenges facing the economy, this is not the time for GR’s untried experiments in food production but for proven remedies.

At least Prime Minister Modi, who started life as a chaiwala and knows how to please customers, President GR is a jawanwala and believes that his commands are sufficient enough to achieve what he desires. Didn’t GR say during one of his circuit-circus that his circulars should be taken as orders by subordinate officers? The idea of wider consultation with experts in respective different fields before taking decisions seems to be anathema to this jawan. His consultation seems to be restricted to his sycophants. This was made clear in the way he handled the pandemic, which once again threatens with a fourth wave in Europe. Similarly, GR’s refusal to back down on the fertilizer issue carries similar tendencies.

On the economic front however, there is growing consensus among former central bankers, independent economists and observers that Rajapaksa regime should swallow its pride and approach IMF for a bail out. Such a bail out succeeded in avoiding a similar crisis in 2015. IMF credit is the cheapest available in the market. Of course, there will be conditions attached to its debt restructuring plan. That would be painful but would help to inject some fiscal discipline in government and that would benefit the economy in the long-term. It was reported that the cabinet had already discussed this option without taking any decision. In spite of opposition within the cabinet, IMF option is unavoidable. It is only a matter of time.

Meanwhile, an obsequious CBSL Governor Nivard Cabraal, an accountant cum politician, whose previous record of CBSL management was not unblemished, is still adamant that IMF would not be approached, because that would hinder the progress of President GR’s so-called alternative development path. One wonders what progress was he thinking about? It had been two years of unmitigated disaster that this alternative path has produced. Given the challenges facing the nation, this is not the time for trials and experiments but for proven remedies.

The budget submitted to the parliament a few days ago, if anything, is a sound reflection of the nation’s economic desperation. The entire political economy needs radical overhaul if the economy to revive. The budget shows no inclination to undertake structural changes to achieve fiscal consolidation and deficit reduction, but instead it is tinkering at the edge of the existing structures by introducing measures such as taxing traffic accidents, leaving the salaries of 1.5 million public servants unchanged and postponing politicians’ pension payments. (Does the country need that many politicians in the parliament and an army of unproductive public servants in the first place?) The budget has no word about increasing direct taxes like tax on wealth, and there is also no plan in the budget to show how the government would tackle the debt issue. The Minister and his CBSL chief seem to be still hoping to rely on loans and currency swaps from friendly countries for salvation, while ignoring the fact that Sri Lanka’s credit rating has been downgraded by international agencies, which means the interest rate on such loans and swaps would be high.

There is also a tendency to put too much reliance on tourism to salvage the sinking ship. With the fourth wave of Covid threatening to shut down international borders once again, tourism would take a long time to revive and operate at its full potential. Likewise, there is over-optimism about the expected financial bonanza from the Colombo Port City. CBSL Governor once advertised CPC as “awesome Sri Lanka” with its futuristic vision and state of the art operations, but what about the awful Sri Lanka that lies outside CPC with an outdated system mired in corruption and incompetence?

Given this scenario and challenges, mass discontent and open confrontation with the regime appears certain. The mass rally in Colombo organized by SJB, despite government attempts to stop it, demonstrates that such a confrontation is gathering momentum. GR may be looking for that confrontation to make his regime even more authoritarian and militaristic. With his championship posture over Buddhism and with his anti-Muslim stance, he is confident of support from the Sangha.

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