An Exit Strategy From The Crisis: Agenda For Shared Revival Of Sri Lanka

By Krishan Deheragoda –APRIL 30, 2022

Prof. Krishan Deheragoda

Introduction

Politicization of the entire state machinery including the judiciary and the Central Bank followed. Systemic failures in the state governance and socio-economic management coupled with the collapse of the law and order had pushed the 21 million people of Sri Lanka to unprecedented levels of sufferings. The inability of the government to ensure the uninterrupted supply of essential public goods at affordable prices due to mismanagement of the financial reserves and the implications of short-sighted policies, has led the country to a grinding halt.

Crux Of The Crisis

Foreign Exchange Crisis: The annual total foreign exchange earnings of Sri Lanka is about US$ 15bn. as against total Import expenditure of about US$ 20bn, resulting a negative trade balance of US$ 5bn. The total foreign debt is about US$ 51.7bn. (as of first quarter of 2022). During this year alone, we are obligated to make about US$ 4bn. loan installments including US$ 1bn. International Sovereign Bonds – maturing in next July, whereas the total foreign reserves stood at paltry US$ 1.93bn. at the end of March this year. This is the crux of the whole issue of present-day Dollar Crisis. Even in 2021, where the country was in deep socio-economic turmoil due to restricted inflow of foreign income, the imports cost was US$ 22bn. as against US$ 11bn. export income.

Daily Income Expenditure Deficit: The daily income of the country is about Rs. 5bn., against a Rs. 7bn. expenditure (Exchange Rate against the US Dollar was $1: Rs.322 as of April 9th, 2022). Further, huge tax benefits granted to facilitate its cronies and changed arbitrarily the existed tax regime immediately after came into the office by this government. This has resulted a loss of about 25% of annual income to the state coffers and exempted about 35% from the regular Tax Net.

 Hence, the incompetence of the government to fix the foreign trade deficit of US$ 5bn. and day to day income-expenditure deficit of Rs. 2bn. has been the root cause of the current socio-economic and political crisis, and to falling into a debt-tarp and losing its credibility and the legitimacy both locally and internationally.

Blunders, Scams and Policy Lurches: The widespread corruption, waste of public funds, foreign trade scams by the cronies and compulsion to repay foreign loan instalments have paved the way for current crisis. Arrogant rejection of expert opinions by the authorities led the country into multiple crisis in almost every field, bringing indefinable suffering to the people.

The Covid -19 Pandemic induced negative impacts made the things more difficult for the country due to its management blunders and corruptions. As a result, Sri Lanka was ranked at No. 4th place among the worst-performing countries in the world during the Pandemic. Its adverse impact on the tourism, exporting industries as well as the foreign remittances was very harsh for the local economy.

Moreover, the ridiculous, non-scientific, and imprudent policy interventions by the government to stop usage of agrochemicals and fertilizer in all sectors of agriculture including the Tea Industry in the guise of promoting organic agriculture had led to a catastrophic consequence on the production. The incomes of the Tea sector drastically reduced. A country which is almost self-sufficient in rice production for decades compelled to feed the market with imported rice due to the loss of paddy production by over 50% in the last season. This situation has created a colossal threat to the livelihoods of millions of farmer families and the food security of the country. The scams involved in importing bio-fertilizer from India and China enabled the politicians and their cronies to siphoned-off billions of rupees, wasting scares foreign exchange for nothing at a time of a crisis.

Down Grading of International Ratings: Instead of addressing the core issues, the government’s key strategy was to release trillions of printed Rupees to the market while artificially holding on the Dollar Rate. All these have further attributed escalation of inflation in parallel to the de-valuation of Rupee against foreign currencies in the face of continuous downgrading of financial rating of Sri Lanka by the international agencies. Sri Lanka almost reached to the level of bankruptcy and there is an imminent danger for the continued existence of local banking system, mainly due to lack of foreign currency reserves, as a result of faulty policy advocacy of the Central Bank.

Under these circumstances incumbent government of Sri Lanka has totally lost its CREDIBILITY as well as the LEGITIMACY both locally and internationally. Unless President and his Government resign enabling to create an interim way-out strategy as proposed herein; dropping Sri Lanka from the position of a “Failed State” to a “Bankrupt State” is inevitable, within next 2 to 3 months.

Apolitical Rising Of People

The entire citizenry of the country took on to the streets irrespective of cast and their race, religion, and creed, representing all the social strata sans any difference to voice against the incumbent president and his government. The climax of this apolitical movement of the Sri Lankans was seen on the 31 March 2022, where thousands of normal unorganized citizens protested near the residence of the president at Mirihana. It was harshly suppressed but erupted as a collective agitation of millions of apolitical masses all over the country with its epicenter at the Galle Face Green. Hence, it is justifiable to name this people upsurge as “March 31st Movement “, as it is the day it was really triggered-off into a national movement.

Volatile Political Scenario

The existing political situation of the country is becoming extremely volatile and reaching at an open-ended crossroads. In the eyes of the general public, the credibility of political parties and their 225 members representing the parliament is becoming obsolete. Because it seems that they do not have a tangible agenda in hand to pursue in an eventuality where the government is suddenly collapsed. Whether they have the capacity to grasp the message of the agitating masses who are on the streets at this moment is also doubtful. These circumstances may effortlessly lead to an anarchic situation within the country and perhaps would pave the way for a “Coup d’état” by the Military, sometimes with the blessings of some power-hungry politicians, which would be the worst-case scenario for Sri Lanka.

Need For A System Change

 It is the current system that matters. Rulers can come and go but, unless the system is replaced, nothing will change for the betterment of the country. Hence, it needs to identify a way-out strategy to address the prevailing deficits in democratic and responsive governance through adopting a radical but amicable systemic change by all the 225-parliamentarians. In this context, a time bound participatory approach is necessary to salvage the country from the current turmoil situation. All in all, the existing socio-political situation has created a unique opportunity to make “A PARADIGM SHIFT THROUGH A COMPLETE SYSTEMIC CHANGE” either by adopting a New Constitution or by adequately amending it to build a Sri Lankan Nation with the blessings of all the citizens. However, it is unlikely to happen, unless there is a conscious effort by the 225-parlimentarians, together.

Characteristics Of The Multifaceted Crisis

 The current multifaceted crisis of Sri Lanka revolves around four cardinal issues:

• Lack of liquid foreign currency.
• Lack of knowledge and the management skills with the incumbent government to Understand and deal with the critical issues.
• Loss of credibility of the president and the government,
• Lack of public confidence and belief in the power-hungry mainstream political parties in the parliament.

Objective

The key Objective of this proposal is to offer an amicable “Timebound Exit Strategy” to come out collectively from the current political turmoil within the framework of existing constitutional construct, while preventing the country from falling into an open-ended “anarchic situation”.

Crisis Management Solutions

 Political Actions: Whereas the 225-Parliamentarians shall Agree to;

• Adopt the “Exit Strategy from the Crisis” by the 225-parliamentarians to form a consensus driven time-bound interim government to overcome the situation.
• Appoint a New President by the Parliament.
• Appoint a New Prime Minister from among the incumbent opposition MPs by the Parliament.
• Establish a Leadership Council consisting of political party leaders representing in Parliament with a view to provide advice, guidance, and policy directions to the Prime Minister.
• Commit all political parties in the Parliament to create 20 National List MP slots by way of removing such incumbent MPs, enabling new persons from outside (professionals recommended by the Leadership Council or External Advisory Council or both) to enter the Parliament.
• Appoint a 20-member Cabinet of Ministers consisted mainly of external apolitical professionals coming in through the National Lists of the political parties of the legislature, including some few eligible elected parliamentarians with highest professional integrity, integrity, if deemed necessary.
• Establish an External Advisory Council consisting of professionals and experts with proven track record, and professional representatives from the “March 31st Movement” with a view to provide advice, guidance, and policy direction inputs to the Leadership Council and to the Ministries.
• Provision of urgent assistance package to the needy segments of our population as an interim timebound arrangement to bring relief to the grieving masses.
• Repeal the 20-A amendment to the Constitution and reinstate the 19th as appropriate by way of enacting a 21st
• Act to abolish the Executive Presidential system and to restore the powers of powers of the Parliament and if necessary to introduce a New Constitution.
• Enable Independent Commissions and Establish the National Planning Commission.
• Implement strict and effective checks and balances in respect of every sector through Parliament and other Institutions upon receipt of recommendations from the External Advisory Council.

Administrative Actions 

1. Dissolve the Director Boards of the Badly Performing and Lossmaking Institutions such as Ceylon Electricity Board (CEB), Petroleum Corporation, “Litro Gas” Company, CWE (Sathosa), Fertilizer Corporation, Pharmaceutical Corporation, Lotteries Board, Sri Lankan Airlines, Airport Aviation Authority, CTB, Bureau of Sri Lanka Standards, Public utilities Commission, and other relevant critical institutions, all Public Corporations, Statutory Institutions and State-Owned Companies managed by political appointees including the “Selendiva” Company (especially created in 2020 for selling prime National Assets to Foreigners and Cronies of the Government) that are responsible for the present predicament, mismanagement, corruption, and misappropriation of funds, with immediate effect.

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