Obviously a presidential election is not possible till 2024. Already several hopefuls including Basil Rajapakse, Sajith Premadasa and Anura Kumara Dissanayake are getting ready for 2024. Businessman Damika Perera an outsider is doing his own thing by offering on line education free to build the next generation of entrepreneurs. He has also suggested solutions to the USD crisis. Unlike the top two politicians in the running , Anura is a local University Graduate and understands clearly Lanka’s predicament. He has capitalized fully to build his base . The youth clearly resonates with his political rhetoric Unfortunately, they are all forgetting that to get 2024, Sri Lanka has to weather an economic tsunami . The way we are going as a country, we are steadily getting buried in more and more debt and a lack of foreign income to survive the next 6 months.
The way out for the government has been. Fixing the LKR to USD at 203, when the black market is LKR 255, curtailing imports by stopping the opening of letters of credit, buying out the ISBs and asking local banks to reinvest in the Bonds. Taking past profits by way of a tax from profitable companies, will affect the cash flows of good companies . Generally, this is a total lack of proper direction. The government is asking companies to attract FDI . Who will invest if they cannot remit their dividends back to their home country . All big multinationals operators have not remitted their dividends since 2020. The Capital markets are not attracting foreign investments for two reasons. Loss of their investment value, and cannot get their money out. Therefore that opportunity has largely dried up. The government based on public feedback has lost the confidence of the public, given its inability to manage the economy . People are liberally venting their frustrations in social media, given that food inflation is over 25%.
The conduct of certain ministers have made it worse. They do not demonstrate any type of confidence of their capability . The biggest disappointment was Minister Basil Rajapakse. So much was expected of him. He has demonstrated that he does not have the knowledge or the experience to get Sri Lanka out of this economic crisis. He is certainly a good grassroots politician. He should focus on that for now snd leave the economy to someone competent who can win the confidence of the creditors. The classic example is what the young chancellor the exchequer Rishi Sunak has done for the UK economy ? Basil’s Rajapakse credentials have lost its currency, given the mammoth crisis we are facing. If the government does not watch out they will very soon preside over a bankrupt srilanka causing untold misery to the 6.9 million people who voted for vistas of prosperity.
Writing on the wall
For a start look at the trade deficit? Our trade deficit is USD 1089 million in January of 2022 from USD 562 million a year ago. Imports have surged 46.8 percent. Why? Where are the import controls. Companies are opening LCs on supplier credit. When those lines expire, will banks have the USD to honour these LCs. If the government continues to mop up the USD to import oil, they will run out of USD . Why are we allowing the import of non essential products ? Ralph Lauren Clothing , Boss Clothing, foreign cheese , ice creams when we are short of medical drugs and fertilizer ? Who is presiding over these stupid decisions? The current economic crisis is largely man made, as pointed out by respected ex Central Banker Dr W Wijewardana . According to Dr Wijewardana, “ the government made serious policy errors when it announced an unsolicited, attractive tax concession to income taxpayers, the estimated revenue loss was around Rs. 650 billion, and the Government went to the banking sector for financing the budget. The consequence of this extraordinary money growth was the building of inflationary pressure in the domestic economy, on one side, and depletion of foreign reserves putting pressure on the rupee to depreciate in the market”.
So whilst Covid 19 severally affected the tourism sector USD flows. The shortsighted policies of Dr PB Jayasundara and his team has pushed the country down this precipice . The government is clearly demonstrating that it lacks the depth to manage this huge crisis. We have already hit the rim and the rim will soon wear off the way we are going. The rich 1% of the population and the politicians have to make sacrifices to get us of this crisis. Obviously given the sentiment of the public the government would be scared stiff to hold any type of election. So at least then get an all party effort before it is too late for Sri Lanka . 2022 will be a year of reckoning for Sri Lanka. The country needs a full reset and that will not come from the current set of representatives, who are making an absolute mockery out of this economic crisis. We are currently a Zimbabwe in the making. Unless we quickly up our capability, to handle the crisis.
Adolf
