Little headway in cleaning mess

Thursday 9th March, 2023

Sri Lanka’s economic crisis is an orphan; nobody takes responsibility for it, but many are those who claim the paternity of what seems to be a nascent economic recovery process. The SLPP-UNP government is elated at the prospect of being able to unlock the 2.9 billion-dollar IMF bailout soon.

President Ranil Wickremesinghe rushed to Parliament on Tuesday and announced that China had pledged support for Sri Lanka’s debt restructuring, and the IMF bailout would hopefully become a reality towards the end of the current month. Making a special statement in the House, the President had the public believe that the economy was now stabilising with the rupee rallying against the US dollar and other major foreign currencies, and the people’s lot would begin to improve after a few months.

But making little headway in cleaning up the economic mess of its own making cannot be considered an achievement of the government by any stretch of the imagination. In fact, it is the IMF that deserves credit for initiating the process of putting the Sri Lankan economy back on an even keel regardless of its modus operandi, which is in part swingeing to the point of peeving the public.

Not everybody is well-disposed towards the IMF, and with reason, for it has a dubious reputation in many people’s eyes; it is seen in some quarters as a handmaid of the western bloc, whose quest for global dominance has taken on feverish proportions. But the fact remains that the IMF has become a necessary evil for the unfortunate nations that elect crooks and cretins, who ruin their economies, Sri Lanka being a case in point. Any port in a storm, as the saying goes.

We would have been able to avert the current, ripsnorting economic crisis if the Gotabaya Rajapaksa (GR) government had made a policy decision, allowing the Central Bank of Sri Lanka (CBSL) to seek IMF assistance at the first sign of trouble, the way the CBSL did at the height of the country’s war on terror in the late noughties. Instead, the GR regime put the CBSL in a straitjacket at the behest of some of its economic pundits, discouraging it from seeking IMF help, and, worse, it did not heed the warnings of the impending crisis. It pinned all its hopes on China, but help from Beijing was not forthcoming, and the economy went into a tailspin.

What is ailing the Sri Lankan economy is multifactorial. Some of the causative factors have been identified as economic mismanagement, excessive borrowing, waste, corruption, politically-motivated tax cuts, poor relief, handouts and subsidies, and the theft of public money including forex. They have to be eliminated if the economy is to recover fully. But the ongoing efforts to shore up foreign currency reserves are bound to go pear-shaped unless the existing exchange control laws are reformed urgently.

One of the main reasons for the present forex crisis is the deep-sixing of the Exchange Control Act of 1953, in 2017, when the UNP-ledYahapalana government introduced the current Foreign Exchange Act. Minister of Justice Dr. Wijeyadasa Rajapakshe has gone on record as saying that the Sri Lankan exporters repatriate only a fraction of their foreign earnings. CBSL Governor Dr. Nandalal Weerasinghe has also highlighted this fact, and called for remedial action. Dr. Rajapakshe told Parliament last year that Sri Lanka’s export proceeds amounting to USD 53 billion had been parked overseas.

The UNP was instrumental in rendering the time-tested foreign exchange control laws toothless in 2017, enabling racketeers to stash away billions of dollars in off-shore accounts.

The Exchange Control Act of 1953 required exporters to repatriate an equivalent or more of their export earnings via the Sri Lankan banking system, and made non-compliance a criminal offence. But it was made a civil offence in 2017, and, as a result, about 30 foreign exchange racketeers who would otherwise have faced incarceration and the confiscation of their properties got away with their crimes.

The need for action to restore the Exchange Control Act of 1953 cannot be overstated, and President Wickremesinghe ought to undo what the UNP-led government did in 2017. Will the self-righteous Opposition grandees who are all hat and no cattle care to push for bringing back the original exchange control laws to ensure that the country’s export proceeds are repatriated properly? They are duty bound to do so, for most of them were in the Yahapalana government.