Monday Dec 16, 2024
Monday Dec 16, 2024
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When joblessness mounts, under pressure, they can easily be induced to revolt similar to 9 May, by setting fire to former workplaces and vehicles. JVP with affiliated organisations would be behind it, the revolting and burning could go on for months or years, making the economy crash again to an unthinkable level
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The country’s economic crisis erupted in January 2022 with electricity power cuts when thermal power plants ran short of oil. Central Bank former Governor Ajith Nivard Cabraal floated the Rupee on 8 March, gradually climbed to Rs. 380 to a dollar.
Finally Cabraal had to go and Nandalal Weerasinghe was appointed as Central Bank Governor. Also Finance Minister Basil Rajapaksa was replaced by Ali Sabry. The new Minister and Governor wished to seek International Monitory Fund (IMF) assistance for the recovery. When going to IMF was discussed in Parliament, none objected, thus all parties have agreed, there is no other option for the issues.
Visiting IMF
2022 IMF and World Bank Spring Meetings were scheduled in Washington. Our delegation to IMF, was led by Finance Minister Ali Sabry and Central Bank Governor Nandalal Weerasinghe, who were appointed barely a week ago.
The IMF meeting was scheduled for 18-22 April, but discussions started two weeks earlier and had fruitful technical discussions for an IMF-supported program.
The Prime Minister too joined the final discussions. IMF wished a 2% budget surplus by 2025, but PM agreed for 1%, still would be challenging. IMF funding would be only for a stable government and a set of proposals to overcome the crisis be agreed upon, may take a few months.
World Bank
The Foreign Ministry was expecting large sums from World Bank. But World Bank Country Director reiterated, “We wish to restore economic stability and help reverse policies of the past. Until an adequate macroeconomic policy framework is in place, the World Bank will not offer financing to Sri Lanka.”
Crisis, people’s reactions
The financial crisis with almost 80% devaluation of Rupee consumers faced higher food prices, shortages of petrol, diesel, cooking gas also power-cuts. In addition electricity rates are expected to go up.
PM’s response
Meanwhile, newly appointed Prime Minister (PM) Ranil Wickremesinghe received enhanced assistance from India for oil and gas, resulting in shorter power-cut hours, with rain-supported higher water levels in hydro-power reservoirs.
But now the PM seems to be more interested in the 21st Amendment to the Constitution expected to create a more stable government, a condition IMF demanded.
Government reimposed taxes that were reduced during the Gotabaya era back to original levels. These taxes were levied by the Yahapalanaya government in agreement with IMF.
The institutions coming under each Minister was gazetted. The next step would be the rehabilitation of State organisations as agreed in the IMF Report. The Ministers currently may not be aware of organisations in the agreement, but will be forced to implement.
Renewable energy
The fuel imports could be reduced heavily with development of renewable energy (RE) projects. Meanwhile RE suppliers complain they were not paid by CEB for electricity supplied for over eight months.
Meanwhile, the Sri Lanka Electricity Act was amended by Parliament removing clauses allowing power generation contracts to be awarded without competitive tendering. CEB engineers made use of the clause to obstruct establishing new power plants. No power plant contracts were issued by CEB since January 2018. Meanwhile, the Auditor General’s report highlighted 1,300 prospective investors capable of producing 4,000 MW of power.
If these projects are allowed, it will require massive funding; do our banks have sufficient capacity to fund the projects? Our banks’ finances are at dangerously low levels.
Recently, the Government signed an MoU with Indian Adani group offering two wind and solar plants 500 MW capacity each at 7.55 US cents per kWh. But the offer brought protests from local producers who claim they are only paid Rupee equivalent of US 5 cents.
An amendment was brought to the Act by opposition to limit the contracts to below 10 MW, but was defeated, which would have obstructed the contract award to Adani. But the Government could have modified the award as Government to Government and Adani becoming Indian government selection.
Already US Aid and Germany have promised funding for import of solar panels. If solar panels are installed in large building roofs as warehouses soon, generating 1,000 MW within nine months would be possible, reducing power shortage during next March/April. If awaiting investors are allowed to proceed immediately, the country could become self-sufficient in electricity within three to four years, eliminating expenditure on oil and coal, easing foreign exchange issues. Self-sufficiency in RE electricity will result in lowest cost power in the world in US Dollars, attracting foreign investors.
Excess employees in Government
The unresolved problem remains the excessive employees in State, numbering 1.5 million in State sector and further 400,000 in State corporations. In 2003 when Ranil Wickremesinghe was the Prime Minister, he reduced employee numbers from 800,000 to 650,000. It would be interesting to see Ranil’s solution to current numbers.
Moving into Sinhala
When the country got freedom from the British, it had a substantial foreign exchange balance, but moving over to Sinhala medium administration and education by S.W.R.D. Bandaranaike in 1956 created the mess. His proposal was happily accepted by the Sinhala masses and the Buddhist clergy. But education crashed and educated Tamils left the country.
Meanwhile university arts faculties were converted into Sinhala medium, teaching mostly Sinhala, Pali, Sanskrit and history, which were disregarded by private sector.
JVP insurrection 1971
On 5 April 1971 JVP (Janatha Vimukthi Peramuna) raising a force of around 10,000 members, conducted an armed insurrection which continued until June. They wished to capture the country’s power and administration by force. The insurgents held towns and rural areas for several weeks, but were recaptured by the armed forces. Large numbers of JVP insurgents were killed in action and thousands captured, held in camps for years under rehabilitation; former President Maithripala Sirisena was a detainee.
JVP originated in the Peradeniya University, when Sinhala medium graduates were jobless and unable to find employment with no solution in sight.
Black July 1983
J.R. Jayewardene in 1977 opened the economy, implemented the Mahaveli development project with help from the West, but the program bypassed the north and east occupied by the Tamils. During the previous Sirimavo Bandaranaike period, the north produced the country’s onions and chilli requirement among others. JRJ’s open economic policies completely devastated agriculture in the north.
The depressed Tamils resulted in the LTTE, ambushed and caused death of 13 SL Army soldiers in July 1983. Southerners reacted violently, searching and killing Tamils in the south. JRJ failed to take prompt action to control violence. It was claimed that the death toll was around 3,000; also, 8,000 homes and 5,000 shops were destroyed. The world reacted against Sri Lanka and boycotted the country until late 1990s when Chandrika Bandaranaike settled the issue after discussions.
JVP insurrection 1987-1989
JVP’s second revolt was a low-intensity conflict from April 1987 till December 1989. The insurgents resorted to assassinations, raids, and attacks on military and civilian targets, killing some politicians and also civilians. Again, the government forces ended the revolt.
War with LTTE
The 30-year war with LTTE ended in 2007, caused much harm to the country. The war was basically due to neglect of Tamils in the north and east; they wished for a separately administrated region.
Neglect of education
The country’s insurrections and violence since 1971 were due to the lack of employment opportunities, especially to young and Arts graduates. A result of conversion of education into Sinhala from English. Meanwhile Singapore with Malay, Chinese and Tamil populace used English and results are visible.
Politicians providing jobs
Increasing number of State corporations provided opportunities to politicians to offer employment to their supporters, resulting in almost all institutions being overstaffed and running at a loss, burdening the Treasury. Governments employ jobless graduates, with Gotabaya adding 60,000.
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Garment sector
The country has 1.5 million Samurdhi recipients but most are unsuitable. The payments prevented young girls moving towards available employment, especially in the garment sector.
A senior manager in the garment sector disclosed they could easily double the garment exports and the demand exists. The issue is absence of workers. If Samurdhi is awarded only to really needy, the girls could get employed in the garment sector, especially when factories offer transport and meals.
Aragalaya or Gota-Go-Gama
The Aragalaya or Gota-Go-Gama started two months ago by few individuals, when people faced oil, gas and electricity shortages. The movement was taken over by JVP affiliated groups. After Myna-Go-Gama and Gota-Go-Gama were attacked by Mahinda Rajapaksa support groups, JVP leaders visited the location and were welcomed. But when Sajith Premadasa visited, he was attacked and had to run for his life.
When MR supporters made plans to attack Myna-Go-Gama and Gota-Go-Gama, JVP agents informed their higher-ups, who made counter-plans in advance. The result was the busses that transported MR supporters to the meeting, the houses and properties of MPs were set on fire, almost simultaneously.
Youth unemployment after economic recovery
With the support of IMF and friendly countries, Sri Lanka could recover from shortages that led to multiple queues, but it will take time. Rehabilitation of over 40 State organisations, named in the IMF report will require discontinuation of a large number of excessive employees.
With the promise made to IMF to achieve a current account surplus of 1% by 2025, employing 1.9 million, would be impossible. Stopping more government jobs, discontinuing many will result in a stressful situation, and will create a similar background prior to the JVP insurrection in 1971.
Possibility of another revolution
Today with queues for petrol, gas and kerosene, people are stressed, and could easily be directed towards violence. When joblessness mounts, under pressure, they can easily be induced to revolt similar to 9 May, by setting fire to former workplaces and vehicles.
JVP with affiliated organisations would be behind it, the revolting and burning could go on for months or years, making the economy crash again to an unthinkable level.
Avoiding the catastrophe
The current queues for petrol, gas and power-cuts could be stopped if the IMF funds come early, and help from World Bank and friendly nations will follow.
When the queues for oil, gas, power-cuts and protests end, tourist arrivals would increase. Large numbers wish for employment abroad. With availability of foreign exchange, black market will end and employees abroad will send money directly.
If the Government could ensure delivery of chemical fertiliser, pesticides and herbicides by early September for Maha cultivation, paddy farmers will be relieved ending their protests and rice shortage would end by next February with the country becoming self-sufficient in rice. But the Government needs to look beyond India for fertiliser supplies.
Moving over to Renewable Energy would result in self-sufficiency in electricity, much cheaper, eliminating import of oil and coal, saving foreign currency to pay back the loans. But RE would be three to four years away.
Crashing of small industries
During the Sirimavo Bandaranaike era in 1972 to 1974 world oil surged from $ 3 to nearly $ 12 per barrel, causing severe restrictions to be imposed on imports. The positive side was, a large number of small investors commenced production of goods and services needed by the masses. This issue affected all non-oil producing countries including India; today their industries and services lead the world in some areas.
However, with the opening of the economy during JRJ period most small investors crashed. In 1983 when the world boycotted Sri Lanka the country’s politicians failed to prioritise improving local production.
After nearly 50 years the country is back to square one; we need to go back to Sirimavo Bandaranaike policies.
Utilising local rock phosphate
Eppawala rock phosphate was discovered in the 1960s with rich phosphorus content of 28% to 42% of P2O5. But cannot be used directly as an alternative for imported Triple Super Phosphate due to poor water solubility. Thus the local phosphate needs to be converted to a usable stage with imported technology. Will our politicians agree?
Graphite and graphene
Sri Lanka produces the purest graphite in the world, mined over hundreds of years. Kahatagaha and Bogala mines were the leading producers of high purity natural vein graphite, with over 99% fully crystallised carbon. The mines were nationalised in the early 1960s. But with failures in running, they had to be returned to former owners.
Nearly a decade ago, the owner of a mine wished to produce graphene with technical assistance from a Chinese investor. Graphene is simply one atomic layer of graphite, a layer of bonded carbon atoms arranged in a hexagonal or honeycomb lattice, making it extraordinarily light and strong. A sheet of one square metre of graphene weighing 0.77 milligrams. An efficient conductor of heat and electricity, strength 200 times than steel, used in high technology manufacture including solar panels and command a very high price.
When the owner sought government approval, a very high person in the Cabinet too wished to be involved. The project was abandoned.
Moving towards IT education
When most school and university students are concerned on future employment prospects, Information Technology offers new opportunities. A sample of opportunities in IT field is shown in Naukri.com, India’s No. 1 Job Portal which claims over 300,000 vacancies in the IT sector, showing the huge employment opportunities in the Indian IT sector.
In Sri Lanka too the situation is similar, but to take advantage, our schoolchildren and university students need English and IT.
School education
To enable moving over to IT, the country needs an education system of international standards with English medium in schools and universities. The country needs to move away from the current emphasis on Sinhala, Buddhism, history and environment.
To achieve same higher emphasis is needed on English, mathematics, information technology and writing skills which are currently neglected. Our teachers need be converted to English medium, possible with a six-month English intensive course and lecturers obtained with Indian assistance.
University education
Arts students in universities fear for their future. All university courses need to undergo basic changes, with all courses oriented towards employment and courses as Sinhala, history, Pali and Sanskrit be discontinued. Universities need to be converted into English stream with English, IT, accountancy or business administration. If those studying Pali and Sanskrit refuse to change, they should be transferred to two existing Buddhist universities.
Another revolt from JVP
Economic recovery with IMF, also achieving 1% budget surplus by 2025 requires massive policy changes and reduction of Government expenditure. Stopping most constructions and impending projects will affect construction workers. Low workload to sub-contractors will reduce production in quarries and reduce staff all around.
The Government will be forced to reduce employee numbers and convert State corporations to at least break-even level, failure will mean closing down or privatisation. These actions will result in large numbers losing their jobs, but how could their families survive?
Today, long queues for petrol, diesel, kerosene and gas at higher prices, also with electricity power cuts and high food prices, have made the public highly stressed. TV shows queues, multiple fights, blocking roads everyday. Meanwhile, the public’s respect for police officers has disappeared.
The reductions of employee numbers in Government, also in the private sector would result in massive calamities. When large numbers are discontinued from an organisation, they will resort to protests. JVP is watching the situation carefully; they are certain to capitalise on the situation and will encourage burning buildings, vehicles and killings. Sabotaging will spread creating huge calamities; a small sample was shown on 9 May. The only unknown is whether JVP’s actions would be sudden or spread over a period of time.
Meanwhile, JVP leaders have presented a program to develop the country and are talking of establishing a new government. What do these mean?
Today, long queues for petrol, diesel, kerosene and gas at higher prices, also with electricity power cuts and high food prices, have made the public highly stressed. TV shows queues, multiple fights, blocking roads everyday. Meanwhile, the public’s respect for police officers has disappeared.