Tackling Sri Lanka’s weakest ability

Everyone seems to hide behind an IMF bailout without understanding what it means and how long it takes. The IMF has asked for a plan on debt sustainability and that has been Sri Lanka’s weakest ability. The ability to plan 

A month of protests and all we know for certain is that none of the current politicians are interested in the country but how to maintain or enhance their status quo. Motions that they knew very well would fail. Pretentious neutrality was just window dressing exercises.

So far, no party has proposed to resign the National List MPs and replace them with a set of professionals to form a new cabinet. The Government has no majority, no cabinet, and no public support. We deserve a set of true professionals to form a cabinet that can really navigate the worst challenge we have faced as a nation. The President is failing even more with total lack of leadership and understanding. His brother the PM is just delusional.

It should not and would not be the same set of people who led us to the current crisis.

Everyone seems to hide behind an IMF bailout without understanding what it means and how long it takes. The IMF has asked for a plan on debt sustainability and that has been Sri Lanka’s weakest ability. The ability to plan. Debt restructuring does not mean anything if we still can’t pay it. To pay, we need to increase our national income and reduce the costs.

Tracking down and bringing back the stolen money is not really a strategy. That would be great if it happens but that’s wishful thinking. On the contrary, constitutional reforms as BASL has proposed are not going to bring in dollar inflows but will certainly create an enabling environment for a better future. 

Increasing income equals increasing taxes and increasing the economic output. We can’t increase the economic output in a hurry other than through tourism as we don’t have money to invest and FDIs will shun away under current circumstances. This means the only option for the time being is to increase taxes, even though our disposable income is going to diminish even more.

Our biggest costs are subsidies, a bloated public sector and loss-making SOEs. For example, on the subsidies, a litre of Petrol averages about $ 1.2 in the USA right now. This means, it’s about Rs. 450. Even after price increases, we are still at around Rs. 250. This is just not sustainable. We need to take out these subsidies, reduce the public sector at least by 50%, sell or close the SOEs. The IMF will come then.

However, this means hyperinflation, job losses, etc. in the interim. There’s no hiding from reality anymore and we need to plan for this and communicate this to our people first and to the international community. It’s painful. But it’ll pass. 

In the longer term, a good plan will bring in investments and will expand the economic output as well as create decent and productive jobs. The savings can be redistributed to enhance our education system and upskill our people so that they can get better jobs anywhere in the world. 

The interim management of cash flow in the immediate aftermath of an IMF facility is the most important as we must minimise the impact on our people. Sale of SOEs such as SLT and Insurance that are profit-making is the fastest and the best option along with the savings on loss-making SOEs. 

There’s 3 million Sri Lankan diaspora who are more than willing to help the country if a transparent and accountable system was installed for their hard-earned dollars. Just a $ 1,000 remittance through the banking channels will create an inflow of $ 3 billion. This is very possible. 

Mr. President, your and your clan’s resignation with a professional cabinet in place will enable this inflow from the diaspora and reinstall the confidence of the people to the State’s capability to govern. This is the defibrillator shock we need for this nation in a cardiac arrest. The rehabilitation as above can then happen along with the constitutional changes to ensure we don’t go there again.

 

(The writer is the Founder of Santani Resorts and Former Lead Consultant to the Government of Malaysia on Economic Transformation.)