The ‘Economics Team’ must change

Sri Lanka’s current economic woes, which have driven many millions into poverty with the rapid devaluing of the currency, is without a doubt a crisis created through incompetence and mismanagement. A quick glance at regional economies, which were also affected by global events such as the COVID-19 pandemic and the war in Ukraine, have fared very differently. 

In the rest of South Asia, official government reserves have increased while Sri Lanka has reached a point of bankruptcy. This was a situation that could have been avoided if those entrusted with handling the economy had the necessary competence to do so. 

Having said that, these individuals had a duty of care towards the public to handle the economy as a reasonably competent person would do. Failing to do so amounts to negligence at best and criminal wrongdoing in case there were elements of corruption, and conflicting vested interests. Those responsible for this calamity should be held accountable or in the very least they should be removed from positions of authority in order to prevent them from doing further harm to the country.

There is no doubt that ultimate responsibility for Sri Lanka’s current predicament lies with President Gotabaya Rajapaksa. This position of responsibility has been cemented through the enactment of the 20th amendment to the Constitution which eroded even the minuscule checks and balances that were placed on executive power. However, as Colvin R. De Silva observed in 1978 at the time of the enactment of a constitution with a less powerful executive presidency, “an incumbent President will in practice be irremovable. The procedure provided for removal of a President by Parliament is so cumbrous and prolix that one cannot see it ever being resorted to in respect of intentional violation of the Constitution, treason, bribery, misconduct, or corruption.”

Despite the increasing unpopularity of the president, his removal from office remains a bridge too far within the constitution. That is the reality on the ground. However, the rest of the ‘team’ that delivered this economic catastrophe should at least be changed immediately. Other than former secretary to the president P.B. Jayasundera and the Governor of the Central Bank (CB), W. Lakshman, no heads have rolled within the economic team. Finance Minister Basil Rajapaksa has held office since July 2021 and Governor of the CB, Ajith Cabraal since September. Had they made the necessary course corrections from last year, the current situation could have been avoided. 

The pegging of the currency to an artificial exchange rate is primarily responsible for the sudden uncontrolled collapse of the rupee in the last month. Today, as the currency is spiralling to a point that would reflect the actual market determined exchange rate, inflation and poverty are rising, people are left destitute and the economy is collapsing. While such policies could be attributed to incompetence, some actions of the ‘Economics Team’ leaves one wondering if there is criminal intent at work. For example, despite advice from numerous economists, the CB made a bond repayment of $ 500 million in January rather than negotiate a debt restructuring. Such action begs the question whether there were interested parties that benefited through the repayment of the bond.

The current ‘team’, including the finance minister and the Governor of the Central Bank neither has the competence nor the confidence of the public to handle this crisis. They do not possess the basic educational qualifications to hold such office or shown any aptitude of learning on the job. The worst attribute is that they are associated with corruption, one even being called ‘Mr. Ten Percent”. Such people cannot be expected to gain the confidence of the public, creditors, investors or international institutions such as the IMF and the World Bank to make the necessary policies in the best interest of the country. As a very minimum first step, the president, who is now all powerful and determiner of Sri Lanka’s fate, must change his economic team in order to restore some confidence in his administration and his ability to guide Sri Lanka out of this economic disaster.