Sri Lanka’s current economic crisis is nothing short of an economic tsunami. The former Deputy Governor of the Central Bank Dr. W.A. Wijewardena, said in a newspaper interview recently “In every respect, Sri Lanka is a bankrupt country,” adding that the challenge of the new interim government was to make it solvent. “If Wickramasinghe fails, Sri Lanka will also fail, not in the next few years but for the rest of the period Sri Lanka will be nonentity as a nation,” he warned.
The economic crisis is largely man made. Starting with the huge cuts in tax revenues, suspending the IMF program and the squander of the Forex, given the pandemic. As a result, money printing has been Rs. 4 trillion. Overall inflation is now at 30% and food inflation over 50%, according to inflation tracker Steve Hanke of Johns Hopkins University, it is over 151%. Sri Lanka’s forex sector is the worst affected. Foreign reserves have fallen from $ 7.6 billion in December 2019 to a usable foreign reserve level of less than $ 25 million at end April 2022. The net foreign assets of the Central Bank are negative at $ 4.4 billion at the end March 2022. The rupee is under huge pressure, there is limited forex in the formal banking system, and a lucrative black market is thriving. The CBSL has officially suspended foreign debt servicing, which amounts to a default. Taking the crisis to another level. Therefore, Sri Lanka is now an insolvent country. Making Sri Lanka a credit worthy country will be an enormous task and cannot be done without the assistance of Sri Lanka’s long-standing friends such as India, Japan, China, UK, USA and South Korea.
We need leadership and inspiration to come out of this crisis
The appointment of Ranil Wickramasinghe as PM was nothing short of a miracle. Nobody in their wildest dreams would have thought it was possible. But it has now happened. The appointment of Ranil Wickramasinghe is timely. Given his vast experience. This is his opportunity to create a legacy, given all what has happened in the past.
The new Prime Minister in a statement said, “Last Thursday, I accepted office as the Prime Minister. I did not request this position. In face of the challenging situation facing the country, the President invited me to take up this position. I assumed this duty not only as a political leader, but also as a national leader who has benefited from free education.”
He went on to say at present, the Sri Lankan economy is extremely precarious. Although the former government’s budget projected a revenue of Rs. 2.3 trillion, Rs. 1.6 trillion is the realistic projection of this year’s revenue. In November 2019, our foreign exchange reserves were at $ 7.5 billion. However, today, it is a challenge for the treasury to find $ 1 million.
The Ministry of finance is finding it difficult to raise the $ 5 million required to import gas. He concluded by saying the next couple of months will be the most difficult ones of our lives. We must prepare ourselves to make some sacrifices and face the challenges of this period. My objective is to save all the people of this country and the future of our younger generation. I will undertake this task willingly risking my life if needed and will overcome the challenges facing us. I ask you to extend your support to me in this endeavour, he concluded.
The expectations of the Prime Minister are very clear, fix the oil and gas queues ASAP. Bring back the 19th amendment, prosecute those who have plundered and mismanaged the economy and fix the Forex liquidity in the economy. The first two can be done with the support of Sri Lanka’s friends. The 19th will require the political will of the 225 in Parliament. The people will not stop protesting until this is accomplished. Fixing the economy will require time, skilled people and objective action. We can no longer rely on bureaucrats to take the lead. They have failed us and failed us miserably. We need leadership and inspiration to come out of this crisis. The Prime Minister has the maturity of a Statesman. What he does in the next three months will either make Sri Lanka the next Sudan or help to regain Sri Lanka’s soul again.