Bandula: Dollar will hit 160
Posted on January 24th, 2016

In an interview with the Daily Mirror the Joint Opposition’s Economic Affairs Spokesman,

MP Bandula Gunawardane said that people would be compelled to endure economic hardships in the form of rising price and the lack of employment opportunities in the new year.  He said it would not bode well for the country, because of budgetary provisions.
Excerpts:

QWhat kind of impact do the 2016 budgetary proposals have on the country’s economy?

The originally estimated government’s revenue and expenditure, budget deficit and the way for financing it have now been changed because of amendments introduced during the debate in an unprecedented manner.

The budget lost its originality because of amendments brought in with the intervention of either the President or the Prime Minister. The government even lost its credibility because it failed to work out an acceptable budget at once.
If someone looks at it from the mindset of a frog in the well, it will be seen as a unique feature of Sri Lanka. Yet, the international financial organisations that observe budgetary financing and affairs and the local business community have been alarmed by what happened in the budget.

Especially, the Prime Minister presented a policy document ahead of the budget to draw international attention to it. However, the entire policy statement was negated after the budget was presented together with amendments incorporated in the process.
It resulted in confusion. In that perplexed situation, the Finance Minister failed to act with responsibility and prudence, albeit it is what is expected from a member holding such a portfolio.

The International Monetary Organisation (IMF) cautioned about certain proposals introduced due to personal interests of the government bigwigs. IMF warned of fragility in the Sri Lankan economy in this context. IMF is duty-bound to make such economic forecasts because Sri Lanka holds IMF membership.
Whether we like or not, our country is doing export-import economic activities. Then, the balance of payment is part of our economy. The IMF contributes to maintaining the balance of payment and the stability of exchange rate at a healthy level.

That is why, there is an IMF office functioning under the Central Bank. It is unacceptable for anyone to dispute IMF articulating its position in this regard. We have already set a bad precedent. The rupee value has depreciated to the lowest in 38 years against the US dollar. It has depreciated during every rule. Yet, it stabilised after the end of the war. During the post war period, the international official reserves were high. It stood at US $ 8.2 billion by the time of the government’s change. Within one year after the change, the rupee has depreciated to 151.  It is bound to hit the 160 mark next year, according to economic forecasts.

The local economic scenario will be worst compounded by the decision of the United States to increase its interest rates last month.
In consequent to this move in the US, investors are now encouraged to withdraw their money invested in our bonds to be reinvested in US bonds. It is more profitable for them. It will add to the present woos of our economy. It will affect the Stock Exchange and the local credit market.

In the last budget of this government, they imposed taxes with retrospective effect such as Super Gain Tax. This time, the government has taken over Avant-Garde, a profitable venture. Next, they suspended the Port City Project. Doctors went on strike. So did bank employees. Even scrap iron traders protested.
Against this backdrop, the President repeatedly says that the government will not collapse. He says he will not allow anyone to topple it. Such repetitive remarks are made because the government’s stability is actually at stake. In this context, nobody is prepared, even to do a feasibility study, let alone any investment.

The budget deficit is estimated to be eight percent. The interest rate will also surge, and inflation will be over 7 percent. The growth rate will be slowed to 5.9 percent.

QHow will ordinary people feel the effects?

Ordinary people will be in a dire predicament under the spiralling cost of living. Theoretically, it is bound to increase. There will be price hikes of imported food items such as sugar, dhal and tinned fish, and intermediary goods such as chemical fertiliser, and capital goods like building materials. It is triggered by the rupee depreciation.

Compared with 2014, people have been taxed more. It means the rate of indirect tax has increased by 58 percent. After January, people will experience the impact of these taxes by way of price hikes of items they purchase for consumption in the market.
Secondly, investments have ground to a standstill denying employment to many thousands of individuals, let alone the creation of one million employment opportunities-the much hyped slogan of the government. Likewise, self employment activities have suffered a severe blow. For them, the cost of imported raw materials has increased resulting in the rise of their cost of production. So, they cannot sustain their industries.

In addition to mega projects, small and medium scale projects have also been affected at village level. In the construction industry, the government is in arrears of payment amounting to Rs.500 million to contractors for work already completed. As long as it is in arrears, construction projects cannot be pursued. It will deny jobs for many persons working as masons and carpenters.

QSome say there was no enlightened debate on the policy matters outlined in the budget. It is said speakers were more concerned on concession reduction and all. What is your view?

This is the least enlightened budget debate I have ever witnessed in my life. The reason is the main Opposition in Parliament, the Tamil National Alliance (TNA), is supportive of the budget. The Janatha Vimukthi Peramuna (JVP) was also supportive of the government in an indirect manner.
The time meant for the Opposition was mostly allotted to these two parties during the debate. When analysing JVP speakers during the debate, it is crystal clear that they were more concerned about attacking the previous rule rather than focusing on the present budget. They also concentrated more on mudslinging at those who served in the Cabinet of the last government for personal reasons.

There was lack of debate on the actual contents of the budget. We, in the joint opposition, actually received less time to articulate our positions. We educated people outside Parliament as a result. The educated segments of society listened to us and understood what we said.
As a result, doctors went on strike, for example. In Sri Lankan Parliament, there is a dearth of MPs with a sound economic knowledge. It is a tragedy because Parliament, as the supreme authority overseeing public finance, needs such legislators more and more.

The media is also not giving adequate coverage to economic affairs taken up in the House. Instead, they tend to highlight frivolous talks uttered to and fro.

QIn the budget, the government has tried to seek a departure from the economic model hitherto adopted in the country, and to liberalise the economy more. What is your opinion on this?

All of a sudden, the economic model cannot be changed radically. If the government intended to do it, it should have sought a mandate from people at the election. It did not do so. It, instead, promised the sun and the moon to people. It said nothing was impossible if corruption and malpractices were rooted out. Ahead of the elections, it pledged to add the allowance of Rs.10, 000 to the basic salaries of public servants.

It vowed to give free motorcycles instead of giving them at a concessionary price. It said fertiliser subsidy would never be curtailed. It promised everything on earth to people and asked them to vote against the Rajapaksa government. Finally, what happened?
It is characteristic of the United National Party (UNP) to have such weaknesses. Yet, it pledged to be more welfare oriented than the Rajapaksa government in the run up to the election.

QHow practical is such an economic model to Sri Lanka?

For a country like Sri Lanka, the extreme end of any model is unacceptable. Education and healthcare are free in Sri Lanka, a phenomenon so different to most other countries in the world. Of course, it is a huge burden on the government. But, the successive governments did not do away free healthcare and education facilities since Independence.

No government can deviate from it now at once. Today, we see a quantitative development in education. We need to improve it quality-wise now. Today, students pass exams but fail in life.

Radical changes are needed in the education sector for skills development. Schools should not close at 1.30 p.m. They should function till 3.00 p.m. like in Japan, China and Korea. We should do away with exam oriented system.
Privatisation of education will not help. Today, even businessmen are harassed.  – See more at: http://www.dailymirror.lk/103951/bandula-dollar-will-hit-160#sthash.xnQQtD0P.dpuf

8 Responses to “Bandula: Dollar will hit 160”

  1. Lorenzo Says:

    It will reach 200 very soon.

  2. Sarath W Says:

    At last it is heartening to hear a politician talking sense. It was a good thing that Mahinda was defeated in the presidential election as he did not listen to his Sinhala Buddhist voters. He was surrounded by some useless yes men. But to defeat him at the general elections was the biggest mistake when it was clear the three traitors fooled us at the presidential elections. Of course every one likes to get a Rs 10,000 a month pay rise, but common sense should have told us it was not possible. I hope the rising cost of living will make those who voted this government realise they were fooled, not once, but twice.

  3. Christie Says:

    People talking about elections do not see that it was Indian imperialists tactics of diding the Sinhala majority first and then using the Indian colonial parasites’ block vote to defeat Mahinda.

  4. Susantha Wijesinghe Says:

    DOES THE IMF OFFICE FUNCTIONING UNDER THE CENTRAL BANK, KNOW ABOUT THE DASTARDLY CENTRAL BANK BOND SCAM ? YES, THEY HAVE TO KNOW IT FOR SURE. THEN WHY ARE THEY SILENT ?

    DURING MY TIME, SCHOOL STARTED AT 9.00AM, WITH TWO CLASSES OF 45 MINUTES EACH, THEN 15 MINUTE INTERVAL, AND ANOTHER TWO CLASSES OF 45 MINUTES EACH. THEN 12.15 to 1.15pm LUNCH. THEREAFTER, THREE 45 MINUTE CLASSES TILL SCHOOL IS OVER AT 3.30pm. THIS WAS THE SAME WITH ALL SCHOOLS AT THAT TIME.

    THEN, SOME NUT ENTERED INTO EXPERIMENTATION OF SCHOOL HOURS, WHICH MADE SCHOOL CHILDREN MISS THEIR BREAKFAST, AND HAVE LUNCH AT 2.30 OR 3.00pm. RESULT UNHEALTHY SCHOOL CHILDREN.

    BANDULA G, APPEARS NOT TO KNOW THIS WHEN REFERRING TO JAPAN, CHINA, AND KOREA. WE ALREADY HAD THE SYSTEM. AN IMBECILE POLITICIAN WITH A SET OF CLOWNS APPARENTLY CHANGED THE SYSTEM TO THE DETRIMENT OF THE CHILDREN.

  5. Fran Diaz Says:

    Sri Lanka is a small country. We can “turn on a dime” and survive bad times in the world economy, provided there is sound leadership. Local food production and preservation imperative. Clean air and water all important. What is this GoSL doing about such life preserving needs ?

    We cannot help but feel that the Agenda set for the Yahap does not include the vital elements of Clean Air, Water, Food and Shelter, plus SECURITY NEEDS. Instead, Yahap appears to have a Cold War type Political Plan per foreign agencies that appears more important than Essentials for Life of Lankans. Dependence on External Forces rather than Internal Strength makes Yahap appear a weak leader.

    Lanka needs clear thinking, proper leadership. Lankans have to go to Survival Mode now with uncertain money markets and Climate Change due to Global Warming.

  6. Susantha Wijesinghe Says:

    FRAN !! I see Good Faith in your thinking. Nevertheless, Please think of the resultant consequences on the following:-

    Bridge from Southern India To Northern Sri Lanka will have an influx of Indian Dalits, who will come in droves, and eat all the Food we have, eat all our crops, and cause a very severe shortage of Food, including Fresh Water. They will defecate all over the land, because the clowns who are set to build this bridge have not thought of TOILETS for the GREAT INVASION. So the whole of the Northern Province will be stinking to High Heaven for a start. Will we have clean Air then ? Will we have enough Water and Food to Share ?? Will we have enough Shelter to spare ?

    These Indian buggers will arrive like **LOCUSTS ** and eat up everything we have. If this “”BRIDGE “”becomes a reality, it will be a Nightmarish Hell, FIRST for the Northerners, then for the rest of the Country. These buggers will defecate all over our Land and roads, and on Rail Roads, as in INDIA.

    As a Senior Management Executive, we were taught to always PLAN and ensure infrastructure before starting a PROJECT. So the Bridge Building Project will start, without any thought for Basic infrastructure. THIS WILL BE, AND CAN BE EQUATED TO. GOING TO THE TOILET FOR THE BIG JOB, WITHOUT ENSURING THAT THERE IS TOILET PAPER, IN THE TOILET. DAMNING CLOWNS.

    It will be in the best interests of ALL SRILANKANS to make sure that the BLUE PRINT for this Bridge, is BURNT and stopped in its tracts. Otherwise, Sri Lankans can look forward to much Blood-shed, brought about by Politicians who have no VISION.

  7. Fran Diaz Says:

    Susantha !

    I was referring to the world problems in relation to Lanka in my previous entry.

    Re the BRIDGE :
    I could not agree more with you re the RANIL’S BRIDGE !!
    I have been condemning the Bridge for many months now. It is the death knell for Lanka. I think the Plan for the Bridge must be torn up and thrown out forever.
    *. INDIA trained the LTTE.
    *. INDIA forced the 13-A on the JR govt.

    Now INDIA wants to build the Bridge to Mannar and Ranil approves of it, and the ADB has approved the funds too ! This must be thrown out NOW ! How do we do it ? We shall have to have thousands of Petitions submitted to (our dead) Parliament and meek Prez ?

  8. Susantha Wijesinghe Says:

    FRAN !! WIGNESWARAN BETTER START BUILDING ATLEAST A HUNDRED TOILETS FOR A START. JAFFNA WILL LOOK LIKE **AN ANT HILL** DISTURBED. THE STINK WILL REACH ELEPHANT PASS.

    WE MIGHT HAVE TO FIND A **HANUMAN**.

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