GSP is a chocolate coated cyanide capsule – Bandula
Posted on February 3rd, 2017


Colombo District UPFA MP Bandula Gunawardane says that the government has brought the economy to such a quagmire that there is no hope of recovery. Here, he is in conversation with the Ceylon Today on core economic issues

?: What are your thoughts on the Treasury Bond Scam and what are the real economic losses?

A: There was never a secret and there is nothing to hide. On the day of it happening, within hours and minutes, all the money markets, stock markets and the capital markets were aware of what really happened.

It was a transaction for which

Rs 1 Billion was initially required but, it was Rs 10 Billion within minutes from Perpetual Treasuries of Arjun Aloysius, the son in law of the then Central Bank Governor Arjuna Mahendran. What was also unfathomable was that, Bank of Ceylon which is also marketing Treasury Bills and Bonds had disbursed Rs 10 Billion to Perpetual Treasuries. This was a very big conflict of interest and a transaction which lacked any transparency.

?: Apart from the known loss of Rs 1 .5 Billion from the transaction that day, do you think that the real losses are much more?

A: Nobody has determined the real losses. Not even the Auditor General and the COPE has the foggiest notion as to what the real losses are. It is very imperative that a team of Economists and other intellectuals should do an in depth economic study and determine the real losses.

What is also damaging is that Sri Lanka as a whole, lost total credibility in capital and money and equity markets.

The results were bared immediately. Foreign investors, who had hitherto invested in government securities, had pulled out a whopping US $ 2.6 Billion by then.

The lack of trust among investors in Sri Lanka was paramount. The Government could have easily mitigated the issue by terminating Arjuna Mahendran from the post. This tragedy resulted in the Colombo Stock Exchange plummeting to an all time low and the interest rates also doubled. During the previous regime in the Mahinda Rajapaksa regime, interest rates were single digit which were at 8.4 per cent and 9.5 per cent and which has now zoomed to 13.5 per cent. This also means that people have to borrow for housing loans and vehicles at these rates. Then people who have already taken loans have to pay double. It is also the same with the people who take overdrafts as well.

This would have a massive impact on debt repayment as we have to pay more in rupees for the Dollar debts.

It is also moot that the Foreign Direct Investments are declining from 2014 onwards in 2015 and 2016. Even during the war times it was at US $ 450 million which was not bad, given the fundamentals at that time.

It is very important that a team of Economists and other professionals should advise President Maithripala Sirisena on the dire strait of the economy. Another danger is that during these periods of economic ills, the government has provided US $ 4 billion to protect the rupee. This will also create a huge dent in the market with more rupees going for repayment of loans.

?: How would you sum up the international perceptions of Sri Lanka?

A: The Bloomberg Risk Indicators also spell out something on Sri Lanka. When taking into consideration, Norway is at very high in the least risk country with 95 points, while Sri Lanka ranks with 11 points, even below Greece. During the Mahinda Rajapaksa regime foreign reserves was Rs 8 billion which had plummeted to Rs 6 billion now with no chance in hell to increase it. There is no chance of boosting FDIs as well. During the first year of the Rajapaksa Presidency, the rupee was Rs 101 to the dollar and ten years later, it was Rs 131 to the dollar. There was a devaluation of only Rs 30 rupees in ten years Now, in two years of the government, the rupee is 153 to the dollar.

?: So, dont you think that the exporters will be happy as they will get higher earnings?

A: What rubbish! The government has provided Rs 400 billion to protect the rupee. That is notwithstanding the lowering of international prices of petroleum, gold, iron, and all other consumer commodities. But a colossal sum of US $ 4 billion which was petroleum has gone to protect the Rupee.

?: What are your thoughts on the proposed Volkswagen Plant which had a lot of hype?

A: That is the biggest joke. The Government said even from the pre-election campaign that there was a Volkswagen Plant coming up at Kuliyapitiya. The President and the Prime Minister both went to open it, but there was no accredited representative from the German automobile manufacturer. This is also a piece of land without any facilities which has been taken to Court by the Public Trustee. The UNP members are also shocked at the embarrassment! They too do not know in which direction the economy is moving.

?: Any other issues with the other investments?

A: The government is sending mixed signals. In one breath it is saying that it is against privatization. The next breath it is saying that it is for restructuring and privatization. There seems to be some conflicting signals from the government.

?:President Maithripala Sirisena had cancelled a deal where a Rs 130 million factory was to manufacture rubber tyres at Horana and where Prime Minister Ranil Wickremesinghe laid the foundation stone. Your comments?

A: This is another joke. That factory was declared open by former Prime Minister Ratnasiri Wickremanayake long years ago.

?:It is also alleged that one of the reasons that President Maithripala Sirisena cancelled the deal was due to the abysmally low lease rental of Rs 100 per acre, which is nonsensical. Your comments ?

A: That is how the lease rentals work. It is 2.5% of the government valuation. It was also on that basis that companies like Sevanagala Sugar and others were taken. There was no action taken in those also. That shows the clear cut bankruptcy of the government. That is why the government is duping the people by uttering falsehoods.

?: Isnt the Central Bank investigating the former Governor who is mired in controversy?

A: Well according to the information, that I got, he had spent Rs 66 million of the CB just for his foreign trips, both official and personal. It is also strange that the National Freedom Front Leader and MP Wimal Weerawansa was arrested and that too without bail for merely supporting the misuse of official government vehicles. So, if that is so for a party leader, then what should be the punishment for a key government official who has been accused of the biggest crime in the country? Why are Prime Minister Ranil Wickremesinghe and the FCID so silent, which is smacking of double standards.

?: So, do you envision any cracks in the Government; with the SLFP faction within the Government pulling out and forming a Government with the disgruntled people in the UNP ?

A: The UPFA got 5.8 million votes at the Presidential election and 4.3 million votes at the Parliamentary election and the votes were a case against privatization and other capitalistic theories. The government might crack on cases like the Treasury Bond scam, the Hambantota Port and ever rising Cost of Living.

?:So, with all the anti- government comments, what do you think about Sri Lanka getting the GSP + facility ?

A: This is also another joke, Sri Lanka has been handed over 58 conditions in lieu of the GSP+ and we are supposed to carry out conditions such as finding a lasting solution to the ethnic crisis, approve abortion, change criminal charges, free all the suspects who have been detained under the Prevention of Terrorism Act, implement Prison Reforms and all that. This is also almost compromising our territorial integrity and sovereignty.

It is also true that Sri Lanka exports 28% of its products to the EU of which 10% of it, is to UK. But, with the UK exit of the EU, we are to get only 18%. So, the question arises as to whether it is worth making all the sacrifices merely to get GSP + for three years The GSP is a Chocolate coated cyanide capsule.

This government is in a deep mess and it will be very difficult to change that. Sri Lanka is at the worst crisis of all time, and it is an overheated and turbulent economy. It is a very frightful picture that the government has painted.

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