Fence mending prospects between SLFP factions before nominations receding
Posted on December 9th, 2017

With nominations set to open on Monday for the first 93 local government institutions, frantic last minute moves are being made to form an alliance between the Joint Opposition and the SLFP faction in the government. The initiative in these moves is from the latter rather than the former. Several public figures like Ven. Elle Gunawansa thera have been involved in these negotiations on the assumption that the Sirisena faction of the SLFP is more progressive than the UNP and therefore, the Joint Oppositioin should form an alliance with them in order to keep the UNP and the TNA at bay. Ven. Gunawansa has put forward three main conditions on which he hopes the two estranged factions of the SLFP will be able to unite – halting the process of formulating a new constitution, halting the privatization of national assets and filing action against the persons involved in the bond scam.

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What is missing is the main demand put forward by the Joint Opposition which is that the Sirisena faction should leave the government before serious consideration can be given to their request to field a joint list for the elections. This was a demand put forward for practical reasons – the impossibility of the opposition and a part of the government running a joint campaign against the government. The fact that the monks have chosen to de-emphasise this fundamental demand put forward by the JO indicates that theirs is an agenda based quest – to put a stop to the constitutional reform process, to stop privatization and to have the bond scam culprits brought to book. These are laudable objectives no doubt, but whether an election alliance can be forged on such an agenda is questionable.

In the first place, these three demands assume that the SLFP Sirisena faction is against the new constitution, against privatization and are willing to prosecute those at fault with regard to the bond scam. We have to bear in mind that when Arjuna Ranatunga was opposing the agreement with China Merchant Co in relation to the privatization of the Hambantota harbor, President Sirisena himself removed Ranatunga from that post and replaced him with Mahinda Samarasinghe and it was the latter who worked with his UNP colleagues to sell of the rights to the Hambantota port to China Merchant Co. Then when it comes to the new constitution, members of the SLFP like Dilan Perera and Nimal Siripala de Silva have been as vocal as anyone in the UNP on the need to devolve power in the manner recommended in the documents put out so far by the subcommittees and steering committee of the Constitutional Assembly. Furthermore, when Ven. Medagoda Abhayatissa had met the President to speak to him about the constitution, the former had told Ven. Abhayatissa that the Tamil people have an issue and that some solution has to be given to this problem.

Referring to the people of the North, Sirisena had even said “Egollange mune le binduwak ne”. To this Ven. Abhayatissa had replied that this so-called Tamil problem is that of the Tamil people not having a state of their own and that this is not an issue that can ever be resolved in Sri Lanka. What that exchange shows is that the President Sirisena himself is committed to the new constitution proposed by the UNP except to the part where the executive presidency is abolished. President Sirisena if at all is even more beholden to the TNA than is Ranil Wickremesinghe. The only reason why President Sirisena is the President today is because of the majorities he received from the northern and eastern provinces. The people of the North gave him more votes than they gave Vigneswaran. So he is acutely aware of his obligations to this constituency. Even in the early days of the yahapalana government, President Sirisena was in the habit of saying that during the Rajapaksa era various things had been distributed to the people of the North but that not one of the recipients had a smile on their faces. He was implying thereby that the only thing that will put a smile on the faces of the northern Tamils are not various chattels but the granting of their political demands. So to imagine that Sirisena is more progressive than Ranil Wickremesinghe with regard to the constitution is obviously a mistake.

As for filing action against the culprits in the bond scam, that will be a matter of political strategy. Once the report of the bond commission is in the hands of the President, it will become a weapon with which he can manipulate the UNP at will. In the event that Sirisena wishes to contest the presidency next time, the bond commission report will be the tool he will use to ensure that there is no UNP candidate and that he is the UNP’s candidate for the second time. He may not use it to file action against the UNP simply because the bond scam happens to be a crime. So to imagine that Sirisena is more progressive than Wickremesinghe would be a major folly. In terms of rhetoric the official SLFP sounds better than the UNP but what counts is what they do in practice. One gets the impression that the Sirisena faction which is in partnership with the UNP appears to be progressive only because they are a passive partner in this government. It is the UNP that drives policy and we see the SLFP responding to this policy sometimes from a populist standpoint and that is what gives them an appearance of being different.

There is also an element of the good cop, bad cop routine in the way the UNP and the SLFP cooperate with one another in running the government. The UNP puts forward a proposition and the SLFP seemingly opposes it only to agree to it later saying that the original proposal has been modified appropriately. This is in fact a better way of handling public opposition without confronting it head on. For all these reasons, the UNP and the SLFP faction in the government are one. After voting with the UNP to hand over the Hambantota Port to China Merchant Co on Friday and voting with the UNP again to pass the budget in Saturday, it would be rather odd for the SLFP Sirisena faction to be handing in nominations this week as a partner of the Joint Opposition. Would the JO want to be seen in public with such a partner? With nominations set to open on Monday and close at noon on Thursday, time is running out for decisions to be made.

The fiction of President Sirisena being able to hold his own as a political party leader is now being proved to be just that, a fiction. What President Sirisena needs now is not futile posturing but an exit strategy. The best option for him now will be to simply refrain from fielding any list at all on the grounds that those contesting on the JO list are members of the SLFP. By not contesting, he will avoid being defeated and he will also be able to claim that he did not allow the party to be divided. By not contesting the JO he will be able to (at least partly) wash off the sins of August 2015 when he deliberately undermined the UPFA campaign by saying that he would not make Mahinda Rajapaksa the Prime Minister even if the UPFA won and sacking the general secretaries of the SLFP and the UPFA and appointing his own loyalists to those positions on the eve of the poll. In fact, it is the bitter memory of August 2015 that has prejudiced members of the JO against any move to unite the two factions of the SLFP. If Sirisena does not field his own list and gives the JO a free run to confront the UNP, the acrimony between the two estranged factions of the SLFP will abate, and unification may become possible at some point in the future combined with an amicable exit strategy for Sirisena.

Bracing for the financial shocks of 2018

Last week the IMF completed the third review of Sri Lanka’s Extended Fund Facility arrangement and approved the disbursement of a further US$ 251.4 million. In doing so, the IMF observed that the government had met the fiscal targets and passed the laws necessary for income tax reform and they pointed out that tax revenue had to increase further to meet Sri Lanka’s high debt burden. The main purpose of the IMF programme for Sri Lanka is aimed at reducing the fiscal deficit. In layman’s terms this means collecting more money to pay for government expenditure. The IMF in disbursing the latest tranche observed that “it is important to build on the progress made and accelerate reforms to further reduce fiscal… vulnerabilities… The new Inland Revenue Act will make the tax system more efficient and equitable, and generate resources for social and development programs.” We pointed out in analyzing the budget for 2018 that the government was preparing to milk the people dry and indeed that’s what is on the cards from April 2018 onwards when the new Inland Revenue Act comes into effect.

According to the budget for 2018, total government revenue has to increase from an estimated Rs. 1,997 billion in 2017 to Rs. 2,326 billion and increase of Rs. 329 billion in just one year. Tax revenue is expected to increase from Rs. 1,749 billion in 2017 to Rs. 2,034 in 2018 an increase of Rs. 285 billion. Guess who’s going to be forking out all this money? In 2018, the government dipping directly into the pockets of people will not be the only horror in store for us. The IMF statement in releasing the latest tranche of the Extended Fund Facility further observed that    ‘weak financial performance of state-owned enterprises increases the importance of further fiscal consolidation’ and recommended that ‘structural reforms’ and ‘energy pricing’, will support fiscal consolidation. What is meant by the term structural reforms is usually privatization and what is meant by energy pricing is increasing the prices of fuel. There is already a demand from LIOC to increase fuel prices which is being kept down with some effort.

The problem however is that the ‘energy pricing’ and ‘structural reforms’ referred to will be coming at a time when the government will be having to face elections – first to the local government institutions, then the provincial councils and then the presidential elections. The signs are that 2018 and 2019 are not going to be happy years for the yahapalana government. Apart from these shocks that one can see coming, there are the shocks that come unexpectedly and at all times under this government. As we go to press, the country is in the middle of a major railway strike and a shortage of aviation fuel.

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