Dilrook Kannangara

Sri Lanka’s economic crisis is due to the inability to repay loans fallen due after grace periods gradually come to an end. This cannot be overcome without earning or saving $4 billion a year for this year and the next 3 years. This cannot be earned or saved no matter how much taxes are imposed as taxes only earn rupees.

Sri Lanka’s trade deficit with India is $4 billion and rising. This has destroyed local industries as India’s exports can be made locally. Investments in motor vehicles cannot be be made in Sri Lanka because the same can be imported from India at a cheaper price thanks to the FTA. Indina Oil Company that controls over 18% of the local petroleum market is also a massive drain on Sri Lanka. This was a profitable sector before privitsation by Ranil’s UNF in 2002. What these figures don’t reflect are service exports from India. A very large number of Indians work in Sri Lanka and they take out scant dollars out of the country. This must end if Sri Lanka plans to manage its forex reserves.

Sri Lanka must also consider defaulting on interest payments on certain bonds issued in western capitals. Some local politicians and their clans are said to be large investors of these. Out of all loans these bonds carry the largest interest burden at time exceeding 6%. It is insane to offer such high interest rates for US dollar loans.

On the other hand Sri Lanka must sign its long delayed FTA with China. This has been delayed since 2008 due to fears of India. China and Sri Lanka do not compete on the same products. Chinese investments will flood Sri Lanka at least in the initial years which can ease the dearth of dollars. Chinese motor investments can be made in the island which can replace Indian imports. Sri Lanka can also access China’s petroleum which China gets at bargain prices due to its economic clout.

As Sri Lanka is saddled with the garment industry, a FTA with China will be able to source material at cheaper prices increasing local value addition. It will also open up a massive market for local tea which now goes begging. Massive Chinese shipping can benefit Sri Lanka. None of this can happen without a FTA with China.

Sadly all Sri Lankan leaders play the blame game without taking bold action. India sides with alternating political clans to destroy Sri Lanka. If this countinues the nation will disintegrate by internal collapse. Sri Lankan people are very shortsighted which is exploited by politicians. The current crisis is due to loans we borrowed over 5 years ago. However, blame goes to the government in power during repayment time! Batterd by blame, the UNP regime is doing the same. Ranil has launched a massive borrowing spree to copy what Rajapaksas did as a desperate bid to become popular, temporarily ease the economic crisis and most importantly burden the next government. These loans too have a grace period of about 3 years. They will become payable in 2021 when the next government is in power. This retaliatory borrowing madness must end. For that to happen people must realise the concept of grace period and politicians must not play the brinkmanship game at the expense of the nation’s future.

Abrogate India FTA and sign an FTA with China to overcome economic crisis, else get ready for the nation’s collapse. Rioting and civil war will become the norm in Sri Lanka in the next few years if people are sqeezed by unending economic hardships.