Editorial Courtesy The Island

The government is all at sea. It is blaming US President Donald Trump for the free fall of the rupee and the attendant economic woes in a bid to cover up its pathetic failure to find ways and means of mitigating the adverse impact of the present currency crisis. It seems to have taken the discerning public for a bunch of suckers. Some government pundits claim that the fall of the rupee is good for the country. If so, would they explain why the Central Bank (CB) has made a frantic effort to stabilize the rupee, albeit in vain? Is it that the CB is doing something bad for the economy as part of a conspiracy against the government?

The yahapalana government claims that the economy remains robust in spite of the worsening currency crisis. Finance Minister Mangala Samaraweera has sought to put a bold face on the situation; he declared in Parliament, the other day, that the allocation of billions of rupees for the government’s Gamperaliya project was alone proof that the economy was in good shape. If so, the question is why the government cannot emulate the Indian example in handling fuel prices and opt for a downward price revision.

Pro-government commentators argue that Sri Lanka is not alone in the present crisis and India is also reeling from the depreciation of its rupee. Their argument is not without merit. But, the problem is that they seem to think that since the currency crisis has hit India hard, Sri Lanka can do nothing about it and should resign herself to the worsening situation. They have conveniently turned a blind eye to the fact that India has reduced fuel prices and bought a five-billion-dollar missile system from Russia. The Indian economy is resilient and, unfortunately the same cannot be said of Sri Lanka’s.

If the economy of this land like no other is doing well as the Finance Minister claims then why are the government leaders asking the people to tighten belts further? This, the yahapalana grandees are doing while living high on the hog. People’s patience is obviously wearing thin, and figuratively speaking, the day may not be far off when the irate citizens seriously consider tightening their belts around the fat necks of the yahapalana politicians.

Curiously, the Finance Minister has confessed that the fuel pricing formula is beyond his ken. This IMF-recommended remedy certainly cannot be rocket science. A government appoints, as its Finance Minister, the person who, in its opinion, understands economics and finance better than anyone else within its ranks. So, if the Finance Minister himself cannot comprehend the pricing mechanism at issue then it goes without saying that the others in the government, too, are not equal to the task.

In other words, we repeat, the fuel prices are being increased according to a formula which the entire government cannot make heads or tails of. This is a self-indictment. The yahapalana leaders ought to reveal the secret pricing formula without further delay; perhaps, a Grade 10 student might be able to explain it to the yahapalana worthies who consider themselves the bee’s knees.

What the Finance Minister has said about the fuel pricing formula reminds us of an apocryphal story about the late Finance Minister Dr. N. M. Perera. A journalist once tried to strike up a conversation with the legend on the budget. NM, not wanting to waste his precious time, asked the scribe a few probing questions about GDP calculation, only to be disappointed. He then politely told the latter that there was no point in discussing the budget with someone who was not au fait with GDP calculation.

In times of a currency crisis, a government has to restrict imports, promote exports and, most of all, adopt austerity measures. Instead, what we witness is an election-oriented spending spree. The people struggling to keep the wolf from the door are made to stump up funds for the government’s election campaign, camouflaged as a development drive. Funds are allocated with a generous hand for a soft loan scheme, which is a vote catching exercise. Fear has been expressed in some quarters that the government is working according to a plan to bankrupt the state banks so that they, too, can be privatised.

Taxes account for nearly one third of the fuel prices and if the government curtails its wasteful expenditure some relief can be granted to the public by reducing the fuel prices as India has done. If the task of determining prices of essential commodities is left entirely to the officialdom, notorious for their bureaucratic callousness, what is a government therefore?