Posted on October 10th, 2019

Kamalika Pieris


Under my presidency, the economy grew at an average annual rate of 6% from 2006 to 2009 despite a raging war and at 7.4% in the five post war years from 2010 to 2014, said Mahinda Rajapaksa in April 2019. No government in post-independence history has achieved an average growth rate of 6% leave alone 7.4%. Because of that growth, the economy was able to absorb the relatively modest annual increases in taxation under my government, said Mahinda Rajapaksa in April 2019.

The total outstanding government debt increased from Rs.7,391 billion in 2014 to more than Rs. 11,859 billion by the end of 2018 – an increase of 62%. These enormous borrowings were not spent on any development work. The national debt has risen by Rs. 4 Trillion in these three years, as against Rs. 5 Trillion in the previous 10 years, despite war expenses.

Prime Minister Ranil Wickremesinghe admitted that Sri Lanka’s economy is in a dire state, while endeavouring, as always, to lay the blame on loans taken by MR’s Government, said Tissa Vitarana in January 2019.

 He conveniently plays down the fact that the loan repayment of USD 5.9 billion due in 2019 is the outcome of loans taken over about 30 years. He also hides the fact that the loans acquired in the last four years of the UNP-led Government, without doing any national development, more or less equals the debt incurred by the MR-led Government over nine years to win the war against the LTTE and develop infrastructure concluded Vitarana.


Milton Rajaratne has looked at the economic growth after Yahapalana. One of the main pledges of Yahapalana was to improve the economy of the country. The tenure of the Yahapalana government is drawing to a close and thus it is timely to investigate whether the government has been able to manage the economy, and bring about the proclaimed results in both macroeconomic and socioeconomic spheres, Rajaratne said.

Rajaratne has created a table presenting data for 25 economic indicators, from the year 2014 to 2018, of which 2014 is considered the reference year. Four year averages of economic performance have also been calculated. The data were taken from the Annual Reports of the Central Bank of Sri Lanka.

The 25 economic indicators include Growth rate, Domestic investment, Domestic savings,  wages, exports, official reserves, Share price Index, Budget deficit,  Manufacturing, unemployment,  Consumer prices,  imports,  public debt, foreign debt,  exchange rate, interest rate.

All the 25 criteria, given in the table, indicate that the average performance of the economy during the past four years is a failure compared to the performance of the year 2014. Economic performance of the first two quarters of the year 2019 has also been disappointing, as all these criteria have further deteriorated.

In the past there was a common belief that UNP regimes were good at economic management, and as a result the economy gained a boost every time a UNP government came to power. However, this time around, this belief has been proven wrong.

Due to the mismanagement of the economy between 2015 and 2018, the expectations of the business and households sector have been shattered, and the economy is caught in a low investment-low economic growth trap, low export-high import trap, low public revenue-high expenditure trap, debt-development trap, debt servicing trap, high tax-low real consumption trap, high production cost-competitiveness trap, low exports-high imports trap, and many other traps, concluded Rajaratne. (Milton Rajaratne island 26.9.19 p 9)  


The government is trying to use the debt repayment issue in order to conceal their inability to run the economy. From the time this government was elected to power, the Prime Minister has been saying that they cannot repay the loans taken by the previous government. They were talking about a mountain of debt, a debt trap and even claiming that some of the loans taken had not been documented. That is a lie,   said Bandula Gunewardena in April 2019. If loans have been taken without any documents, there is no need to repay such loans, either.

When  the Rajapaksa government  took office in November 2005, the total outstanding government debt was Rs. two trillion. When we left in 2015, it was 7 trillion, said Bandula Gunewardena. During those nine years, we went through the world food crisis of 2007, the world’s worst recession since 1933 in 2008/09, and experienced the highest oil prices ever, for a number of years. Then we had to face the Eelam war. An unprecedented amount of development work was also done during those years. With all that, indebtedness rose by only Rs. five trillion, continued Bandula.

Towards the end of 2018,  Yahapalana  government bought  2.5 billion USD sovereign bonds. Then they presented the budget for 2019 to Parliament and before it was passed they took yet another 2.4 billion USD through a sovereign bond. Then they took one billion USD from the China Exim bank for the Central highway project. In that manner, they have taken about six billion USD in foreign loans in just the past few months.Today the total outstanding government debt is Rs. 12 trillion. It has gone up by five trillion without the government doing anything to show for it, within a short period of just four years, continued Bandula.

When the Rajapaksa government was in power, there was enormous restraint exercised when making foreign borrowings. Indeed one could say that all previous governments were much more careful in that regard than the present one. During the Rajapaksa era, Sri Lanka Development Bonds were issued only twice a year and that too never in excess of an average of about 350 million USD per year. But under the present government SLDBs were issued with reckless abandon.

During our time, an additional one billion USD would have sufficed to take things forward very comfortably. We have never taken amounts as large as 2.5 billion USD at a time through sovereign bonds,  concluded Bandula Gunewardena.


The budget for 2019 was a fraud perpetrated on the people, said Bandula Gunewardena. It is one big lie.  Parliamentary Committee on Public Finance report on this Budget  pointed out that the  assumptions and calculations on which the budget was based were faulty. Whether the Easter Sunday attacks took place or not, the economy is going to take a nose dive this year, said Bandula Gunewardene.


Mahinda Rajapaksa said in 2019, the government hopes to collect Rs. 2,077 billion as taxes, twice the amount that was collected 2014. All that money is to be wrung out of the public in a context where the annual growth rate has declined to 5% in 2015, 4.5% in 2016, 3.1% in 2017 and it is expected to be around 3% in 2018.


Every economist in the world knows that a country can never be developed with a double digit interest rate. The interest rates went down to single digits during Mahinda Rajapaksa era. In Sri Lanka, the interest rate went up to double digits after the Central Bank bond scam. If the cost of capital is 15 percent, a business will have to make a profit of at least 40% to make his business viable after meeting operational costs, taxes and the cost of capital etc. So a person who takes a loan now is in deep trouble, said Bandula Gunewardene in April 2019.


Any salary increase given by this government disappears almost immediately. The Rupee depreciated from Rs. 131 to the Dollar at the end of 2014 to reach around Rs.180 under Yahapalana rule, driving up the prices of all imports. Under my government, taxes were much lower, and the exchange rate was controlled to prevent increases in the prices of imports. So whatever was given by my government as salary increases actually stayed in the hands of the recipients, said Mahinda Rajapaksa. ( Continued)

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