State Subsidized Hajj Will Sink Lankan Economy Irrecoverably
Posted on January 28th, 2020

Dilrook Kannangara

A basic Hajj pilgrimage including food and necessities costs upwards of $4,500 from Sri Lanka. Almost the entirety of this goes out of Sri Lanka as foreign exchange. 2,850 pilgrims is the existing quota per year as at Hajj 2019.

Registered Hajj Operators – Department of Muslim Religious and Cultural Affairs

If 2,850 persons make the pilgrimage annually, the total cost to Sri Lanka is $789 million over 40 years. (A Muslim is required to perform Hajj during his adult lifetime). The impact of these decisions is not for a year or two, but for the long term.

It includes a basic inflation of 2% and a borrowing cost of 6.75% which is the bond rate at which Sri Lanka borrows in USD. This is an enormous loss to the nation suffering a debt crisis, a forex crisis and a widening import-export gap which must be borrowed.

To put into perspective, this is many times more than the total cost of state sponsored foreign trips of politicians and their relatives at all levels combined.

After repeated requests recently, the number was raised to 3,500 which boosts the cost to $1.036 billion over 40 years. That is an additional $247 million over 40 years the nation will suffer as a result of the 2020 increase.

There is yet another special request by the government of Sri Lanka that is pending to allow an additional 2,000 as a special quota. If it goes through, a whopping $1.628 billion will leave the country in the next 40 years. This is a massive increase of $839 million over 40 years over what would be if 2019 numbers continued. It will sink the Lankan economy irrecoverably as the nation is struggling to repay foreign loans and interest.

Additionally, there is an election promise to subsidize the Hajj pilgrimage so that Muslims who can’t afford it now will be able to make it. In addition to the impact on foreign reserves as calculated above, state subsidies will have a domestic fiscal, monetary and budget impact too.

The above calculations exclude purchases made by Lankan pilgrims in foreign lands. Their purchases also amount to a few hundred million dollars in total over the comparison period.

It will get even worse as future governments will demand further increases to the quota as the Muslim population grows and the demand to increase the percentage of Hajj performers. Assuming an average male life expectancy of 72 years for a Sri Lankan male, the existing quota of 2,850 means only 20% are able to perform Hajj in their lifetime. In order to keep the 20%, this quota must be increased annually by Muslim population growth which is the highest in the island. Further, as politicians have taken up the task of increasing the 20%, it can go up to 14,600 (plus future population growth) one day in the future to help all Muslim men perform Hajj. What politicians have started is a race between them that can ruin the national economy and forex reserves even more.

This is also discriminatory. Government cannot subsidize the pilgrimage of just one creed. How about the Buddhists, Hindus and Christians? They too have foreign pilgrimages that are affordable only for a few. Buddhists must be subsidized in their pilgrimages to India, China, Bhutan, etc. Hindus should also get subsidized pilgrimages to a host of Hindu pilgrimages in India and Nepal. Christians must also get subsidized tour packages to the Holy Land, the Holy Sea and Fatima. Otherwise the move amounts to the violation of the Constitution.

To all political parties, please consider these facts and the long term impact before making election promises. It is not your money. It is the money of taxpayers who are already suffering economic problems.

Calculations

40 year cost factor for $1 = [{(1+Inflation) to the power 40 years -1} / Inflation]*(1+Inflation)*(1+Interest rate)

40 year cost factor for $1 = (((1.02)^40-1)/0.02)*(1.02)*(1.0675)

40 year cost factor for $1 = 65.77

Total 2019 cost = Persons * Cost per pack

Total 2019 cost =2,850 * $4,500 = $12,825,000

Total 40 years cost = $12.825 million*65.77 = $843 million

Total 2020 cost=3,500*$4,500=$15,750,000

Total 40 years cost = $15.75 million*65.77 = $1,036 million

Total 2020 cost with special 2,000=5,500*$4,500=$24,750,000

Total 40 years cost = $24.75 million*65.77 = $1,628 million

One Response to “State Subsidized Hajj Will Sink Lankan Economy Irrecoverably”

  1. Ratanapala Says:

    What is the basis for giving only the Muslims special subsidies which other pilgrims do not receive? What is happening tantamounts to bribing a special sector and their leaders for votes and those leaders and pilgrims accepting such bribes with no consideration for fair play!

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