SITUATION REPORT - (2002-07-18)

By Champika Ranawaka

An economic relief package accompanied Mr. Ranil's statement on the bogged down economy. The Prime Minister touched on several important aspects about the country's economy.

The National Debt

The debt burden was the PM's first concern. In 2001, when the GDP was Rs. 1,400 billion, the external and the internal debt amounted to Rs. 1,450 billion or about 103%. It was mentioned that while the anticipated total revenue of the government in 2002 is 275 billion, Rs. 320 billion would be required to service the debt, i.e. to pay back the annual interest and part of the capital.

Raising capital through foreign and local loans is normal in managing a country's economy. Japan, which has a zero external debt has an internal debt of 140% of the GDP. The external debt of the USA is over 60% of its foreign debt. But both these countries have gone into debt to finance investments. Sri Lanka is in debt as a result of financing consumption. Sri Lanka was pushed into a debt trap, especially since 1977, by the then government in which Mr. Wickremasinghe was a key figure. Ms. Kumaranatunga, together with a group of senior officers who were being controlled by the IMF-WB-WTO trio, pushed the country faster and further into debt. The government of Mr. Wickremasinghe is continuing with the same destructive policies, from where Ms. Kumaranatunga had to stop. As a result, the country would no doubt be ensnared more firmly in the debt trap. In this month alone, the UNF government took steps to borrow Rs. 8.8 bln. from foreign banks. Indonesia and Argentina are two countries that got entangled most recently in debt traps of powerful nations. It enabled the latter to exploit at will, those two economically destroyed hapless countries. Before that, nations like Somalia and Zaire were completely destroyed. The situation Sri Lanka is going to be in, would be no different.


The second important aspect of Mr. Wickremasinghe's statement is the selling of enterprises that are operating at a loss. He mentioned the Ceylon Petroleum Corporation (CPC), the Ceylon Electricity Board (CEB) and the Cooperative Wholesale Establishment (CWE), which suffered losses of rupees of 17 bln., 12 bln. and 6 bln. respectively. The two bankrupt state owned banks, the People's Bank and the Bank of Ceylon, are also in the list of institutions to be privatised.

However, the truth is, the CPC suffered a loss of 17 bln. in 2001, because the treasury drew 24bln from it's capital. The cost of a litre of petrol works out as follows;

Landed Cost Rs. 18.63
Operating and distributing cost Rs. 1.95
Actual cost at outlet Rs. 20.58
Debt Recovery Rs. 5.40
Loan interest Rs. 2.48
Govt. Tax Rs. 25.54
Sale price Rs. 54.00

Now the government tax is being reduced by Rs. 6.00.

The picture with regard to diesel is no different. Though a litre could be sold at Rs. 12.10 to the consumer, it is actually priced at Rs. 30.50. Therefore, the CPC is not operating at a loss. On the contrary, it brings a huge revenue to the government. It is the government and the CPC management that has made it debt ridden. Now their sins have fallen on the shoulders of the people.

The destruction of the CEB also started in the UNP era. Because of the Samanalawewa project and Gam Udawa, the loss to the CEB is Rs. 16 bln. The purchasing of electricity from private companies during the PA government at Rs. 11.60 a unit, when thermal electricity could have been obtained at Rs. 4.60 a unit, caused the CEB to loose heavily. The UNF government too, purchased electricity at Rs 8.60 a unit during the power crisis. It is noteworthy that this thermal electricity is being produced by a group of Tamil businessmen. Because Mr. Thondaman is not allowing the upper Kothmale scheme to be built, the government loses Rs. 12 million a day. This is Rs. 4.4 bln. an year. These enterprises loose money because of the folly of the government. And, the people have to pay for its sins.

CWE was a profitable organization not only during the era of Mr. Athulathmudali, but also during that of Mr. Kingsly Wickremaratna. Just like Sri Lankan cricket, the CWE too, was destroyed by the Ranathungas. Without getting them to pay for their actions, selling of the CWC would be a sacrificial offering to the non Sinhala Pettah merchants at the expense of the consumers.

The UNP and the PA governments also brankupted the two state banks, Bank of Ceylon and the People's Bank. Because of defaulting on loans taken by state corporations as well as political buddies of the party in power, in December 2001, these two banks had bad debts amounting to Rs. 680 bln. Many high profile businessmen with political muscle owe these banks billions of rupees. Without recovering these monies, the government seeks to follow the remedy prescribed by the world bank, and hand over these two banks as well to foreign enterprises.

It has already been decided to hand over the CPC to Indian Oil and a Malaysian company. CEB is going to be taken over by a group of local Tamil entrepreneurs (Maharajah - Subramanium). CWE would probably be bought over by non Sinhala powerful wholesale merchants of Pettah. The management of the two banks have already been handed over to two Hong Kong and Swiss firms.

Selling of state enterprises, from which capital was siphoned out at will to balance the budget, would not only limit the funding options available to the government, but would also bring about the total collapse of the national economy.

The present economic crisis is accelerating the marginalisation of the Sinhalese from the Sri Lankan economy. The small and medium industries in which the Sinhalese were engaged are closing down rapidly. Powerful non Sinhala elements are taking control of the economy through the stock exchange. The Sinhala consumer is reduced to begging.

Bribery and Corruption

An independent foreign report claimed that bribery and corruption drains away 17% of the GDP, or rupees 238 bln. This is said to happen at the customs and at other points of collection of government revenue. If this could be prevented, there would be no budget deficit. Though the SU proposed in 2001 September, an independent commission with the necessary powers to tackle bribery and corruption, it was not included in the act that was finally passed. What now happens is, allegations are made against various politicians, without making any effort to recover the assets robbed by them. So the nation has to pay for their sins. It is imperative to forfeit the assets of corrupt politicos in order to save the nation.

Western aid

The Western nations, on whom the UNF government pinned its hopes for reviving the economy, have looked aside now. Up to now the AID FORUM has not given a red cent. Yet, it is prevailing on the government to enforce the MOU signed in May 2001 with the IMF and WB. According to same, power, transport and banks are to be privatised. Further, relaxing of labour laws, limiting of free education and removing of pensions are to follow. 'Green Capitalism', demands handing over of forest and nature reserves to USA. It is clear from all this that the aim of the Western powers is to squeeze from us as much as possible, by choking us economically. This is similar to what happened in Indonesia in 1996.

The 'Peace' Process

Just as the Sihala Urumaya pointed out, the hopes of the gullible on the so called peace process have come to naught. The LTTE has informed the Norway representatives last week, that if 273 camps are not vacated by August 09 as per the MOU, there would not be peace talks.

In the meantime, the LTTE influence is fast extending even to Sinhala areas. Their latest target is the Ampara area. The LTTE terrorists have come to Panama and pressed for the removal of the STF camps there. We are working to counter it through protests by the Sinhalese. We shall not allow the removal of camps from Sinhala areas under any circumstances, and we are working even with Muslim leaders for that purpose. While the Muslim population in the Eastern province is 450,000, the Sinhala population is 309,000, even though about 80,000 have been driven away from the area. The Tamil population is 240,000. To prevent Karuna or Paduman from capturing the Eastern Province, there is a need for a massive Sinhala movement, which we are in the process of building. Pujya Ananda Himi from Ampara district and Pujya Piyatissa Himi from Trincomalee have come forward for this purpose.

Stability of the Government

Meanwhile, there is a threat of the government majority in the parliament being reduced. The UNF government has 114 seats. In protest against the UNF governments betrayal of the Muslims of the East to the LTTE, already Mr. Athaulla, Mr. Sethu Isadeen (Ampara) and Mr. Cader (Mada Kalapuwa) have decided to go to the opposition. Mr. Hakeem's leadership of the SLMC is being challenged. There are 9 SLMC MPs in the UNF government. A constitutional amendment granting freedom to the MPs to change sides, by allowing them to vote according to one's conscience, is really for the purpose of getting the MPs to the government side. A move to impeach Ms. Kumaranatunga is also under way. The UNF is preparing to face yet another election in January next year, in the event

of the above trump cards failing to stabilise the government. If the election takes place in the same manner as the recent local government election, the present 107 seats of the UNP would increase to 132, while the number of seats of the PA would go down from 77 to 55. It is doubtful whether even through such an election it would be possible to solve the present crisis.

As a solution to the economic crisis we have proposed a national economic plan. During the next two months, small and medium scale industrialists, Sinhala manufacturers and the farmers, would be organized under different names. The organizing of the regional network of the Jathika Sangha Sammelanaya (JSS) would be over by the end of August. The organising of a much bigger protest by then is also being planned.


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