Blame for current economic crisis
Posted on July 11th, 2016
Observer Courtesy The Island
July 11, 2016, 8:06 pm
Newspapers report “PM flays Rajapaksas for leaving country bankrupt” and PM says “we took over a nation with a pillaged economy in its wake”. If the Yahapalanaya Government was so convinced, common sense surely required it when taking office to call for a period of austerity and simple living, while they put the bankrupt economy in order.
Instead the Yahapalanaya Government steered the economy straight to the rocks. First, it injected an enormous amount of cash into the hands of the public by way of increased salaries to government servants, reduced petroleum prices, and other financial “giveaways” including interest cuts. The Yahapalanaya Government had the choice of incentivizing the recipients to save the politically driven largesse by imposing prohibitive excise duties on luxury goods imports, including motor vehicles for, say a 18 month period, under the guise of sorting out the economic “mess” left by the Rajapaksa Government. Instead, the Government enabled the largesse to be spent immediately on luxury imports, notably motor vehicles, with relatively cheap credit. Consequently the fortuitous windfall of over $2 billion to the nation (2015 compared with 2014) because of the precipitous fall in world oil prices vanished, following payments for higher imports in 2015. If such imports had been curbed administratively, the deficit in balance of payments on current account would have narrowed significantly, national savings as a percentage of GDP risen, domestic economic activity boosted and servicing of foreign debt facilitated.
Second, the Chinese-funded Port City Project was halted by Government fiat. Thereby the prospect of swelling the currency reserves of the country by the inflow of $1.5 billion of Chinese money in 2015 and 2016 for work on the Project vanished at a stroke.
Third, Government economic management unsettled financial markets. $2 billion invested by foreigners in the securities and stock market during the Rajapaksa Government in 2014, exited with alacrity since the Yahapalanaya Government took office. Worse, the stock market indices have been falling, the currency depreciating with no end in sight, the annual migrant workers’ remittances stalling for the first time in years, the black market in currency booming and inflation bouncing upwards. What really takes the biscuit, however, is the fall in FDI since the Yahapalanaya Government took office.
In short, the Yahapalanaya Government`s obsession of pinning the blame on the Rajapaksa government for the current economic crisis does not stand up to scrutiny. It is time for the Yahapalanaya Government to recognize and learn from the mistakes made in managing the economy over the past 18 months.
Observer
July 11th, 2016 at 6:44 pm
Like the proverbial crabs in a pot, the Lankan economy is slowly getting cooked. Wake up mates.
July 11th, 2016 at 8:43 pm
Let us not forget that the Yamapalana GoSL immediately gave 225 new duty-free luxury vehicles to their new Ministers and MP’s while preaching austerity to the common citizen.
These new vehicles, which are typically large SUV’s to match the ego’s of the politicos, have now arrived in Sri Lanka. The Toyota V8 Safari, imported by 16 politicos, typical of these vehicles, costs Rs 8.5million duty free, or about 60,000 USD.
That is indeed a luxury vehicle even by US standards! I wonder how these people can face the voters of their constituencies and tell them to pay a 16% VAT, while they themselves throw money at these vehicles which is more costly … at the duty free price
… than the homes of most of the people they are supposed to represent!
Like Marie Antoinette, who intoned “If they don’t have BREAD, let them eat CAKE” will these politicos be beheaded by the voters in the near future??
July 12th, 2016 at 12:13 am
This is true. However, the largest debt to befall Sri Lanka in a single administration was from 2010 to 2014 which was a massive $36 billion in external loans and over $15 billion equal in local borrowing. 90% of these were wasted in the north and east where the return for the government is very little. People there don’t pay their due taxes and some development work were excessive. Instead had most of it been invested in the North-Western and Western provinces, the returns would have justified these.
Yamapalanaya government worsened it with election sweeteners, corruption, incompetency, disruption of projects and pandering into Tamil racism. Now more needs to be borrowed to repay old debt. People have to bear this increasing cost of plunder. And things are worsening. Just like crabs in a pot!
I pity the younger generation unable to leave the country. They will pay the debt of older generations.
July 12th, 2016 at 11:02 am
Yes Ananda USA,
let them eat cake
Yes Dilrook
we must pity our young(and old as well)left behind unable to leave the country.
They will surely pay the debt left behind by the crooked politicians who get involved in worthless projects, earn commissions and buzz off the Western countries.
At the beginning they use patriots like us to campaign and put them into power, rob the country pitilessly, while ignoring our pleas for good governance and on the second term they will get to power without the help of the grassroots with the mighty power of the wealth looted, thus putting the generations into debt, just like in Zimbabwae and all failed states where their economies are in ruins and their currencies are not worth the paper.
In our case they first pretend to save us from the colonials,mellow and control the population with the main religion and deceive people by pretending to be good Buddhists by attending to bogus religious events and expect people to follow them and their events like sheep.
We become a desperate and poor third world and no develop country wants us even to visit them on a short visa.Our innocent youth are virtually prisoners in their own country with no help whatsoever from our cruel politicians.
They could have protested to the Western countries during various international forums where our citizens are treated like dirt.
It seems our past presidents attended events like the Commonwealth events just to make an extravagant trip for them and their cronies where no benefit had ever bought for the people back home.
In a way the powerful countries like these leaders who seem to rob the natural recourses of the third world country and deposit their wealth in their countries where economic power of the develop counties are further strengthened.
Saddam and Gaddafi paid a high price for not following the norm.
I will believe our leaders working for the country when I see them wearing proper cloths, not attending places of worship, attending to the short comings of the country which are too many to mention, like prolong court deputes going for decades,transfering people, detaching themselves from the judiciary, police and other arms of the government and most of all not directly getting involved business ventures of the country that is not the business of the politicians.
I will never see the day when likes of Obama,Camarons and their families run the national airlines and other commercial ventures. It will be an outrage, but only it happens in the third world.
July 12th, 2016 at 5:31 pm
I believe that people are suffering from the economic mismanagement from the time war ended. After the war our leaders developed egos and even became maharajas, crown princes etc. When the Suddha fellow was running Sri Lankan they were making profits and we were even proud to call it our National Carrier. Close to $7 billion was coming from foreign employment also. What happened to all that money?. Siphoned off in surrepticious ways through central bank?.
Now it is an economic blackhole and the CB is selling bonds at a rate in large amounts.
Last night I was watching BBC interviewing the CEO of the Qatar airway at Farnbarough air show in the UK. He was telling that their airline has made close to a billion dollar profit for the year. It is run by foreigners and the crew are europeons. I understand that even the Dubai airport is run by Suddhas. These Arabs know how to get things done by others. Our airport also is in a mess. My wife who travelled to SL couple of days ago was telling me that it was full to capacity and it took a very long time for her to clear the immigration. It looks as if BIA has become the transit point for major airports to India. This is a golden opportunity for gosl to cash in. However I do not think RW with is arrogant Royal college buddies are up to the mark. They still live in colonial times.
With the current global situation we seem to be in the center stage of Indian ocean region. Every major power wants to deal with us. We want GOSL to make full use of the situation without thinking about their parties only.
July 12th, 2016 at 5:52 pm
I understand Qatar Airways alone does five daily flights to BIA. Perhaps most of the passengers are Indians on transit and we see them sleeping on corridors and all possible places. So the GOSL must be getting proper share of tax just like in Singapore. Or is someone selling our services and collecting the proceeds offshore for us to be in this situation?.
July 12th, 2016 at 8:10 pm
The Government of Ranil and Sirisena will run the country to the ground at the end of the five year period. They will give the Tamils the North and the East. They will not be able to control the influx of Tamils from South India. The Tamils will keep moving down South buying all available property and populate the South with a Tamil majority. It will be a matter of time before the Tamils will take over the whole country. The Sinhalese will disappear as a nation. They will end up working for the Tamils unless they are fortunate enough to migrate.
We will have to thank the UNP and Sirisena for this catastrophy. It will be Good-bye to the Sinhalese Nation.
July 13th, 2016 at 10:33 pm
Blaming the former Government for the country’s debt is what the foolish, naïve supporters of the new regime wants to hear. The new regime knows it and keeps serving loads of such bullshit for the consumption of these blind supporters, so that the new regime could carry on with their incompetent administration causing enormous economic blunders and allowing mega fraudulent transactions, with the knowledge they could pin the blame on the previous regime for anything and everything.
The question is what kind of leaders are these, who have no feelings for the welfare of the nation and do so much damage to their motherland, which is just out of a 30 year debilitating conflict, but impressively developed since the end of this conflict, by the former regime, ?