There is no question that we are in an economic crisis. It is certainly not a new development. Almost, throughout our contemporary history successive finance ministers’ special task was to go around the world with the begging bowl. As we turned into the new millennium, the then Government even contemplated selling the Sinharaja Rainforest to foreign investors to raise money. When the Liberation Tigers of Tamil Eelam were arming themselves with superior weaponry, we were struggling to put boots on our soldiers’ feet. However, it was the previous government that came under the harshest criticism, of its political opponents, and accused of plunging the country into heavy debt.

Yet, despite that our country’s finances are now under those very critics’ control, our economy has deteriorated into an absolute catastrophe as never seen before. At a recent lecture given at the Public Library by Dr Nalaka Godahewa, former chairman of the Sri Lanka’s Securities Exchange Commission, disputes that the previous administration mismanaged the economy. In fact, he asserts that since eradicating terrorism from our shores, the economy received that Government’s full attention.

Economic achievements

Previously, he had explained to this writer that the limelight on the Rajapaksa administration’s achievements was on uniting this country.

However, no one paid heed to the economic revolution that administration engineered. Despite the impressive strides we made economically, many did not realize this ground reality. Hence, they were easily misled by the political opponents’ claims that though the Rajapaksa administration won the war, they were incapable of managing the economy as it’s an administration steeped in corruption. Dr Godahewa observed that many Sri Lankans have a weak grasp on numbers and do not understand the difference between a million and a billion.

At a Public Library event he noted that, By 2014, we were on a clear track forward and every economic indices in Asia ranked us as either first, second or at the very least in the third place. Our growth rate was only second to China. Foreign investments were flowing into the country and the entrepreneurs’ trust in the economy was solidifying. This was reflected by the rapid progress, then, at the Colombo Stock Exchange. It was during this economic development that war-winning President Mahinda Rajapaksa was defeated by the present political coalition.”

Those who voted for this government had immense confidence of its ability to manage the economy,” he noted. The public, especially in the business community, had a misconception that a United National Party-run Government can develop this country economically. This misconception took root during the period 1994-2005 period and when the economy in 2001 nosedived to negative growth. People thought if the economy was in the UNP’s hands, this situation would change.”

Today the country is being administered by that very same political coalition, critical of the Rajapaksa administration, with the UNP behind the driver’s seat, steering the economy. Yet, President Maithripala Sirisena himself is on record that the UNP had destroyed the economy. Indeed, the situation has deteriorated to selling off our national assets, and still failing to arrest national debt from increasing from USD 7,400 billion in 2014 (accumulated since Independence) to USD 10,400 billion by end 2017 or from safeguarding the value of our Rupee from crashing.

There are two reasons for this,” explains Dr Godahewa. This coalition government is made of partners holding opposing economic ideologies. This is a unique situation. This has resulted in the partners being unable to agree on any economic policy. When one takes a decision, the other opposes, which the initiator refuses to be overturned, hence creating chaos.

This government came into power pledging to save the country from the economic ruin they accused the Rajapaksa Government of causing. Yet, they have no economic policy. Every Government since independence had a definite economic policy, noted Dr Godahewa, whether it was an open economy or closed, left-orientated or right. This government on the other hand changed its economic policy four times just between the 2015 Presidential Elections and the General Elections that were held that same year. In these three years, they had introduced nine different economic policies. A Government that does not have a definite economic policy is one without an economic policy.

Bad decisions

The second reason for their economic mismanagement is the successive terrible decisions they took. In their very first Interim Budget presented in March 2015, they committed their first blunder with an unprecedented attack on the business community – the very community that had immense faith in the UNP’s economic management. For instance, they claimed that any company that earned an income of over Rupees two billion, was an unwarranted income and imposed a massive tax on it. This eroded not only the local business community’s confidence, but also lost the foreign investors’ trust.  The mistake they continue to commit, noted Dr Godahewa, was to repeat the same falsehood of corruption and economic instability that they did before the elections. Naturally, when the Government itself is on record of such status, the investor confidence will not improve. As a result, the foreign investment of USD 1,400 billion that flowed into the country in 2014 dropped to USD 600 billion in 2015, which further fell to USD 300 billion in 2016 and by 2017, it has trickled down to USD 17 billion. The thriving stock market is crashing as investors began to pull their money out of the country.

Then, within 50 days of assuming power, they engineered the biggest scam in Sri Lankan history with the Central Bank bonds. Despite the concentrated effort to conceal the crime, the whole country is aware that this government’s highest powers are responsible. These scams ripple effect has directly affected the interest rates. As the interest rates increase, entrepreneurs find it difficult to finance their businesses and especially the export industry had been adversely affected.

Another blunder they made was to cancel the country’s biggest development project – the Colombo Port City Project. After one year, they were forced to grovel before the Chinese Government who then demanded USD 26 billion as compensation for lost time. Likewise, they canceled a Sri Lankan Airlines’ order for Airbuses and had to pay USD 17 billion as compensation. These are only a few examples in which this government’s haphazard decisions had cost the country dearly.

In 2014, our agriculture was in a strong position that this government was able to store the additional paddy stocks at the Mattala Airport, reminded Dr. Godahewa. However, from day one, they underestimated the importance of food security and took away the subsidies and other support given to the agricultural industry. By 2017, the paddy production was only sufficient for eight months. Likewise, other industrial and service sectors have been severely affected by this government’s gross economic mismanagement.

Whilst thus mismanaging, the Government increased its spending especially on privileges to politicians. When the economy fails, the income falls, explains Dr Godahewa. This directly affected the Rupee value, which has since begun to slide rapidly. Since 2014, the Rupee has fallen by 20 per cent in comparison to the USD value. This in turn has increased our debt burden by an additional USD 820 billion. Putting this value in perspective Dr Godahewa points out that the total cost of the main projects undertaken by the previous administration – the Colombo-Katunayaka Highway, Hambanthota Port, Mattala Airport, Norochcholai Coal Power Plant – together cost only USD 460 billion.

When the income does not meet the expenses, the Government must find other avenues to meet the shortfall. The three methods this government has adapted to do so, listed Dr Godahewa are, selling our national assets, taking loans and increasing taxes. This is only the beginning of the destruction by this government, concludes Dr Godahewa.