Sri Lanka’s Economy in the woods: But there is a way out.
Posted on February 24th, 2024

by Garvin Karunaratne

Thanks to Cabinet Spokesman, Minister Bandula Gunawardena for revealing that the Sri Lankan Government is running a shortfall of Rs 10 trillion to meet its expenditure with its revenue…We collect only Rs 3 trillion while the expenses are Rs 13 trillion”(The Morning20​/02/2024)

This reveals a situation of sheer bankruptcy, a situation out of which we can perhaps, never recover.

What has happened is that since 1978 we have been overspending- living far beyond our means.

Professor Charita Herath has aptly stated in the Lankadeepa of 9/2/24 that we are tatu nodena nayata ka satutuvima” – that we are living happily in sheer debt. He discloses that our foreign debt is now as much as $ 91 billion. When Gotabhaya handed over Sri Lanka to President Ranil the foreign debt was only $ 56 billion. It follows that President Ranil has during 2023 has increased the foreign debt by as much as $ 35 billion- all within one year 2023. This is an alarming increase that shows how the present Government is spending foreign money obtained on loans in an unprecedented manner.

Further, today’s Daily Mirror states that Sri Lanka is within the list of 22 heavily indebted countries, facing strictures by the IMF.

We are doing this spending while poverty is terribly increasing. Poverty has doubled from 13% to 25% between 2021 and 2022(Lanka Web: 19/2/2024). With increases in taxes over half the population live within the bounds of poverty.

Our economy is in serious straits and the present Government is actually spending- adding loans and creating debt, which deserves to be avoided. It is true that we have avoided petrol queues and acute shortages of food, but the phenomenal increase in our foreign debt tells me that our country has merely borrowed more- for instance the petrol queues were stopped by inviting foreign petrol giants to come in and we are now in debt to those international petrol companies. Our book shops are replete with unnecessary novels and our shops are full of unnecessary wares all brought on our foreign exchange!

We have even miserably failed to grab the dollars that come in- the bulk is taken in by private currency dealers, who are not accountable for the dollars they take in- mind you even the foreign banks that collect foreign exchange hold on to the foreign exchange and bid the value upwards when the State Banks have to face a big oil bill as happened on 25 th January 2001, causing an immediate devaluation of 20%!(Page 53 of my book How the IMF’s Structural Adjustment Destroyed Sri Lanka(2022)

Mind you even today foreign passport holders need not pay hotel charges in dollars, while in India, Thailand and all other countries all foreigners have to pay in dollars. Even Multinational hotel booking companies advise the clients to pay our hotels in Rupees, but send their charges- 15% to he hotelier and the hotelier takes that invoice to his bank and it gets paid from our reserves. We have not done our arithmetic right re foreign dollars that comes in.

That is how we have increased our foreign debt. It is sheer misadventure.

A note of warning may be useful for the politicians and mandarins who are responsible – There is Minister Keheliya Rambukwella and the Secretary of his Ministry a very high ranking officer , incarcerated for financial mischief at the moment and the day may dawn for all politicians and officials who are responsible and have resorted to spend unnecessarily to be held behind bars. Generally it is believed that this may happen if the JVP comes into power. However this holding officials and politicians responsible for financial misadventure is happening right now.

Mind mind goes back to my time in the Administrative Service when we had to close the books and ensure that we did not spend what we did not have. All Government expenditure was done with local printed rupees and the incoming dollars were carefully collected and spent on imports-essentials first. That to us was a sacred task and we did it well while also bringing about development, till in 1977 President Jayawardena decided to live on loans as advised by the IMF and commenced the rot. Sri Lanka did not owe a cent to anyone when Premier Sirimavo handed over the country to President Jayawardena at the end of 1977.

It is time for our President Ranil and our elected leader, our Prime Minister Mr Dinesh Gunawardena to think and act to make an immediate change by developing programmes to get our unemployed to make items that are being imported. This is poverty alleviation and will reduce imports. This can be done without spending any foreign exchange. We, have only to follow the last real development programme we had- the Divisional Development Councils Programme directed by Professor HAdeS Gunasekera the eminent professor of economics, which created employment for 33,000 youths. .It would have been far more if not for the JVP Insurrection of 1971 and the JVP Kangaroo Courts that chased all wealthy entrepreneurs out of rural areas.

We in the Administrative Service did work fast.

The Divisional Secretary at Kotmale collected all the waste paper he could find from all the Government Offices in Nuwara Eliya and rolled up his sleeves and worked with the youths in Kotmale to make paper and cardboard. Greetings for this 2024 New Year came to me from the Prime Minister’s Office with a Diary and a GreetingCard made from illuk by the Divisional Secretary at Hewaheta. Instead of following in the footstepps of the Kotmale Divisional Secretary we have since 1978 till today- for almost fifty years exported 8000 tons of waste cardboard to India a month collecting a few coppers and buying the paper and cardboard India make out of it paying dollars. Truly we must have our heads examined!. We do not use waste paper to make paper today.

I may submit for kind consideration two major industries I established in Matara where I was in charge, implementing the DDCP Programme. One was the Mechanized Boatyard that employed around twenty youths who made some 40 seagoing boats a year, which became the flagship industry established by the DDCProgramme. This Boatyard was established by my Divisional Secretary Ran Ariyadasa and his Development Assistant within three months.

Another major industry I established was Coop Crayon- it took three long months of experiments to find the art of making a crayon. This happened within the four walls of the science lab at Rahula College Matara and the key person who found that art of making crayons was no other than Vetus Fernando, my Planning Officer. We fine tuned the crayons to be equal in quality to Reeves Crayons, the best of the day. I entrusted the task of establishing the Crayon Factory to Sumanapala Dahanayake, the Member of Parliament for Deniyaya, who happened to be the President of the Morawak Korale Coop Union. I had only to handover a letter signed by me authorizing him to use Cooperative Union funds, purchase the ingredients the cookers, pots and pans where the liquid was to be boiled and put into glass tubes manually, allowed to rest and each crayon stick handcrafted. In two days time, Planning Officer Vetus, Development Assistant Paliakkara, The Assistant Govt Agent Ranjith, the District Land Officer Chandra Silva moved to Morawaka. It had to be a non stop twenty four hours a day operation, with Vetus and my officers supervising the lads at work . In the second week Sumane got the labels and packets printed and in two weeks time we filled two large rooms with crayons. I was there for the first three nights and on many more nights.

The only problem was that we did all this with the greatest secrecy, The boss of the DDCP Programme Professor HAdeS Guanasekera was unaware. I was certain that he would not approve it. We moved differently. Sumane and I took the crayons and showed them to the Minister for Industries Mr Subasinghe. He was surprised at the quality and agreed to open sales. We rushed back and within that week end got him to open sales, and the sales youths from Morawaka were on the streets selling coop crayon in Matara and Colombo. We faced the problem of having to buy imported dyes in the open market at high prices. I got info that the Ministry of Imports was about to authorize imports of crayons and Sumane and I moved in to meet the Minister Mr Ilangaratne. We first met the Import Controller Harry Guneratne and convinced him that we only needed a fraction of the foreign exchange he was going to spend on imports for us to import some dyes. He was convinced but he wanted us to get the Minister’s approval as this cross allocation had never been done earlier. The moment we showed the crayons we made to Minister Illangaratne he started scribbling on paper and found that his hands were not soiled with colour. He not only gave us an allocation but also shouted for the Controller of Imports to ban the import of crayons altogether. In weeks Morawaka lads were selling coop crayon at both Alimankada and Pamankada.

These two are true stories of how our administrators did work.

My message to the highest elected person in Sri Lanka, His Excellency Mr Dinesh Gunawardena. Please read the Lankadeepa article by Professor Charitha Herath Tatu Nodena, Nayata Ka Satutu Veema” to the effect that our foreign debt has increased to as much as $ 91 billion. Professor Chatitha Herath is a learned professional who can be relied upon.

My message to the Excellency is clear. We do have the ability to tackle our economy and make things ourselves, training the unemployed youths to get cracking. We did it once earlier and dear Excellency we can do it again if only our leaders and the Central Bank approve it.

Let us live in hope

Garvin Karunaratne

former GA Matara


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