Chanaka Bandrage
The country is facing a severe foreign exchange crisis. Our foreign reserves are almost zero now.
Due to lack of dollars to import fuel, there are daily power cuts; long vehicle queues can be seen in petrol filling stations. The banks have no dollars to pay to clear the thousands of shipping containers that have piled up in the port. We import almost everything in Sri Lanka; due to the dollar crisis there is a huge scarcity of some imported items.
The list of difficulties and inconveniences we face is endless.
With time to come, the problems will exacerbate. They will become unbearable to the citizens.
Due to the Ukrainian war, there is no doubt that the world fuel prices will further escalate. Already a petrol barrel fetches above US$ 120 in the world market. This is the highest price for petrol in 9 years (after 2013). They will definitely increase further.
The government is faced with an unprecedented situation. Omicron peak has still not reached. More than 20 people die a day. At least US$ 7 billion of foreign debts are required to be paid soon. Strikes are propping up in every corner. One needs to sympathies with the government. No one would want to manage a finance in such situation.
Finding dollars is the key solution to all the problems. This has become an essential issue in everyone’s lives.
Sadly, the government does not seem to be proactive to secure dollars. Bribery, corruption and bureaucratic inefficiency are rampant. And there is apathy on the part of the citizenry in regards to the government’s attitudes. Hence, this article.
Rather than exploring new dollar avenues the government continues to rely on the older, traditional methods. The government must realise that these methods have failed.
The government does not seem to have new ideas. Inflation is skyrocketing. The suffering that people undergo is tremendous.
The government is obsessed in building useless new expressways, causing enormous environmental, wildlife and agricultural land destruction. Many projects employ Chinese labourers denying locals employment opportunities. Everybody knows expressways are a good source for the politicians to earn huge illegal incomes. More than 70% of the population receives no benefit from expressways. More than 60% of the country’s registered vehicles (InterCity Buses, motorcycles and three wheelers) are banned on expressways. In developed countries they are allowed – they do not have three wheelers. Rather than reducing the overall traffic congestion the expressways have sometimes contributed to exacerbate traffic problems. Another foolish venture is the nonstop building of walking tracks. The government even tried to build a walking track on the bund of the Great Tank – Parakrama Samudraya.
These projects do not contribute to the direct increase in the country’s GDP.
The government still foolishly thinks that mega projects is the way to development. Very little is done to introduce micro loan schemes to improve the lives of the down trodden.
In regards to solving the dollar crisis, the government believes that obtaining currency swap assistance is the only and best solution forward. We have even borrowed from Bangladesh.
The government must realise that these are only stopgap measures. Also, none of the assistance comes free of charge. They are all loans. As it is obvious that we do not have the means to pay off these loans, we will end up selling our valuable assets to foreigners, especially real estate. Already we have given away precious Colombo lands to China, Trincomalee Oil Tanks to India, Kerawalapitiya LNG Electricity plant to USA and thousands of fertile Wellassa lands to Singapore.
Despite all these efforts, the dollar crisis has worsened. There is no sign of the economy improving. Every day the economy is nose diving. Are we already a bankrupt country?
The government must act fast, it must stop the country from becoming not just Asia’s but World’s ‘basket case’.
The government has not done anything substantial to increase exports. Expanding the garment industry is a good way to earn extra dollars. This is how Bangladesh somewhat prospered. We have the niche in the world’s lucrative tea market, but we have failed to capitalize. It is doubtful that the government has skilled, capable people to undertake such tasks. The cabinet is full of lethargic persons.
Why the government is not seeking or reluctant to obtain IMF assistance is a million dollar question.
Lebanon has sought active IMF assistance, and it is gradually coming out of its grave economic crisis. Argentina was also rescued by the IMF. Greece was rescued by the EU. Like Venezuela, there is no one to rescue us. Thus, we may not be able to survive.
If the government is not going to IMF solely due to IMF’s strict loan conditions, then the government is not acting in the best interests of the nation. This is like denying a dying patient medicine. If IMF imposes strict conditions – that is in order to streamline that country’s economy. They do so in good faith.
Currently this is exactly what we need (strict conditions). Of course we could negotiate the conditions with them.
If the government is refusing IMF assistance due to any other reasons, it has a duty to tell those reasons to the people. It is ours and our children’s future that is at stake.
Some say if the IMF is involved, they will ask the government to scrap the government’s efforts to keep the Rs/Dollar rate static (Rs 203 = US$1). True, currently this artificial arrangement is serving the government well in managing inflation. But, this lower dollar rate has dissuaded expatriates from sending remittance to Sri Lanka. Furthermore, the IMF will ask the government to stop printing money. It will want the government to reintroduce the corporate taxes that the government scrapped soon after coming to power in 2019. The government’s ‘best friends’ will resist the reintroduction of the high-end taxes. The IMF will definitely ask the government to cut costs and reduce the public service (we have one of the Asia’s largest, on a per capita basis). Under an IMF assistance package, the perks and privileges enjoyed by the politicians and top government officials will have to be drastically reduced.
How to raise new dollars – few suggestions
We have an abundance of men and women working overseas. They number at least two million. Lots of them are good patriots. The government must tap into them in this moment of grave economic calamity – to secure dollars from them. Surely, if they are approached correctly, these patriots will reciprocate kindly.
Most of our brethren working oversees are smart, hardworking and intelligent. In the past they have remitted to the country large amounts of foreign exchange, say up to US$7 billion per year. Now they are not sending money here. Since recently they have resorted to sending money through the Undiyal system. Thus, the country has missed out on receiving much needed dollars. Given that the banks are buying dollars at a much lesser rate than the registered private money lenders, the expatriates will continue with the Undiyal system. The government must try to break this. For this, it ought to give incentives to expatriates to send money to the banks, just like in the past.
There are other ways and means to encourage the expatriates (include the Diaspora in the West and workers in the Middle East) to send dollars (or applicable currencies) to Sri Lanka.
One sound idea is to allow them (long term expatriates) to send a vehicle (car, van. motorbike, three wheeler) to Sri Lanka (without opening L/Cs here), and to pay their customs duty in dollars. As Sri Lanka’s vehicle import duties are very high, this will be a good source of dollar revenue for the country. This will also ease the current vehicle shortage in Sri Lanka that has arisen due to the prevailing vehicle import ban. The ban has existed for 2 years.
The government is not doing this as the motor car dealers strenuously oppose the scheme. The government must look at the benefit of the scheme to the country and the public at large. It should not be biased towards a small group of people.
Apart from vehicles, customs duty for all other imports should be allowed to be paid in foreign currency, and such payees should be afforded incentives/discounts.
Expatriates used to send lots of monies to Sri Lanka through the NRFC scheme. Local banks offered them good interest rates. Thus, they bypassed their resident countries and sent money here. Due to the foreign exchange crisis very few people are using the NRFC scheme now. People are scared that they will lose their hard earned money (dollars and other currency). The government must alley the fears that the depositors have.
Foreign tourists to this country and Sri Lankan citizens living here who have dollars (and other foreign currencies) must be encouraged to pay for their goods and services in foreign currency. For example, those who patronize elite hotels, holiday destinations should be allowed to pay their bills in dollars. Foreign tourists must be encouraged to pay various entrance fees (Temple of the Tooth, Sigiriya, Dambulla, various botanical gardens etc) in foreign currency. Fees should be slightly lowered to those who pay in dollars.
Sri Lankans who are buying electrical appliances like TVs, refrigerators, washing machines etc from leading stores should be given the option to pay in dollars. Then, Incentives must be afforded to them such as tax concessions.
A Duty Free shopping complex must be opened in Colombo where trading must be done in foreign currency.
The government must ensure that the Central Bank will buy those dollars from the respective businesses promptly after paying the dollar collectors a reasonable commission in addition to the actual item price that they have sold.
The Central Bank must have a scheme to buy dollars from the private money exchange market. There are large scale dollar deals occurring in the private market each day.
Another suggestion is that the government can set up a ‘Support Sri Lanka’ dollar account with the Public Trustee and the Government Auditor as Joint Trustees to manage it. If it is honestly managed, expatriate Sri Lankans and Sri Lanka’s overseas friends will contribute. Ukraine has just established such a fund.
What we need to realise is that all these new dollar revenues would collectively add to a sizable amount. Today, every dollar is valuable to the country.
Sri Lanka is currently hemorrhaging and unless the government becomes proactive to secure the much needed dollars, the economy could well sigh its last breath. Currently, we are all tremendously suffering. In the near future, we could lose all our life savings in banks and many other calamities could happen. Lots of people could commit suicide (like in Argentina, Greece).
Sadly some of the people who run the country’s finances and some in the cabinet are extremely corrupt, inefficient, unintelligent and lethargic. The leaders do not seem to have a vision. They have brought the country to a day-to-day situation. The whole country pays a huge price for their actions and in-actions.
Why our citizens are so passive, incredibly quiet and disinterested in public affairs is also a million dollar question. There are no other people like Sri Lankans. They want to keep dancing well knowing that the ship is sinking. Many of them think only about their and their families’ wellbeing, not the country. Many are unbothered about corruption because if given the chance they would also engage in corruption. By the time our people wake up, the ship would have sunk.
The writer is an International Lawyer (ethos8@bigpond.com)
