{"id":121556,"date":"2021-12-26T17:15:46","date_gmt":"2021-12-27T00:15:46","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=121556"},"modified":"2021-12-26T17:15:46","modified_gmt":"2021-12-27T00:15:46","slug":"sri-lankan-economy-has-floundered-is-there-a-way-ahead","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2021\/12\/26\/sri-lankan-economy-has-floundered-is-there-a-way-ahead\/","title":{"rendered":"Sri Lankan Economy has floundered. Is there a way ahead?"},"content":{"rendered":"

By Garvin Karunaratne\u00a0<\/em><\/span><\/h2>\n\n\n

The economy of Sri\nLanka has come to a situation where the Government has allowed it to freewheel,\nwithout any controls. Going on this path It is  purely a matter of\ntime-  for the economy to totally crash. The Aim in writing this\nPaper is to find a solution to the present mayhem where we do not have funds even\nto pay for essentials.  <\/p>\n\n\n\n

Perhaps how countries have suffered and\nfaced similar crisis in the past may offer us ideas. <\/p>\n\n\n\n

In 1997 The Asian Giants- Malaysia,\nIndonesia, Thailand,  Southern Korea all crashed.  <\/p>\n\n\n\n

 In 1995, the World Bank had said\nthat Thailand was the world\u2019s  fastest growing economy. <\/p>\n\n\n\n

 Of Thailand,   in\n1996, export growth slumped  from over 29% to zero. The stock market\nlost two thirds of its value.  The country was battered by\nspeculators into a sharp depreciation- the biggest finance company collapsed.\nTwo thirds of all finance firms were suspended. The IMF was called in to\narrange the largest ever bail out\u201d<\/em>.( From Thailand Boom and Bust by\nPhongpaichit and Baker).  <\/p>\n\n\n\n

Of all countries that had crashed\neconomies, Malaysia stands out as the one country that emerged victorious.\nOther countries had to beg for assistance from the World Bank and the IMF.\nIndonesia was bailed out with a loan of $ 43 billion,  South Korea\nwith a bail out of $ 56 billion and Thailand with a loan package of $ 17\nbillion. They were all loans that enabled the countries to survive for the\nmoment and pay later- their foreign debt increased. <\/p>\n\n\n\n

The financial upheaval in Indonesia\nsaw  the fall of its leader Suharto Nicholas Kristof, Jakarta\ncorrespondent of the NEW York Times aptly wrote of what happened to Suharto, the Prime Minister of\nIndonesia: <\/p>\n\n\n\n

What overthrew Suharto was not a guerrilla\ninsurgency,  but a conspiracy of far more subversives- capitalism,\nmarkets and globalization; Suharto\u2019s  sleuths never figured how to\nhandcuff them<\/em>. <\/p>\n\n\n\n

(Herald International Tribune) <\/em><\/p>\n\n\n\n

It has to be understood that Sri Lanka\ntoday has been held hostage by international capitalism working through its\nagent, the International Monetary Fund. <\/p>\n\n\n\n

There was one country that did not go\nbegging for Aid. That was Malaysia.  Mahatir Muhammed the Prime\nMinister took charge of the economy, collected all the dollars from all the\nbanks. In my words, Mahatir Muhammed declared war with the IMF by doing the\nexact opposite of the IMF advice. He did not go on bended knees to the IMF.\nInstead he effectively controlled the economy of his own country. He imposed\nstrict controls on the use of foreign exchange. He did not allow anyone\nto  spend the money on the import of unnecessary goods. He clamped\nsevere restrictions on the use of foreign exchange. This even went to the\nextreme of stopping foreign  exchange for Malaysians studying\nabroad.  There was mayhem in student  circles in the\nUK.  Some students took leave of studies and went back. Others were\ncompelled to work as waiters and kitchen hands  and pay\nthemselves\u201d(How the IMF Ruined Sri Lanka: 2006:page 238) <\/em>  In\n1958  Mahatir even stopped foreign investors from taking away\nmoney.  <\/p>\n\n\n\n

In the opinion of Mahatir Muhammed,  <\/p>\n\n\n\n

Any country at all which says it\ncannot control its banks and its banking system- they are not fit to be\ngovernments and they should either resign or be overthrown\u201d. (Daily News.lk:\n1\/2\/1999) <\/em><\/p>\n\n\n\n

Malaysia was  the one and only\ncountry to get out of the East Asian Foreign Currency Crisis. <\/p>\n\n\n\n

Let us relate  what Mahatir\nMuhammed did to our present situation.  <\/p>\n\n\n\n

Even today the Sri Lankan Government does\nnot collect the dollars that come in. The bulk of the dollars are\ncollected  by the private and foreign banks  and the\nprivate money changers who are allowed to fix their own rates to buy and sell.\nThe private dealers collect  dollars or rupees within minutes, while\nthe State banks take at least half an hour of form filling and passport checking.\n. That is how the government is bankrupt.  The State Banks collect\nonly a fraction of the dollars that come in.  <\/p>\n\n\n\n

A funny thing did happen on 2\/1\/2001- a\nday, two decades ago. Our two State banks the Bank of Ceylon and the Peoples\nBank did not have sufficient dollars to pay a large oil bill and they went hat\nin hand to the private foreign banks in Colombo. The foreign bank that had\ncollected dollars raised the price to Rs 106, when the rate had been Rs 85 and\nthe two State Banks were forced to buy at the higher price. The Rupee was\ndevalued immediately.  <\/p>\n\n\n\n

The Central Bank when questioned admitted\nthat the Central Bank has control over the domestic Rupee(The Island:\n17\/2\/2001) <\/p>\n\n\n\n

In other words the private banks collect\ndollars that come in and sell it as they like, fix their own rates and this has\ngone on and even today the banks and private dealers fix their own rates. <\/p>\n\n\n\n

What all this indicates is that even today\nour Government does not control the foreign exchange that comes\nin.   Naturally we are today facing the music of not having\ndollars to pay for essential imports. <\/p>\n\n\n\n

What can be done? The Governor of the\nCentral Bank Minister Cabral has ruled out going to the IMF. Because the IMF\nwill insist on devaluing the Rupee, increase interest rates, privatize State\ncommercial ventures, draw further loans and live on them like what we did in\nthe past. He is right. <\/p>\n\n\n\n

Our leaders jump up and state that we will\npay what we owe  next year- some $ 4 to 5 billion to service the\nforeign debt we owe. It is time for moot thinking whether we need to service\nand pay any loan outstanding to the IMF and the World Bank purely because we\nhave done everything they have said and we are now facing a crisis due to their\nwrong advice. <\/p>\n\n\n\n

We have to find out, question\nourselves: <\/p>\n\n\n\n

Are we yet collecting all the dollars that\ncome in? No. We allow the private and foreign banks and private dealers to\ncollect, fix rates and sell as they like.   This they have done\nfor decades from November 1977, and at least now we have to collect all dollars\nthat come in like what was done before we embraced neoliberalism in 1977. <\/p>\n\n\n\n

Are we yet being fooled by foreign\ninvestors who trade in the local Rupee,  calculate profits in the\nRupee but take away profits in dollars from our reserves.  <\/p>\n\n\n\n

Are we not yet being fooled by foreign\ntourist booking agencies that book hotel stay, get the hotel to collect in\nlocal Rupees but get paid by invoices in dollars going out of our reserves.\nHotel bookings from foreigners has to be collected in dollars.  <\/p>\n\n\n\n

Before\nPresident Jayawardena foolishly  submitted to neoliberalism and\nstarted living on loans, we had a closed economy that was totally controlled.\nThen we had two budgets a local Rupee budget that attended to all development\nwork. We had a separate foreign budget run with the dollars we collected from\nimports etc.  Then we spent the dollars we had firstly for essentials\nand if we had extra we gave small allocations to import cars and fridges etc.\nWe never gave funds for  foreign travel unless it was necessary for\nour country, Nor did we allocate any foreign funds for students to study\nabroad. Do we not have to get to this system even now.   <\/p>\n\n\n\n

Perhaps how we managed our finances from\nthe day we achieved independence  till President Jayawardena started\n,licking the boots of  the IMF is of importance. The fundamental fact\nis that at the end of 1977 Sri Lanka did not have a foreign debt. <\/p>\n\n\n\n

As much as we have had to restrict imports\nlet us have a programme to make all what we imported. Not long ago we had the\nDivisional Development Councils Programme(DDCP) of 1970-1977 when we made sea\ngoing fishing boats(at Matara), even Crayons equal to the Crayola of today(at\nMatara), even paper made out of waste Paper(at Nuwara Eliya- Kotmale)\nagricultural farms ( in every District)and many more,  all done with\nlocal Rupees,  all done by local staff. We can easily do it again in\nmonths.  That will also provide incomes and employment to the\nunemployed.  <\/p>\n\n\n\n

The Government cannot allow the banks to\nrule any longer by allowing dollars to whom they prefer. The Government has no\nalternative but to collect all dollars that come in and spend first for\nessentials- there should be no kero queues and no milk food  queues. Price\ncontrols are inevitable. Essentials first. There will be no money to feed\nforeign universities and the foreign universities  have even jacked up the\nfees to bolster their funds It is all a plan to increase the debt burden of\npoor countries. <\/p>\n\n\n\n

Perhaps a re think of priorities and a\nfirm resolve to go ahead is what is required today. <\/p>\n\n\n\n

Garvin Karunaratne
Author of How the IMF Ruined Sri Lanka , Godages 2006~
How the IMF Sabotaged Third World Development, 2017<\/strong><\/p>\n\n\n\n

26\/12\/2021<\/p>\n","protected":false},"excerpt":{"rendered":"

By Garvin Karunaratne\u00a0 The economy of Sri Lanka has come to a situation where the Government has allowed it to freewheel, without any controls. Going on this path It is  purely a matter of time-  for the economy to totally crash. The Aim in writing this Paper is to find a solution to the present mayhem where […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[57],"tags":[],"class_list":["post-121556","post","type-post","status-publish","format-standard","hentry","category-by-garvin-karunaratne"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/121556","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=121556"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/121556\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=121556"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=121556"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=121556"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}