UNP leader and a record six times Premier, Ranil Wickremesinghe was sworn in as Sri Lanka’s 39th Finance Minister by President Gotabaya Rajapaksa yesterday, thereby ending a 16-day hiatus.
Previously, when the then Premier Mahinda Rajapaksa together with the then Cabinet resigned following the 9 May riots, there were no takers for this post among the ruling party SLPP MPs led by their fear for the wrath of the masses.
The underlining reasons for the 9 May riots were due to the high cost of living (CoL); a record of over 30 per cent inflation; shortages of essentials like fuel, cooking gas, medicines and milk foods to name a few; long queues lasting for more than 12 hours daily to buy such, but quite often returning empty handed; bribery and corruption; nepotism; cronyism; daily hours-long power cuts too, due to the lack of US dollars to import coal and a thriving black market. The reasons behind these socioeconomic ills are the lack of dollars in the country to make such essential imports, caused by corruption, coinciding with the election of Mahinda as the President nearly 17 years ago on 17 November 2005.
The current state of Sri Lanka is similar to the situation that beleaguered the socioeconomic fabric of the island 45 years ago in 1977 by a Marxist/socialist regime, before it was transformed by Wickremesinghe’s West leaning and ‘friend of Japan’ uncle, President J.R. Jayewardene.
‘The Hindu’ yesterday quoting Wickremesinghe’s Office said, “During the two weeks he has been at the helm, he reestablished the island’s foreign relations, took steps for constitutional reform with the draft 21st Amendment, ensured fuel supplies and has been making preparations for an interim budget.” Wickremesinghe took over as Premier from Mahinda on 12 May.
Whether after Wickremesinghe taking over ensured fuel supplies or not, the fact remains that at least till yesterday long lines of vehicles and people were continued to be seen at fuel stations in the City, ‘queuing up’ for petrol, diesel and kerosene.
Two critical problems which the new Finance Minister has to address on an urgent basis are the rising CoL and inflation. For this he requires the all important dollars to make essential imports freely available to the masses at a reasonable price once more, increase productivity by cutting down on waste and enhance not just employment, but better employment to the masses of this country. These, his uncle Jayewardene successfully did, with the help of Japan and the West.
Despite all of what Wickremesinghe and/or his Office may say and/or do, whilst giving an allowance for the fact that he has been in power for only a fortnight, nonetheless, the 9 May riots is an eye opener that the needs of the masses have to be solved on an urgent basis, to prevent another riot which may be worse than the ‘first’.
Central Bank of Sri Lanka’s (CBSL’s) 1977 Annual Report quoting the malaise besetting the country’s political economy then said, “In the short-term, the adverse effects on living standards of the people may have to be cushioned by external assistance especially if a large external resource gap emerges.”
Sri Lanka currently too, suffers from a large external resources gap typified by a persistent deficit in the current account in its balance of payments led by an almost perennial negative trade account.
Going forward, CBSL’s 1978 Annual Report said, “Substantial capital inflows, together with resources from the IMF, went on to create a favourable overall balance in Sri Lanka’s payments, augmenting the external assets for the third year in succession, to a level that would normally be adequate to meet four months’ imports projected for 1979.”
The conduit of almost unconditional capital flows for a country like Sri Lanka which practices a liberal economy are the West and Japan for which only two other conditions need to be fulfilled, firstly, the rule of law and secondly respect for human rights. Until such time the Gotabaya Rajapaksa-Wickremesinghe Government gives primacy to the rule of law, to Sri Lanka’s peril, much needed capital flows from this quarter will be slow to come by.