What Should Come First – Political or Economic Stability?

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Should a country first have political stability or economic stability is rather like the eternal egg or the hen that came first question. Politics is basically the decision- making process on how a country should be governed and its finances managed. An economy cannot survive if there is a lacunae in leadership, vision and will. Therefore, one may argue that political stability is predominant. 

Yet, can good decisions be made when one is hungry is the question we cannot ignore. If we cannot figure out how we are going to afford the next meal, then would the political structure hold any relevance? Chinese philosopher and politician Confucius apparently equated poverty to a house on fire. As such, eradicating poverty must take precedence.

Then again, anarchy cannot reign during a crisis. The governance must be clearly defined and respected. There must be trust in the system in place.

Having declared on 12 April 2022 that our country as bankrupt and therefore unable to service any of the loans, it appears that we have firmly placed our economy on the back burner. Until we hear something from the International Monetary Fund (IMF), which could take months, it seems that we are quite happy to let the issue be for the time being. Parliament is more interested on the 21st Amendment to the Constitution, which is ludicrous when the economy is collapsing before our eyes.

Fuel Crisis

Daily, newspaper headlines are screaming the increasing repercussions due to fuel shortages. According to the alarming news that dominated last week’s front page, the Ceylon Petroleum Corporation (CPC) was without USD 180 million to release four oil tankers already docked at the Colombo Port.

Making a special announcement PM Ranil Wickremesinghe stated that for this year we can only get 50 per cent from the total national requirement for fuel. According to the top CPC officials, stocks at the CPC is currently around 50,000 metric tons and therefore only 500 metric tons will be released per day for the fuel stations.

Under the Indian credit line the last diesel ship carrying 40,000 metric tons of fuel arrived in the Island on 16 June 2022. This will suffice for only seven days. Another shipment has not yet been procured due to the shortage of forex. Hence, the fuel situation will worsen in the coming days.

The Government is trying to secure another Indian credit line worth USD 500 million. However, this time the Export-Import Bank of India might ask for a collateral, given the country’s deteriorating economic situation.

This brings forth the question whether Ali Sabri, who was Sri Lanka’s shortest serving Finance Minister, and Central Bank’s newly appointed Governor Nandalal Weerasinghe made the right decision to stop debt servicing. If a country does not have money to pay off its loans, then obviously that country does not have money for commodities either. The fact that this decision was taken without the nod from the Monetary Board or Cabinet and certainly without debate in Parliament adds to the contention.

Already we owe our long-term suppliers a total of USD 735 million for fuel supplied for the past year. However, our failure to settle our dues has resulted in these suppliers from refusing to bid on tenders. This has forced the Ministry of Power and Energy to select new companies. According to Minister Kanchana Wijesekara six have already been selected.

Without fuel 85 per cent of public buses are stuck in refilling station queues. Minister Wijesekara has repeatedly asked the public not to waste standing in queues. A bowser can only carry 6,000 liters, which is sufficient for about 220 vehicles. Yet, some queues have over 2,000 vehicles, said the Minister.

He is clearly apprehensive of a volatile situation building with the mounting frustration of waiting for fuel that may not come. Indeed, over the past few days the growing tension has led to a number of altercations with the police.

The Association of Medical Specialists reminded the Health Ministry that practical and viable measures to ensure the mobility of medical specialists and other healthcare workers during this fuel crisis has still not been taken. These transport issues are eclipsed with the power crisis.

Power Crisis

Holding a press conference on 15 June 2022 the Ceylon Electricity Board Engineers’ Union explained that the CEB is struggling to cater to the existing demand. With consumption increasing, the CEB must increase its capacities accordingly. Until then, CEB will be compelled to continue its ongoing scheduled power outages at least for three more years.

In the meantime, due to the shutdown of the second plant of the Norochcholai Coal Power Plant there will be daily three-hour power cuts. The power plant has to be shut down for scheduled maintenance, which has already been delayed as much as possible because of the current crisis in the country. Any further delay might cause breakdowns in the plant.

As it is, CEB’s consumption of diesel had increased by 49.3 per cent during the first quarter of this year. This is because of the frequent breakdowns that has caused a 10 per cent declining of the supply.

The maintenance will take about 75 days to complete. Until then, the national grid would be without 270 MW. While the reservoirs are full, we can meet that gap through hydro power. However, once the reservoir levels starts depleting we will have to resort to thermal power plants. This is not only the most expensive form of power generation but made more complicated by the fuel shortages.

Government’s Focus

The fuel crisis, which is proving to be the mother of all crisis (if the predicted famine does not materialize) is because our income has dropped due to a slowed down GDP since 2015, Easter Attack and the pandemic. Most unfortunately our expenses continue to soar. The issuance of USD 12 billion by the Yahapalana Government as well as this Administration’s failure to arrest the growth of the black market via the Hawala and undial systems has contributed to this mess.

Incredibly, the Government is more interested in the constitutional amendments. Even that exercise has been flighty. For the third time in a row, the Cabinet postponed approving the proposed amendment. It is almost as if this 21st Amendment is to serve as an excuse for parliamentarians to avoid addressing root causes afflicting the country.

Though amendments from the 18th onwards did not exist during the war, these on its own has not contributed to political instability. It is neither the constitution nor the amendments that weakened this government that came to power with a two-third majority. The problem was with the mismanagement of internal conflict.

If the present constitution saw us through a war against terrorism and a pandemic against all odds, then we can surmise that despite its flaws our constitution is fairly robust. Then, our debate should not be on whether it ought to be the president or parliament who should be exercising the executive powers.

Our total focus should be on the economy. The present chicken wire-chewing gum remedies as declaring every Friday for the next three months a holiday for the State sector or closing down schools will only contribute to contracting the economy.

We cannot continue to live from loan to loan. The IMF bailout, if it ever materializes, is also not the panacea. Instead, our immediate attention must be on increasing our income and expanding our economy.

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BY Shivanthi Ranasinghe