Economy Contracts


The Department of Census and Statistics yesterday said, the economy contracted by 1.6 per cent in the first quarter (1Q) of the year after growing by 3.3 per cent last year, before contracting by 3.5 per cent in 2020. The economy grew by two per cent in 4Q 2021. Prior to 1Q 2022, the last time the economy contracted on a quarterly basis was in 3Q 2021, where it shrank by 5.8 per cent.

In the midst of this dire performance, the Government, being broke to import fuel and in a move to stretch whatever is remaining of its spartan fuel stock, has allowed only “essential” services to operate over a 13-day period beginning yesterday and ending on Sunday 10 July, portending that 2Q 2022’s economic performance would be as dire as 1Q 2022, if not worse.

Even the operation of schools is restricted during this period, delivering a further blow to schoolchildren whose education has already been disrupted by COVID.

Government has, however, assured that the situation will normalise post 10 July. Cabinet Spokesman Bandula Gunawardena is apparently banking on this based on Power & Energy Minister Kanchana Wijesekera’s current visit to Qatar and a yet to be named minister’s visit to Russia.

He further said, the crisis is due to mismanagement. If it’s due to mismanagement, what charges do Gunawardena and his Government hope to arraign against those responsible for this catastrophe? If not, why?

Is this mismanagement due to the fact that in the first seven years of President Mahinda Rajapaksa’s tenure, from 17 November 2005 to 31 December 2012, where the expensive and short-term foreign commercial debt as a percentage of total foreign debt which was a mere four per cent as at end 2005, rising to be over 50 per cent by 31 December 2012 and being over 50 per cent at least till 31 December 2021? If not, what? This newspaper remembers then IMF Resident Representative Dr. Koshy Mathai warning of the dangers of rising foreign commercial debt during this period, but his warning fell on deaf ears.

This, taken together with what is happening currently, has to be looked at in the context that since Independence in 1948 and up to 2005, a 57-year period; Sri Lanka’s foreign commercial debt as a percentage of total foreign debt was under7 per cent, till this record was broken by former President Mahinda Rajapaksa.

Rajapaksa’s younger brother and present President, Gotabaya, in his election manifesto released on the eve of the November 2019 Presidential Poll said, “We pledge to bring to justice all those involved in the Central Bank Bond scam, and other 20 major financial crimes.”Does Gotabaya also plan to bring to book those involved in the “mismanagement of the economy” that has caused misery to the masses?

Is, increasing Sri Lanka’s foreign commercial debt as a percentage of total foreign debt (unique only to Mahinda), from 4 per cent to 51 per cent in the short space of seven years, “corruption” or “mismanagement?” It’s also the duty of Gunawardena who also served in Mahinda’s Cabinet to explain the reason behind this phenomenon.

Renegade SJB Minister Harin Fernando addressing the same briefing appealed to the masses to have faith in the Government. Can the masses have faith in a Government which first reduced VAT from 15 per cent to 8 per cent no sooner it came to power in November 2019, only to raise it to 12 per cent a few days ago?

Further, can the voter have confidence in a Government, where its President in his election manifesto pledged to do away with the fuel pricing formula, only to reintroduce it a few weeks ago?

Gotabaya Rajapaksa in his election manifesto also promised that healthcare will be delivered countrywide on the basis of a National Health Policy. Can, then Fernando explain the reason behind the rise in deaths due to snakebites and rabies? Is it due to a short supply of the required medicines and what has caused this short supply? Gong by current performance, can the masses trust this Government and the promises made by its agents, in the likes of Fernando?