PBJ: Emerging out of the closet

| by FS

( March 25, 2012, Colombo, Sri Lanka Guardian) For months on end, Treasury Secretary Dr. P.B. Jayasundera has been Sri Lanka's most elusive public official. Heading the two most important institutions in the country dealing with Sri Lanka's public finances - Ministry of Finance and the Treasury - and later taking on another portfolio, Secretary, Ministry of Economic Development, Dr Jayasundera rarely spoke to the media, gave interviews or was accessible on the phone.

Initially this top government official who has survived many governments - and one would hasten to add is like Bradman Weerakoon who served many masters and Sirima Bandaranaike during his time as Secretary to the Prime Minister -, and also a Supreme Court ruling, was widely believed to maintain a low profile soon after he returned from 'forced' retirement based on the Supreme Court verdict in the LMS privatization case.

Subsequently, however, he gave a few interviews to selected media and journalists but by and large was not accessible, explaining on Thursday at a media briefing that this was because he was 'extremely' busy and didn't have time to deal with the media. However the biggest flaw here is that he also directed his officials not to speak and to even set the record straight on a plethora of issues that confronted the economy. The economy has been on a topsy-turvy ride since the last two years of the conflict particularly with defence spending soaring, tax revenue falling and the international financial crisis exploding in Sri Lanka's face, eroding foreign reserves and forcing the country to seek a bailout package from the International Monetary Fund (IMF). That $2.6 billion Standby Arrangement (loan) came with tough conditions - lower budget deficits, cut government spending, trim losses at the CPC and the CEB and allow a free float of the Rupee.

While some of these conditions were met, others were not like the free float of the Rupee. However these issues didn't concern the ordinary masses who were more preoccupied with the war and its daily burden on most rural families who had at least one member of the family employed in the security forces. Thus in many ways the conflict hid serious economic issues at the time, coupled with government propaganda plus a Central Bank which economists like Harsha de Silva say is led by a politically-powerful Governor. Furthermore any critical view at the time, even if it was on the economy, was seen as 'hostile' to the Government or an 'unpatriotic' act. Well-articulated economic arguments and suggestions for change in policy were countered as "economic terrorism." As the economy chugged along with the end of the conflict, the situation worsened and much of it was reported by the Sunday Times and the Business Times in often, exclusive reports with no denial from either Dr P.B. Jayasundera or the Government.

The authorities were more concerned in finding the sources of this information rather than correcting the imbalances. The crisis came to a head with the Pensions Act which led to streets protests and the tragedy of a protestor dying in police shooting. Another attempt to resurrect sections of the Act, without consulting employers and trade unions, was fortunately nipped in the bud.

Trade Unions and opposition economists charged that the Pensions Bill was aimed at raising, short term money for a cash-strapped Government rather than helping private sector workers to a pension on retirement. Many of the other schemes, it has been alleged, were avenues to raise money for the Government. In the past 2-3 years the debate on the economy has essentially been one between the opposition along with economists, many who request anonymity in publishing their comments fearing reprisals, and the Central Bank Governor and his officials. Apart from statements on economic issues and defending the criticism at public forums, Dr Jayasundera has remained non-committal or out of reach of the independent media; not the right approach in a democracy where the Government is accountable to the people particularly on how public money is spent. On the other hand the Treasury Secretary has also drawn the wrath of ruling party Ministers not only from the current UPFA Government but also from the previous Government of Chandrika Kumaratunga, for cutting their budgets.

In many ways, the Treasury Secretary is like one of his predecessors, R. Paskaralingam, an accomplished civil servant of the likes of Bradman Weerakoon, Dharmasiri Peiris, W.T. Jayasinghe, Tissa Devendra, D.B.I.P.S. Siriwardene and Lionel Fernando among others, who turned out to be a 'politically-motivated' civil servant at the behest of then President Ranasinghe Premadasa.

The political machinations also resulted in a 'cold war' between the Treasury and the Central Bank which led to a 3% devaluation of the Rupee in the last budget at the request of the Treasury. Both institutions have disagreed on the US dollar level which, until that time, was held at artificially low levels hurting exporters while encouraging imports. That changed last month after economic pressure and falling foreign reserves forced the Central Bank on February 3 to withdraw from intervening in the market while at the same time restricting credit for banks.

As the dollar rose sharply, the Central Bank - a few weeks later - restricted the quantity of foreign currency a bank can retain per day to prevent possible hoarding. Dr Jayasundera is correct in saying that the dollar would ease to the Rs 125 (per dollar) and below levels because current demand is based on seasonal (Avuruddu) needs.

However his coming out of the closet, preparing to meet the media once in two months and allowing the media access to senior Treasury officials (lifting a ban he himself had imposed) is not because he wants to but forced by circumstances beyond his control; the reality that the economy is facing a major crisis and a need to clearly explain often 'unpopular measures' to the people.