What Way Out for Sri Lanka from the Present Mess?

 

It is true that  foreign exchange inflow due to tourism in Sri Lanka has severely fallen  due to  two years of pandemic. Sri Lankan government could do nothing about this. 

by N.S.Venkataraman          

All said and done, millions of Sri Lankans living in Sri Lanka and in several countries abroad as well as those who admire the Sri Lankan culture and traditions for various reasons and millions of tourists who have visited Sri Lanka and enjoyed the beautiful landscape of the land and local hospitality,  are shocked and surprised that economic crisis in Sri Lanka has been  allowed  to become  so severe now,.  This is particularly so , since Sri Lanka’s human development  index value for the year 2019 puts it in the high development category. 

More than one reason :

There are more than one reason for Sri Lanka’s present crisis. While some reasons are beyond the control of the Sri Lankan government, there are other reasons which could have been prevented or anticipated   and the intensity of the problem  could have been reduced by implementing pragmatic forward planning  measures.

Factor  beyond control :

It is true that  foreign exchange inflow due to tourism in Sri Lanka has severely fallen  due to  two years of pandemic. Sri Lankan government could do nothing about this. 

Factor due to  faulty decision on farming operation :

The decision of Sri Lankan government to switch over to organic farming   and import organic fertilizer from China has resulted in disastrous consequences. 

The efficacy    and overall advantages of organic fertilizers   over chemical fertilisers is still a matter of debate all over the world. Organic fertilizer has a low shelf life and has to be stored , packed and transported in low temperature   and sealed conditions  and  the farmers need to be trained adequately well in handling organic fertilizers. 

None of these precautions seem to have been adequately taken  care of by Sri Lankan government.

No country in the world has switched over to organic fertilizer in a massive way  like what Sri Lanka has done.

Further, the organic fertilizer supplied by China was declared as sub standard and was rejected by the testing laboratories in Sri Lanka.  However,  China rejected  the complaint that the quality was bad and insisted that Sri Lanka should make the entire payment.  Obviously, to keep China in good humour, Sri Lankan government paid huge money to China for organic fertilizer that was not used.

Due to the use of organic fertilizer, production of crops such as tea came down severely  and  the export of such  agro products  declined , that were contributing to Sri Lanka’s foreign exchange earnings earlier.

 Certainly,  the present government of Sri Lanka should admit this mistake. But,it has not done in the way that it should be done.

High interest loan from China  :

Sri Lankan government has been availing  loan   from China   which amount to around 10 to 15% of  it’s  total debt , at high interest 

Since the year 2000, China  has become the leading provider of commercial loans to Sri Lanka  for infrastructure projects including the Hambentota port.

About half of Sri Lanka’s foreign debt was owed to capital markets.  While taking such loans, the repaying capability and the capacity to serve the debt by paying interest was not adequately planned or calculated.

All the past Sri Lankan governments in the last decade or so are responsible for making Sri Lanka debt ridden.

Unproductive investment of loan amount

Several of such loan amount were utilized for projects  such as  construction of stadium, Mattala airport, Lotus Tower in Colombo  and others  which are non revenue yielding projects.

The Rajapaksa government is largely responsible for such wasted investment.

What way out now ?

Individuals can declare themselves as insolvent and run away. But, countries with millions of people do not have this option and have to find a way out.

If such crisis are not sorted out  by good planning and governance, the consequence would be very severe and  the mass protest will start and violent incidents will take place, as it has started happening in Sri Lanka. With the debt burden  of more than 35 billion US dollar, there is no way that Sri Lanka can repay such debt or service the debt   for the next several months.

Obviously , Sri Lanka need the support from friendly countries to tackle the present crisis.  While India has responded with great speed by providing shipload of diesel and other credit , there is a limit beyond which India cannot assist Sri Lanka to overcome the crisis.

In such situation, Sri Lankan government should give up the prejudice that it has developed  with regard to IMF and some countries, which  are rich enough to help Sri Lanka at this stage.

Sri Lanka should realise that it’s relation with China has only resulted in a scenario , where Sri Lanka has been forced to surrender Hambentota port to China and got into a debt trap. 

There is little  common between China and   Sri Lanka , as Sri Lanka is a democratic country and China is a totalitarian regime . Sri Lanka is a country with people devoted to religion such as Buddhism, Hinduism , Christianity etc. China does not have such  regime ,which accepts religion as  way of life. 

As a matter of fact, in the relation between China and Sri Lanka, China’s gain is much larger than that of Sri Lanka, as location of Sri Lanka provides several strategic advantages for China in military terms and transportation .

Alliance with countries that share value system :

Obviously, Sri Lanka has to become closer to countries  like USA, Canada ,Japan and European countries , that  advocate liberty and freedom in the way that Sri Lanka also does and practice democracy in the way that Sri Lanka does. 

 In today’s conditions, Sri Lanka certainly need  financial and technological support which only countries like USA and Canada and European countries as well as Japan can provide.

Obviously, this requires that Sri Lanka has to move away from depending on China and cast it’s eyes elsewhere.

Focus on economics and growth rather than politics in external relations  is the only option for Sri Lanka .

Of course, Western countries have been accusing Sri Lanka of human rights violation unjustifiably. This issue can be sorted out by skillful diplomatic move by Sri Lankan government in dealing with USA and  European  countries.

Form national government for one year :

There is accusation that Sri Lankan government is being governed  like a family concern by Rajapaksas.  This impression should be removed.

What is needed now is   cooperation between all political parties realizing that entire Sri Lanka is now caught in an extremely difficult situation and political up manship  by one political leader or the other would be counterproductive for the whole country.

Let a  national government be formed and a taskforce  appointed to guide the country to overcome the economic crisis in one year period . Let there be election after this.