Sri Lanka: Cost of manufactured tragedy

Rajapaksa wanted to set up a company and to do the deal through that company on terms and conditions that he and his family members fancied.

by Patali Champika Ranawaka

( December 3, 2018, Colombo, Sri Lanka Guardian) We are all aware that the despicable political coup staged by Sirisena-Rajapaksa Junta, has now brought upon this country a multi-dimensional national crisis, particularly the risk of a prolonged economic crisis with a devastating impact on our national economy.

So, how grave, how disastrous, is the economic cost of this coup? What is the price that you and your children will have to inevitably pay, during the coming years, as a result of this conspiracy?

Perhaps, the shockingly undemocratic, unbelievably illegal political conduct that Sirisena-Rajapaksa Junta has been demonstrating over the past weeks, may have overshadowed the grave economic disaster that their despicable coup has inflicted upon our country. Put simply, this conspiracy would add a debt burden of 30,000 Rs on each citizen of this country, in the year 2019 alone.

In the meantime, it might potentially bring down our economic growth rate to zero, or even negative. Something that has happened only once, in the post independence Sri Lanka.

Today, in this 21st century, we are living in a world with a heavily globalised, heavily interdependent economy, where no country can exist in a state of economic isolation. Productive international economic partnerships, international trade, are necessary not only for economic growth but also for the very survival of the national economy.

Those International partnerships depend on the political stability of the country on the one hand, and the credibility of the government in office, on the other hand. Nobody wants to deal with any country, while a rogue, unstable government is in office. Who wants to do business with such a rogue government that does not respect the rule of law, that forcibly occupies the government offices, and that has not been officially recognised by any of the other 192 countries in the world.

Foreign investors are divesting from government securities.

Going by the trend during the past weeks, they would take away from Sri Lanka, an estimated 209 billion rupees in 2019 alone.

The reason is simple. Just as much as you don't want to invest your money at a place like ‘Sakvithi’ or ‘Thangalle Danduwam Mudalali’, that you saw a few years ago, the international investors do not want to risk their funds in the hands of this rogue government.

Tourism industry has suffered a similar blow. This is the time of the year that accounts for about 40% of overall tourist arrivals, and almost 50% of revenue. A vital source of much needed foreign exchange - generating around 4 billion US dollars per year. Sri Lanka was recently ranked as the Number One tourist destination by one of the most leading, most prestigious travel magazines - the Lonely Planet.

And, what is happening now?

During the past few weeks there was a sharp decline in tourist arrivals. And if this trend continues, that is if loose 20% of tourism income, the country will loose around 150 billion Rupees, directly affecting the livelihood of more than 300,000 people and their families.

In the meantime, with no legitimate government in office, it is inevitable that International financial Institutions such as IMF would eventually withdraw their financial guarantees backing our sovereign debts. This is already happening. On the 14th of January next year, the government will have to repay a 1 billion US dollar commercial loan. A loan obtained by Mr Rajapaksa’s government back then, when he was legitimately in office.

The loan was obtained at 5.5 % interest rate even at that time.

Now, in order to refinance that loan, his rogue government has to borrow at 9.5%. The interest rate has gone up by as much as 4 percentage points! In other words, the cost of financing has nearly doubled! In 2019, this country will need as much as 4.2 billion US Dollars for refinancing of its loans, and at least another 1.5 billion dollars of fresh borrowings.

If we assume a 3% percentage point increase in interest rates, which is actually an conservative estimate, the additional interest that the country will have to pay in 2019 alone will amount to US dollars 171 million. That means 32 billion Rupees even at the current exchange rate. As those bonds are normally issued for a period of 10 years, the people of this country will have to pay at least, an additional of Rs 324 billion. And, this is more than half of the total capital expenditure by the government for education, for health, road and infrastructure development, and for poverty alleviation projects like Samurdhi, all combined.

As part of his desperate attempt to divert people's attention away from this grave economic disaster, Rajapaksa has started playing Santa Claus - much before the Christmas. Prices of fuel and several consumer goods reduced. Fuel prices should have been reduced anyway in keeping with world market prices. Rajapaksa’s relief package will cost Rs 30 billion for the balance part of this year.

While offering this relief package of 30 billion rupees in one hand, he has collected Rs 150 billion by totally annihilating several major ongoing development projects. He has completely disrupted the rural development programme 'Gam Peraliya', the urban regeneration program ‘Sukhitha Purawara’ that was aimed at uplifting the living standards of underserved urban dwellers, and the program for distribution of Tab computers to schools etc.However, the cost of Rajapaksa’s relief package, if continued in year 2019, will be Rupees 150 billion.

In the meantime, there is a strong possibility that Sri Lanka could lose the GSP plus preferential trade concession.
This could affect about 4000 items, including fisheries products, that we export to Europe. And the impact for 2019 would be Rupees 76 billion.

So the financial impact of only those few results of the sirisena rajapaksa political conspiracy will be Rupees 617 billion for year 2019 alone. And what does this mean? Every citizen of this country, every Man, every woman and every child will have to carry an additional debt burden of at least 30,000 Rupees, in 2019 alone, to bear the cost of Sirisena-Rajapaksa political coup. This figure is only for 2019. We will actually be paying much more, and for much longer.

What is happening to Foreign Investments in some of the major infrastructure development projects?
There was a loan agreement that was scheduled to be signed with Japan, on the last 22nd of November, for financing the construction of a light rail transit system from Kaduwela to Colombo. It was a 1400 million dollar loan negotiated at an interest rate of 0.1 %, with a payback period of 40 years. Now, there is a huge risk of this not realizing.

There was another agreement to be signed in December, with the Millennium Challenge Corporation of the United States, to secure a grant aid of US dollars 480 million.

A grant aid!

A grant aid for strengthening public transport, for strengthening bus services, and for improving the provincial road network.

Today, there is a risk of this being suspended because of the rogue government.

There are also 1700 US dollar million worth of other on-going projects, with world bank funds, for development of vital infrastructure facilities, including transportation, water supply, flood control and urban development etc, which now carry the risk of being suspended as there is no legitimate government in office.

Now what are those self-styled economic policy advocates of the Sirisena-Rajapaksa Junta saying? They have changed the topic. Drop economics, and talk Patriotism! When the inevitable economic disaster unfolds before the eyes of the people, they are now trying to blindfold the people with fake- patriotism. They talk about a utopian, effectively closed type of economy which is non existent anywhere in the world.

What they talk about is necessarily an international economic isolation of the country.

Such an isolated economy can exist only in their heads.

There is no debate that, we as a nation, should strive to develop a strong manufacturing base,a strong services base, and a well developed agricultural sector. But there is absolutely no way that we could achieve any of those, working in isolation.


The total exposure of our national economy, in terms of its external in-flows, is more than 36% of the GDP.

Goods exports around 13%, services exports 8.9%, foreign remittances 8.1 %, and then direct investments, loans etc around 6%.

Can we afford to do without our exports? Can we afford to do without tourism? Can we bring home approximately 3 million Sri Lankans working abroad? Can Mr Sirisena and Mr Rajapaksa employ them in their paddy fields in Polonnaruwa and Hambantota?

On the other hand, imports account for more than 29% of our GDP. Are we going to do without fuel imports, gas imports, pharmaceutical imports and fertilizer imports? Fake patriotism is not at all a substitute for effective International trade relationships!

We must look at the experience of the few countries whose governments in office at the time had no options but to operate in such isolation.

North Korea, Venezuela, and Myanmar at some stage.

Take Venezuela - One of the most oil-rich, and gas-rich countries in the world.

But what has happened to that country today. Inflation has skyrocketed up to the range of 1 million percent.

Are those fake economic advocates of Rajapaksa-Sirisena Junta advocating to make Sri Lanka another Venezuela, just for the sake of survival of their rogue government?

While those self-styled economic advocates are engaged in babbling about a utopian, nonexistent, national economic model, with a fake patriotic wrap-around, we must also see what Rajapaksa is doing today and what he was doing when he was in power before 2015.

Did Rajapaksa, together with Sirisena, take over the Hambantota port?

Has he at least made a pledge that he would retain Mattala ?

On the other hand, has he been able to live at least up to an inch of his rhetoric on his economic competence by exercising a semblance of control on the exchange rate?

It is the self-same Mahinda Rajapaksa who sent PB Jayasundara to China in 2011, to give away Hambantota Port, Mattala airport, Colombo South Harbour, and Norochcholai power station.

Not that China wanted it.

But Rajapaksa wanted to set up a company and to do the deal through that company on terms and conditions that he and his family members fancied.

Then, later, he sent Jayasundara to India to negotiate a similar deal for the much talked about oil tanks in Trincomalee, through a similar behind-the-door deal.

When I vehemently opposed the Norochcholai deal, he kept on harassing me until I left that portfolio of power and energy.

I have exposed all the details in my book Balaya saha Balaya - Power and Power.

It is unfortunate that the 21 million people of this country will have to suffer the prolonged, disastrous consequences of this despicable political coup by Mahinda Rajapaksa, Maithripala Sirisena and the bunch of rogues around them.
If there is at least one single positive outcome for the people, it is the opportunity that the last one month has given the intelligent people of this country to do a real assessment of Mahinda-Rajapaksa and his bunch of rogues.

On the one hand, the Sirisena-Rajapaksa Junta has clearly exhibited the depths of undemocratic, uncivilized tactics that they could readily resort to when they are desperate for power, just for their own political survival.

On the other, they have shown the depths of economic disaster that they are ready to bring upon the people of this country just to satisfy their desperation to cling onto the positions of political power.

In the meantime, perhaps very importantly, the last month has blatantly exposed to the people of this country the kind of fake-leader, the fake-hero that Mahinda Rajapaksa actually is.

It has exposed the fake-economic performer, with absolutely no competence, who had been created merely by the heavily compensated fake media.

(Patali Champika Ranawaka is an electrical engineer and a Sri Lankan politician. He is the Cabinet Minister of Megapolis and Western Development in charge of building the Western Region Megapolis, Government of Sri Lanka. Views expressed in this article are the author's own )


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