The country should be open to broader Investments
Instead of selling, long-term leasing policies should be followed
What should be done now is to create a permanent solution for the crisis
A new economic production system should be implemented within the country
In anticipation of the President’s forthcoming address to Parliament, President’s Counsel U R de Silva reflects on critical national issues, particularly the strategies proposed to tackle the country’s deepening economic crisis. Emphasising the necessity of viable solutions beyond the IMF’s involvement, the discussion advocates for long-term leasing over outright sales, and the urgent need for a sustainable economic framework.
Q: Our country has been trapped in a severe economic crisis over the past few years due to the inability to repay debts and the shortage of reserves. The President recently addressed the nation with a special statement about this. What are your thoughts on the situation then and now?
A: Actually, the word “bankrupt” is not entirely appropriate. In April 2022, the Central Bank Governor stated that by that time, our country did not have the capability to repay the debts it had incurred. It was with that statement that the idea of our country being bankrupt emerged. This word is not entirely appropriate. This further increased the disadvantage that our country faced. The real cause of this situation was the complete stagnation of the country’s revenue.
Referring to the situation as bankruptcy further damaged the country’s image. In reality, many people now blame Gotabaya Rajapaksa for the country’s failure. However, this accusation is not entirely fair. In 1977, a new economic system was introduced in the country, fully opening up the previously closed economy. At that time, we did not understand what we should or shouldn’t do. As a country, we fell into a dependency on debt. Instead of establishing a productive economy and repaying the loans, successive leaders resorted to borrowing more and more. This led us to the massive debt trap we found ourselves in by 2022. The budget deficits were filled by taking more loans.
It wasn’t out of love for us. The global lending institutions continued to lend to us because they could charge more interest. Until 2022, we somehow managed to pay the loan installments. The economic crisis worsened due to the Covid-19 pandemic and the Easter attacks, which halted tourist arrivals. The amount of money sent by our overseas workers also decreased. The ultimate result was a significant economic trap. Moreover, many large factories were closed during this period. The outcome of all these factors was a severe economic crisis.
Q: As a result of the economic crisis, a political crisis also emerged, didn’t it?
A: Yes. As a consequence, an unorganised yet powerful popular uprising occurred in the country. The initial result of this uprising was Prime Minister Mahinda Rajapaksa having to resign. Subsequently, President Gotabaya Rajapaksa also had to step down. However, the protest movement did not produce an alternative leader. At that moment, the country was facing a massive crisis, posing a significant challenge to the stability of the state. It was during this time that Ranil Wickremesinghe first assumed the role of Prime Minister and later the role of President. In fact, he was the most experienced and senior politician available at that time. After taking over the country, he systematically developed a plan to resolve the crisis.
The IMF does not operate solely for our benefit. We are the disadvantaged party in this situation. Therefore, as a government, we negotiated and reached a middle ground.
Q: There have been various criticisms in society regarding the solutions that were reached, haven’t there?
A: Primarily, this occurred right after Gotabaya Rajapaksa’s government came into power, specifically due to the removal of tax systems that generated revenue for the government. Officials in the Ministry of Finance at that time are responsible for this. Actions like removing the sugar tax resulted in the government losing a significant portion of its revenue. In this situation, the IMF’s request was to properly implement tax policies. If tax policies had been implemented correctly back then, ordinary people would not be facing such difficulties now.
Even today, there are individuals evading taxes. By identifying such groups and collecting taxes from them, we can prevent the public from facing hardships. The practice of shifting the burden onto others should not continue. What needs to be done now is to create a permanent solution for potential new crises. Even the President’s speech hinted at this. He also believes that to avoid going back to the IMF, a new production-based economic system must be implemented within the country.
Q: Those who criticize the management of the debt crisis do not offer alternatives, do they?
A: Yes. As a country, we are currently taking the most suitable path in this critical situation. Whether we like it or not, there is no alternative path beyond this. Therefore, at this moment, everyone needs to work together for a certain period. The new economic act also focuses on this. Additionally, instead of opting to sell state assets, the country should be opened up to broader investments. Long-term leasing policies should be followed instead of selling. Such long-term policies will help bring the country back to normalcy. What needs to be done now is to move towards a system that thinks and works for the country, rather than focusing on short-term projects. This places a significant responsibility not only on the opposition but also on the government and public officials.
Q: What kind of responsibility do public officials have?
A: The majority of public officials understand and fulfill their responsibilities. However, a small group acts recklessly or neglects their duties. They too have a significant responsibility.
Q: But currently, groups with alternative views are expressing various opinions about the loan proposals. How realistic are these opinions?
A: In the upcoming Presidential Election, no matter who becomes President, there will be no other path to resolving our economic crisis. Despite any grand statements, there won’t be a significant change during negotiations with the IMF. This is not a suitable time for experiments. We have already made considerable progress within the IMF process, and there is no turning back now. Additionally, there are no other suitable alternative paths. While strengthening our production processes, everyone needs to honestly dedicate themselves to the country. Corruption, fraud, and bribery must be eradicated. The IMF has provided us with guidelines regarding this, and the President is expected to inform Parliament about the IMF’s management tomorrow. Following this announcement, a proposal to seek the consent of the MPs is likely to be presented.
Q: What might be the MPs’ response to this proposal?
A: I am not quick to say that the IMF’s proposals are 100% good and successful. Anyone who thinks something 100% perfect is being proposed is making a big mistake, in my opinion. Let’s assume the President’s statement is defeated in Parliament. Even then, the IMF proposals won’t be harmed. However, if that happens, our country will be ridiculed in the international community as a nation without any consensus. Moreover, despite any minor flaws, only opportunists would oppose such a nationally important issue. Today, the two main opposition groups, the National People’s Power (NPP) and the Samagi Jana Balawegaya (SJB), do not oppose the IMF proposals. They agree with the steps taken by the President as a procedure. They mainly highlight technical issues. In the future, even if a government led by the NPP or the SJB comes into power, they won’t be able to completely dismiss the measures taken by President Ranil Wickremesinghe.
Uditha Gunawardane
