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In Haldummulla, amidst Sri Lanka’s verdant tea-green landscapes of extraordinary beauty, an infant died this week as her desperate parents were not able to obtain sufficient petrol to run their three-wheeler long enough to take her to the nearby hospital. The distraught Judicial Medical Officer (JMO) at the Diyatalawa hospital went on record, stating that if she had been brought for urgent medical attention just an hour prior, her life would have been saved.

Sri Lanka, a textbook example of misgovernance

It was that same hour spent by weeping family members searching for petrol as the fuel crisis for want of foreign reserves, shut down filling stations across the land. Mind you, only a small amount of petrol was needed to save this child’s life, just a fraction of what is grabbed by Colombo’s ‘privileged’ to power their generators and top up their not one but two or three petrol guzzling luxury cars. Down our lane in Nawala, generators run purring like satisfied felines, residences brightly lit up, lights ablaze from gates to back gardens. It is a spectacle of (ghastly) illumination, except that the illumination is not of the mind but of the staggeringly huge gap between Sri Lanka’s desperate and the uncaring.

Sri Lanka is now a textbook example of how not to govern, from a catastrophically failed experiment with organic farming to letting the foreign reserves run dry with nary a care. Where is accountability for the death of the infant in Diyatalawa or the uncounted deaths of the countless elderly for want of essential drugs as the nation’s medicine chest runs to zero, much like the Treasury’s coffers? The remorselessly avoidable death of that infant is one too many. This is the obscenity that Sri Lanka has become, a country which threw away decades of a carefully nurtured public health system on the toss of an electoral coin.

That coin was spun by a Rajapaksa Corporate which used the historic backdrop of the Ruvanwelisaya to promise vistas of prosperity and splendour for the rejuvenated Sinhala-Buddhist citizenry. These are not perversions peculiar to this nation. When German children are taught their history, the rise of Nazi power on the flagstand of a glorious Germany and harvesting hatred against Jews blamed for hyper-inflation, political violence and terrorism, occupies a key role. The collapse of the Third Reich in ashes with millions dead, is a lesson for the ages.

Asking uncomfortable questions

So when Sri Lankans point a finger at politicians for our misery, for the very many circuses that are the country’s constitutional reform process, four fingers must be pointed back at us. One question is at the heart of our existential crisis. For more than two years, how did a privileged coterie of stupendously corrupt politicians, public servants, corporates and professionals dance in the Rajapaksa sun as our foreign reserves dried up and the economy fell pell mell into the abyss? What was the role being played by watchdog institutions, including the Chamber of Commerce, in this respect?

These are uncomfortable questions that must be asked nonetheless. The International Monetary Fund (IMF) has called for macroeconomic stability and debt sustainability, pointing out that Sri Lanka’s public debt is unsustainable. That assessment had been made from 2020 onwards despite the Government being dumb, deaf and blind. ‘Approval by the Executive Board of an IMF-supported programme for Sri Lanka would require adequate assurances that debt sustainability will be restored’ the IMF has observed. The World Bank has also warned in uncharacteristically blunt language that a proper fiscal and monetary policy framework is compulsory for bridging finance to be granted.

But how in the name of all that is wondrous, is this possible without overhauling the procedures and processes of apex financial institutions including the Central Bank of Sri Lanka and the Monetary Board? Merely expounding on what went wrong before television cameras will not suffice. Will reforming the process of appointment of members of the Monetary Board and the Governor of the Central Bank suffice? Apparently, these appointments are to be brought within the vetting authority of the 19th Amendment’s Constitutional Council (CC), as part of a proposed 21st Amendment. The fact that this proposed CC is again top-heavy with politicians is not reassuring.

Grievous flaws in monetary policy making

Even so, this may prevent a bizarre repeat of appointing a pro-Rajapaksa member clueless about monetary policy to the Board. That worthy resigned recently. But this is scraping the barrel, so to speak. Put simply, the problem with the Monetary Board is not just how its members are appointed. Flaws in monetary policy making which have a direct causative impact on the current crisis reach far beyond that. According to media reports of proceedings of the Committee on Public Enterprises (COPE), two members of the Monetary Board had been warning of a potential – and severe – balance of payments crisis.

But who, beyond the rarefied circles of the Monetary Board where things went so disastrously wrong, knew about this? The Monetary Law Act, as it stands presently, imposes responsibilities on the Board to promptly act when domestic monetary stability is threatened. Most importantly, Section 68 decrees that the Board must take remedial action when there is a ‘serious decline’ in the international reserve or when the reserve ‘actually’ falls to a level that the stability of the rupee is in peril. The Board, it appears, had committed a flagrant violation of due diligence duties, as stipulated by these statutory conditions, in failing to take action.

That worsened in 2021. The (then) Finance Minister was missing in Parliament for a good part of the year. The (then) Governor of the Central Bank was bleating nonsense about ‘home grown solutions.’ So who knew the severity of the crisis? Certainly not the general public on whose shoulders, the burden of this crisis has now fallen. Finally it is not the parents of the ‘privileged’ whose parents die because there is no medicine or whose children die for the want of fuel to take them to hospitals. The need for comprehensive monetary policy reforms is paramount.

Badly needed monetary law reforms

One proposal (2019) that may be dusted off and re-examined is the replacement of the Monetary Law Act with a far more tightly drafted law defining the responsibilities of Sri Lanka’s apex financial bodies. This included the establishing of Governing and Monetary Policy Boards comprising experts in the areas of finance and economics and contained restrictions on money printing. In addition, though not part of the reforms package at the time, omnibus duties to ‘preserve secrecy’ applicable to officers of the Central Bank may be better balanced with the requirements of public transparency. Currently the scales are too heavily weighed against the latter.

Such clauses only operate as a fig leaf of respectability to prevent public scrutiny. No matter what, reform of appointments to key financial positions as part of a constitutional reform process will only scratch the surface. Policy reformers would do well to listen to the chants of ‘we are the many, you are the few’ by the youth of GotaGoGama’ on Galle Face Green. The lustre of the protest movement may have been dimmed following inevitable infiltration by political parties seeking to capitalize on a powerful show of strength. But the underlying rage of the populace has not lessened.

Rather, this has increased a hundredfold as one Prime Minister goes, another one comes in and the President holes up in his bunker pleading with the world to help. Those cries are polite chants compared to the national conflagration that fury against the ‘privileged’ (the few) will bring about by people pushed to the point of no return (the many). And infuriatingly condescending committees to ‘help protesting youth’ by Premier Ranil Wickremesinghe who specialises in the political art of ‘death by committee’ will not serve to blunt the next deadly round of destruction.

That much is certain.