Editorial

If the May Day theme worldwide is ‘workers of the world unite’, Sri Lanka’s labour force joined hands and flexed their collective muscle in a rare show of solidarity last Thursday as a prelude to today’s International Workers Day.

Last year, it was COVID-19 that prevented the workers from their annual parades. Their grievances have only aggravated since with the skyrocketing cost of living and wages that cannot keep up with rising prices. They have adopted the last resort — strike action — several times, even at the expense of inconveniencing the community they are expected to serve, from teachers to hospital workers to others in essential services, holding not just the Government but the people to ransom.

These workers are going to be in for a bigger shock in the months ahead when the ongoing IMF negotiations kick in with demands from that end for a systemic change in the way state corporations are managed in Sri Lanka. They will certainly call to cut the fat from SOEs (State-Owned Enterprises) where thousands upon thousands are employed. And if the Government thinks the challenge it faces nowadays from angry workers is bad enough, wait for the ‘fun’ to begin when the prescribed reforms – or ‘haircuts’, need to be implemented.

Successive Governments have talked of this perennial problem of public sector reforms with the IMF, the World Bank and the ADB but there was no will from both sides of the political spectrum for this continuing pantomime which has turned Sri Lanka from a middle income country just the other year, into a basket case.

The revising of the ailing economy goes hand-in-glove with drastic reforms focused on the bloated public service and SOEs. Almost every SOE is looking for capital infusions from a Treasury already gone broke. The three big SOEs alone, SriLankan Airlines, Petroleum and Electricity owe banks half a billion USD and amount to 3 percent of GDP. Parasitic corporations like Lanka Sathosa are reeking with corruption and living on handouts from banks buttressed by Government guarantees.

Success stories of privatisation like Telecom, Ceylon Oxygen and Ceylon Leather are examples to follow where they are no longer a burden on the Treasury. If the large contingent of workers in the loss-making SOEs need to keep their jobs, but without causing a further drain on the overall economy, the unions and Government will have to implement mechanisms for future public-private partnerships with professionals in charge, and sound management plans.

And what of the million odd Sri Lankan workers abroad. Last year during this time, the largely ignored Sri Lankan worker abroad was clamouring to be allowed back into the country during COVID lockdowns in West Asian and Gulf cities. To add to their woes they were being short-changed by the Central Bank that was giving an artificial exchange rate for their hard-earned salaries. It was also counter productive to the national Budget. Now, the Government is pleading for them to send their foreign currency through the formal banking system rather than the informal exchanges. It will be lucky if they do so as long as exchange controls exist and the dollar to rupee rate keeps spiralling upwards on a daily basis.

Charlatans at the Treasury and the Central Bank — and the Presidential Secretariat at the time — only encouraged this underground exchange system which prevailed in a smaller way to flourish. Economists estimate the country lost a minimum of USD two billion by this short-sighted policy.

The Government is struggling to stay relevant these days. From all accounts the dysfunctional Administration that the country experienced from 2015-2019 is being repeated with the President and Prime Minister jockeying for control of state power with Parliament continuing to dither. The new Central Bank Governor said this week the IMF is prepared to work with whatever Government is in power and place in Sri Lanka. As much as there is a public demand for the abolition of the Executive Presidency, with the shenanigans within Parliament on public display, unable to even agree on a No-Trust motion leave alone how to run the country, it is the Executive Presidency that is ironically holding the wobbly state from completely collapsing like the proverbial house of cards.

What was anticipated by the economy going into free fall is now happening. Prices are soaring on all fronts in addition to the shortages. The rupee is not even worth the paper it is printed on. It costs more to mint a coin than its face value. The danger of a famine is for real.

The citizenry need not despair entirely, however. They are not alone. Europe is at war, sending fuel and wheat prices up globally, inflation and price hikes are everywhere and economies are in recession. That will be little comfort though to Sri Lankans staring hyperinflation in the face and getting hit harder than most due to fiscal incompetence, mismanagement, an element of arrogance and widespread corruption at very high levels of Government.

In the past, even countries like Great Britain had to once have recourse to the IMF for bailouts. The1964 Labour Government of Harold Wilson had to devalue the Sterling Pound, restrict credit, enforce defence cuts, and reintroduce exchange controls that were imposed during the World War. Tough packages of deflation and austerity measures were introduced. They borrowed USD 3.9 billion (about USD 19b today), the largest loan at the time from the IMF, managed with half of it, and repaid it when the Conservative Government of Margaret Thatcher came to office in 1979 and did away with those regulations. Trade unions were paralysing Britain, but a tough Ms. Thatcher overcame the crisis.

The mounting hysteria against the Government notwithstanding, life is going to be tougher before it gets any easier here too. The public protests seen throughout Sri Lanka are united in what they are against, but not exactly on what they want next. Politicians remain divided on whether the Government must stay or go as parties and individuals jostle for places.

Even if the President and/or Prime Minister get dragged out of office kicking and screaming, jointly or severally, who will want — or be given the poisoned chalice of leading this country out of this crisis, remains the question.