Find dollars, fast
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As the dust has settled on the presidential race with veteran parliamentarian Ranil Wickremesinghe, who has served a record number of times as prime minister, triumphing at the presidential vote in Parliament, the scene now shifts to resolving the worst economic crisis on record.Sri Lankans are suffering in queues for fuel, cooking gas and sometimes food. While some are foregoing two meals a day, others are skipping one meal and its time the President, the new Prime Minister (who would have been appointed by the time this column is read on Sunday) and the new Cabinet buckle down to work. Their immediate priority – a game plan to have sufficient foreign exchange for the next six months to pay for essential imports, mainly vehicle fuel and cooking gas. But there are other priorities, more on this later.
On the economic front, the economy is set to contract by as much as 6 per cent this year, according to government and independent economists which makes it a huge challenge to recover in 2023 where the deficit (-6 per cent) has to be wiped out and positive growth ensured. To achieve at least 8 per cent growth (including the estimated 6 per cent deficit in 2022) would be a huge challenge next year!
Central Bank Governor Dr. Nandalal Weerasinghe, while expressing that political stability is important for economic development, has said that the authorities are working on bridging finance options from friendly countries like India, China and Japan to tide over foreign exchange difficulties till the bailout package by the International Monetary Fund (IMF) is approved by around December this year.
As these thoughts ran through my head, Kalabala Silva, the often agitated academic, raised an interesting point during a telephone conversation this Thursday morning.
“I say…….have you ever wondered why electricity is becoming a luxury and not an essential commodity,” he asked. “What do you mean,” I asked in response.
“Well the other day, when the power came on at 8.45 p.m., a few minutes before the 9 p.m. news on TV channels, I jumped up in sheer delight,” he said, adding: “This has been the case for many days now – relief that the power has come on.”
I said: “You may be right. I get the same feeling when the power comes on. The irony is that while power has become essential in our lives, we have now factored in this commodity as part of the shortages and got used to the fact that power cuts would be a part of our lives.”
He said: “These power cuts might go on for several months to a year at the rate we are unable to find enough dollars for imports.”
My response was that power is like food, “you” need it every day – 24/7. “If the right policies were in place over many decades, we would never have had power shortages and if we had developed solar power – having sunshine right through the year – and other renewable energy sources,” I said.
At this point of our conversation, I was reminded of the late singer Sunil Perera’s words during a TV interview: “When I was growing up, Sri Lanka was a third world country and now when I am close to departing from this world (more than 70 years later) Sri Lanka is still a third world country.” For a country that has all round sun and strong winds, one begs the question as to why we haven’t used natural resources to provide power to the nation instead of relying on expensive imported fuel. It is widely believed that it’s the administrators themselves who are blocking solar power and renewable energy projects!
Resolving the foreign exchange crisis, meanwhile, is not an easy task given the balance of payments which is heavily in favour of the import side.
For the record, earnings from exports increased by 12.2 per cent to US$5.3 billion during the five months ending May 2022 from the same 2021 period, while import costs increased by 5.3 per cent to $8.8 billion ending May 2022 from the same 2021 period, which shows a trade balance deficit of over $3 billion.
In the meantime, earnings from tourism for the first five months of 2022 were $680.7 million sharply up from $39.9 million in the same 2021 period but still much lower than the 2018 figure (which was the highest on record). Workers’ remittances in January-May 2022 saw a 51 per cent drop to $2 billion from $3.3 billion in the same 2021 period as Sri Lankan expatriate workers continued to use informal money channels to send home their earnings.
If we add the earnings from tourism, workers’ remittances and from IT exports (no immediate figures available), it would result in a total sum of $8 billion of earned foreign exchange which is equal to the import figure. Then why are we having a shortage of foreign exchange, the common man may ask? There may be other reasons that the layperson is unaware of.
I saw an interesting comment on Facebook the other day referring to the forex crisis. The commentator said: “Anyone in the streets knows we need foreign inflows. But what exactly is the plan to increase dollar inflows? What sectors should we target? For god sakes, just give us the fuel and gas so we can be productive and drive economic activity, sort the essential items and have some decent and consistent policies and we will sort the rest out for the country. There are enough capable professionals and people with a sincere passion for the country who can help bail Sri Lanka out (through investments and not just loans which add to our debt).”
He has a valid point. The country needs to move forward – the foreign exchange crisis is not the only issue that needs to be resolved. The production economy must get activated. Goods and services have to be produced to meet local demand and for exports. The government needs to prepare not only a new game plan for foreign exchange but also for the production of goods and services to steer the economy forward (not backward).
I wondered what the trio would have to say on this point and walked to the office window where I could see them engaged in a heated conversation. “Ithin Ranil mahaththaya than aluth janadhipathi wela (So Ranil mahattaya has become the new President),” said Kussi Amma Sera.
“Meka aragalaya kattiyata athida. Mama nam hithanne ne (Will this satisfy the ‘Aragalaya’ protestors? I don’t think so),” said Serapina.
“Monawa wunath, mage balaporuththuwa anduwata polim saha badu hingaya adu karanna puluwan wei kiyala (Whatever it is, I hope the government can reduce the queues and shortages),” noted Mabel Rasthiyadu.
Ending the never-ending queues and Sri Lanka’s multiple crises is also my prayer as we move towards a new era in administration and governance.
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