Phew! What a year
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Phew! What a year, probably the worst in decades. I was pondering over the events in 2022 when the silence of the household was shattered by Aldoris’s food tuk-tuk coming down the lane with its blaring tune.Waiting for him at the gate was the trio. “Oya hithanawada aluth avurudda (2023) giya avuruddata (2022) wediya honda wei kiyala [Do you think the New Year (2023) will be a better year than last year (2022)],” asked Kussi Amma Sera.
“Mama danne nae. Mata mila wedi wenakota, mage kaema warga wikunanna amarui (I don’t know. For me the price hikes have made it difficult to sell our products),” he said, adding that there were times he wanted to give up his business in desperation.
“Godak tharuna kattiya den pita rata yanawa lankawe thiyena arbudaya hinda (Many young people are going abroad due to the crisis in Sri Lanka),” noted Serapina.
“Meda panthiye kattiyata thama wediyenma karadara thiyenne mae arbudaya hinda (It is the middle class that has suffered most due to the crisis),” added Mabel Rasthiyadu.
As I got back to my column, the silence of the household was broken, for the second time this Thursday morning, by the ringing of the landline. It was my jolly-mood economist friend, Sammiya (short for Samson) on the line.
“Hello… hello,” he said.
“Troubled days, you know my friend,” I replied.
“Yes, one of the most serious developments from this economic crisis is that we are losing a lot of talent with young people migrating abroad,” he said.
“According to latest reports, more than 300,000 people have gone abroad for employment purposes. Normally it’s around 200,000 a year and these are those mainly going to West Asia,” I said.
“It was indeed a topsy-turvy year,” noted Sammiya.
Getting back to my column, the year indeed witnessed the worst economic crisis in history. Even during the dark days of the 1970-77 administration and the then period of shortages, there was no fuel shortage. Of course, those days, people relied more on public transport and there were fewer cars around.
People are literally fleeing the country with long queues at the Passport Office, with the profile of applicants being around the 21-to-40 years’ age segment. This is the cream of Sri Lankan talent.
The biggest event of the year was the Aragalaya (struggle) and its aftermath which saw President Gotabaya Rajapaksa fleeing the country and staying in Singapore before returning home. The former President this week went abroad with his family.
Unbridled corruption, particularly in the procurement of fuel and coal stocks and health tenders, hit at the moral fabric of the country and the culprits are still at large. One particular coal tender was cancelled on three occasions and then awarded.
In April, after Dr. Nandalal Weerasinghe was appointed as the Central Bank Governor, the Ministry of Finance along with the Central Bank declared a suspension of foreign debt payments and resorted to a foreign debt restructuring process. The US dollar was also allowed to slide in a managed-float process. In July, Ranil Wickremesinghe was elected by Parliament as President.
In the meantime, pressure from Sri Lanka’s foreign debt holders to similarly resort to domestic debt restructure is mounting.
A scarcity of dollars and foreign reserves hitting record lows meant a crisis emerging over fuel supply. Queues formed at fuel stations around the country as supply was affected by the inability to find foreign exchange to purchase fuel.
After several months of waiting in fuel queues, often for two to three days at a stretch, the government introduced the QR (Quick Response) code, rationing fuel at 20 litres per week for cars and heavy vehicles, with a reduced quantity for tuk-tuks and motorbikes. The rationing system is still prevalent and though the quantity is insufficient for motorists, the queues have disappeared.
Last year, apart from fuel queues, there were also queues for LPG cooking gas and milk powder. At some point, drugs and medicines were also in short supply.
For those travelling abroad, only a limited quantity of foreign exchange was released by banks. The situation appears to have improved in recent weeks with travellers being able to buy a reasonable amount of foreign exchange.
Power cuts at one time eight hours and currently at more than two hours per day have badly affected businesses. Even worse is the likelihood of 7-8 hour cuts to be enforced this year, unless energy prices of the consumer are increased, according to Energy Minister Kanchana Wijesekera.
The government also brought back the pre-2019 tax regime as it was losing money from taxes. Income tax was at that time imposed on anyone earning more than Rs. 3 million per annum which is now back to taxes being imposed on an income of over Rs. 1.5 million. According to the Inland Revenue Department, tax cuts in 2019 saw revenue drop by half in 2020 which badly affected government coffers.
Depleting foreign exchange reserves, which are barely enough to meet import needs for a few weeks, continues to haunt the government. The other day, Central Bank Governor Dr. Nandalal Weerasinghe was quoted in newspapers as saying that only companies’ earnings in dollars were likely to be able to overcome the economic crisis.
The Government is desperately seeking support from the International Monetary Fund (IMF) and though a staff-level agreement for a US$2.9 billion bailout package has been reached, the IMF board has to approve the deal which is being held back since Sri Lanka needs to work out a debt structuring schedule with foreign debt holders.
Moving on, tourism is slowly recovering though the little over 700,000 visitors this year are nowhere close to the 2.5 million visitors achieved at the peak of tourist arrivals in 2018.
Inflation has seen a sharp increase though it is tapering in recent months. Money printing has been the order of the day as the government tries to raise funds to reduce the budget deficit and pay for expenses. The Gross Domestic Product (GDP) is set to contract by 7-8 per cent in 2022 and 4-5 per cent in 2023.
Finally, the murder of businessman Dinesh Schaffter sent shockwaves amongst the business community. No suspects have been arrested so far.
When Kussi Amma Sera brought in my second mug of tea, she asked: “Mae avurudda (2023) wada honda weida [Will this year (2023) be a better year].”
I replied with a negative nod of the head, implying that this would be another bad year with elections also on the cards.
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