Columns

• Basil and others learn to grin, embrace and move forward with Wickremesinghe’s approach
• Moves to revive SLPP at grassroots level for local council polls and big May Day rally
• President explains plans to reinvigorate the once-bankrupt economy and expresses confidence of major improvements in coming months
• JVP cites its own projections and claims it  can push main opposition SJB to second place if local council elections are held

By Our Political Editor

The ruling Sri Lanka Podujana Peramuna (SLPP), which sprung up as a major political grouping surpassing established parties, suffered the worst blow to its image in the aftermath of last year’s mass protests.

Rather than an electoral defeat, such a damaging downfall came, paradoxical enough, due to the actions of the then President Gotabaya Rajapaksa. The strongest blow was to his elder brother, Mahinda Rajapaksa, when he called for his resignation as Prime Minister. That rendered the then Cabinet of Ministers invalid. Other brothers Chamal and Basil found themselves dropped ignominiously. So did Namal, the young and ambitious nephew. No one in the country’s political landscape had been able to paralyze the political activities of the Rajapaksas in just one blow as did brother Gotabaya. If he did think these and other measures, later turning out to be huge blunders, like a bungled economy and an equally bungled security sector as revealed in these columns last week, would hold him in good stead, it was not to be. He left them behind and fled the country.

Nowhere was it felt more than in the SLPP’s founder and ideologue Basil Rajapaksa, who was widely credited for the formation and the rise of the party. Last years’ protests saw him being thrust into a catch-22 situation. It is no secret that both he and his party were strongly opposed to Ranil Wickremesinghe, now President, and his United National Party (UNP). In an unbelievable turn of events, he has now accepted President Wickremesinghe as the leader of the SLPP-led government. Basil Rajapaksa was the principal architect of the 2019 presidential election campaign that led to Gotabaya Rajapaksa’s victory. His biggest dilemma came when Parliament elected Wickremesinghe as President on July 20, last year. That was at the instance of ex-President Gotabaya Rajapaksa. He and his party could no longer fight one of their key political archenemies. It was a case of a grin, embrace and move forward praising what was perceived as good and stomaching what was thought to be against their line of thinking. Of the latter, they only talked in whispers.

Creditably, Wickremesinghe, within days of assuming office, had delivered a morale booster for the SLPP parliamentarians, a single stroke that won him great dividends. It was breaking through a taboo. After mob attacks on their homes and other properties, they had curbed their movements. Even a visit to Parliament was with armed escorts. Both through direct instructions and at meetings of the National Security Council, the President ordered that tough action be taken against protestors who posed a threat. It came as the biggest guarantee for the safety of SLPP members. So much so, on a visit to a funeral house in Tissamaharama, SLPP leader Mahinda Rajapaksa told the household that MPs were able to move around because of the tough stance of President Wickremesinghe. That seemed a great relief not only for them but for him too.

Thus, the cohabitation machinery moved with President Wickremesinge winning the support of SLPP parliamentarians who became the best fans, even better than those in the dormant UNP. Policy as well as differences in opinion took second place. Thus, a predominantly SLPP cabinet of ministers endorsed many a proposal that was the brainchild of President Wickremesinghe. This included even the demands placed by the International Monetary Fund (IMF) for the Extended Fund Facility of US$ 2.9 billion including the upward revision of taxes and a second increase in electricity tariffs. They have stood by the President as he ordered a crackdown on protestors who included trade union and student union members.

The SLPP-led government has just approved three important pieces of draft legislation. One is to amend the Chief of Defence Staff Act. Another seeks to give legal status to the country’s intelligence services. A third will provide legal basis for the National Security Council, which now remains an informal entity where not even minutes are recorded.

SLPP General Secretary Sagara Kariyawasam: The party is for the conduct of local polls but economic revitalisation is a priority

Behind the scenes, without the glare of publicity, Basil Rajapaksa did his best to convince the government’s political leadership to conduct the local council elections. However, President Wickremesinghe was not in favour and argued that the revival of the economy should be given high priority. This is why SLPP leader Mahinda Rajapaksa spoke in support of the President. Even General Secretary Sagara Kariyawasam, a staunch Basil Rajapaksa loyalist, declared that the party was for the conduct of the elections. However, he did say if economic revitalisation was the priority that should be clearly explained to the public.

President Wickremesinghe who declared in Parliament that local council elections were not possible until there was an economic recovery also hinted about other polls. During an informal conversation with confidants, he spoke of the likelihood of the presidential and parliamentary general elections, in that order, being held in 2024. It is not clear whether he is basing his thoughts on the belief that the economic situation would have improved considerably by that time. However, despite the hemming and hawing that is going on, it became clear that the local council elections would not be held on March 9 as announced by the Election Commission. The EC has said it has re-scheduled the polls for April 25. The move is viewed as administrative and is for the information of Returning Officers in the various electoral districts. However, the Commission also declared that postal voting would take place from March 28 to March 31. Here again, such votes cannot be counted until the poll is completed.

In new developments this week, moves are afoot to resurrect the SLPP.  Basil Rajapaksa was back in the exercise. He was the only guest to be present at a dinner hosted by SLPP leader and twice President, Mahinda Rajapaksa for government MPs. This was at his newly renovated residence cum office complex at Wijerama Mawatha. It was the first occasion the government parliamentary group was meeting there. This residence has been assigned to Mahinda Rajapaksa as former President. Unlike the days when it was occupied by Foreign Minister Lakshman Kadirgamar and former President Maithripala Sirisena, the premises has assumed a completely new look. One of the waiting rooms for visitors, replete with antiques, contains a collection of replicas. Other than two that project Lotus flowers (the symbol of the SLPP) in glass cages, the rest are all elephants and contain the names of people or organisations that gifted them.

A total of 62 SLPP parliamentarians met first at the office complex where there was enough space to accommodate more. Chefs assigned to the residence had turned out a buffet meal. Playing hosts were onetime first lady Shiranthi Rajapaksa and Limini Rajapaksa, wife of Namal Rajapaksa MP.

During the three-and-half-hour event, Basil Rajapaksa explained the state of the SLPP. It was agreed that the SLPP should conduct a major rally in Colombo for May Day and ensure that large crowds attended. Branch organisations countrywide are to be asked to send participants. District-level leaders of the party thereafter briefed those present on the status of the party structure and support base in their areas. Speakers were upbeat and said the SLPP still commanded support at the grassroots level. One of them cautioned that it would be a mistake to neglect this aspect. He criticised the new Freedom People’s Alliance formed under the leadership of Wimal Weerawansa with a helicopter as the symbol. He likened the new party to the Bodu Bala Sena and said he believed it would not be able to win seats at an election. He said he also believed that some members of the new party would even join the SLPP.

President Wickremesinghe in Parliament on Tuesday delivering the good news that the country will soon receive the IMF funds

The discussion on revitalising the party took considerable time. District-level SLPP leaders have been told to take steps to strengthen party branches in the electorates and launch a membership drive. District-level public meetings are also to be held. The first such meeting will take place in Moneragala today under the leadership of Mahinda Rajapaksa. Thereafter, the parliamentarians focused on the conduct of the local council elections. A formidable section was in favour of holding the polls arguing that it was necessary to ensure that the party remained active at the grassroots level. There were a few others who held the view that a poll at this juncture was not necessary.

Moves to strengthen the SLPP come at a time when most major political parties are in disarray. An exception would be the National People’s Power (NPP) led by the Janatha Vimukthi Peramuna (JVP), which had, citing its own surveys, forecast a major victory for it if local council elections were held. This, according to its projections, would push even the main opposition Samagi Jana Balavegaya (SJB) to second place. This notwithstanding, the SJB’s own stature has declined considerably in most areas. Some seniors in the party blame it on their leader, Sajith Premadasa, not being active enough. Others said added to that reason was the front’s failure to generate considerable public support over unpopular measures adopted by the government. The SLPP’s revival, if it goes according to plans, could affect the UNP and the Sri Lanka Freedom Party (SLFP) the most. The internal bickering in the SLFP has heightened in recent weeks.

The local council elections formed the subject of a debate in Parliament this week. It was Prime Minister Dinesh Gunawardena who was caught on the wrong foot. He had earlier denied that the Cabinet of Ministers took no decision to direct Public Administration Ministry Secretary Neel Hapuhinne to order Returning Officers (or District Secretaries) not to accept nominations. Here is what transpired this week in Parliament:

“Sajith Premadasa, Leader of the Opposition: The Prime Minister knows that Mr Hapuhinna ordered District Secretaries asking them not to accept deposits for the local government election. That order was based on a Cabinet decision taken on January 9. The order was thereafter sent to District Secretaries on the 10th. Mr Hapuhinna rescinded his order on the 11th. I have the Hansard from January 17 where Prime Minister Dinesh Gunawardena told this Parliament that the Cabinet did not take such a decision. However, information released via a Right to Information (RTI) application has revealed that the Cabinet Secretary has forwarded that decision to Mr Hapuhinna.

“As such, I say that the PM misled both the country and Parliament. I want to know why you lied to this House and to this country.

“Prime Minister Dinesh Gunawardena: I state with responsibility that the Cabinet did not take any decision to stop the acceptance of deposits. I stated as much in Parliament. The Secretary to the Ministry took immediate measures to issue a correction on this matter. He was then summoned by the Election Commission. He went and explained the matter to the Commission. The Secretary issued a clarification the same night.

“As such, it is unjust to take certain snippets of reports and quote them. It is good if those who make these allegations get the full story.

“There are other Cabinet Ministers here. They can vouch for the fact that there was no such Cabinet paper. If the Secretary gave such an order, he took measures to rescind it the same night. I said then there was no such Cabinet paper and I say the same thing now.”

Another matter of importance is the scheduled meeting of the directorate of the International Monetary Fund (IMF) on March 20 to approve the US$ 2.9 billion Extended Fund Facility. Making a statement in this regard President Wickremesinghe told Parliament last Tuesday that IMF assistance is a “positive solution to Sri Lanka’s economic crisis.” Here are edited excerpts of his speech:

“When the foreign exchange crisis worsened, in mid-April 2022, it was declared that it was impossible to pay the country’s foreign debt. Since then, Sri Lanka has operated as a bankrupt economy. All of you in this country have experienced its negative impact. By mid-2022, this country has experienced many problems such as fuel queues, gas queues, electricity cuts, food shortages, difficulties in procuring medicines, inflation, depreciating rupee, and increasing poverty. It is a fact which everyone accepts that the country has never experienced such a catastrophic situation in modern history.

“The economic problems that existed since June 2022 have gradually been resolved to some extent. Due to the provision of fertiliser, we achieved a good harvest last year during the Yala and Maha seasons. The export of agricultural products also returned to normalcy.

“The Government has implemented various measures to ensure the availability of gas and petroleum, proper functioning of schools and examinations, providing continuous electricity supply, providing fertiliser, and allocating additional funds for Samurdhi beneficiaries. Also, the Government had to go back to the same tax policy implemented in 2019. After the emergency tax cuts implemented at the end of 2019, Government revenues fell by as much as 8% of GDP. To restore it we had to go for new tax policies.

“Similarly, interest rates had to be raised under the Central Bank’s monetary policies. Raising interest rates was a positive step we had to take to control the rising inflation. By September last year, average inflation had risen to around 70%. Food inflation crossed the 90% mark. However, currently the rate of inflation has decreased to approximately 50%, and food inflation has also dropped to 54%. Additionally, due to a shortage of foreign exchange, exchange regulations were tightened, and imports were limited.

“Following the announcement of Sri Lanka’s inability to pay its foreign debt, foreign nations and financial institutions-imposed restrictions on financial transactions with the country. This included the World Bank (WB) and the Asian Development Bank (ADB) which ceased providing new funds, leading to the suspension of nearly all foreign aid projects. Sri Lanka was also unable to open Letters of Credit (LC) and its credit rating was downgraded to the point where lending to the country was not advisable.

“Given the aforementioned restrictions, Sri Lanka was able to acquire foreign exchange through various means, including:

•    Exports

•    Remittances from foreign workers

•    Income generated from tourism.

“In 2022, the unfavourable conditions in the country resulted in an unsuccessful tourism industry. However, there are indications that the situation is improving this year. Although foreign exchange remittances decreased to one-third of the level in normal conditions, they show a tendency of increasing. Sri Lanka still faces a shortage of foreign currency to import inputs that could also help boost export earnings.

“Starting in 2021, the IMF has been issuing consistent warnings about Sri Lanka’s economic crisis, specifically regarding the foreign exchange crisis. Since mid-2022, discussions between the IMF and Sri Lanka have been on-going, with regular delegations visiting the country for extensive talks concerning the balance of payments, fiscal crisis, and foreign exchange crisis. Additionally, the IMF has emphasised the need for implementing long-overdue structural reforms, stating that there is no room for delay.

“We had a staff-level agreement with the IMF by September 1, 2022, but the IMF stated that the agreement couldn’t be presented to the Executive Board until our country achieves debt sustainability. To achieve debt sustainability, the Government continued discussions with creditors and sought the help of international agencies like Lazard and Clifford Chance.

“The discussions were lengthy and complex. Accordingly, discussions were held with both Paris Club and non-Paris Club creditors, including India and China, which have provided loans to Sri Lanka, to secure financing assurance. India provided its assurance on January 16, 2023, while China extended its assurance on January 18.

“The Paris Club agreed to provide financing assurances to Sri Lanka at its meeting held on January 25, 2023. In addition, we had lengthy discussions with India and China as well. Subsequently, I discussed with International Monetary Fund Managing Director Kristalina Georgieva on the fund facility by the IMF on March 2. Last evening, I had discussions with the United States’ Treasury secretary Janet Yellen as well.

“The Government had to fulfil the requirements set by the IMF. These included revisions to electricity tariffs and fossil fuel prices, ensuring the independence of the Central Bank, and increasing interest rates to control inflation, reforming public enterprises, strengthening the social safety net, working to increase public revenue and controlling public expenditure. Expanding competition in the petroleum and electricity sectors had to be done in advance. Those tasks that Sri Lanka should have done proactively have been completed by now.

“I am aware of the hardships that the people of this country had to suffer. As a government, we apologise for that. We received the letter of financial assurance from Exim Bank of China last night.”

The Sunday Times today reveals exclusively (see box story) the full text of the letter the Exim Bank of China sent to the Ministry of Finance with copy to the International Monetary Fund. It was in Chinese and Finance Ministry officials revealed that it contained an English translation as well.

“Accordingly, on the same night, I and the Governor of the Central Bank signed the letter of agreement and forwarded it to the IMF. Now our duties are done. I hope that before the end of this month, by the fourth week, the IMF will do its duty. After that we get the first round of money from the World Bank and the ADB.

“This time, there is no room for failure in completing every task agreed upon with the IMF, unlike the previous 16 occasions.

“If Sri Lanka fails to fulfil the tasks agreed upon with the IMF, it could result in the IMF discontinuing its collaboration with the country, and this could in turn lead to other multilateral and bilateral financial institutions being unable to work with Sri Lanka.

“Accordingly, if the existing agreement with the IMF is breached, foreign economic activities will be largely hindered, and we would have to pay loans taken from foreign countries and private banks. An annual amount of approximately Rs. 6-7 billion of foreign loans are due to be paid until 2029, and we do not have the foreign exchange to pay this debt. Thus, we need the IMF to continue the agreed debt sustainability discussion with foreign creditors. The agreement with the IMF is of special importance to restore our economy, and there is no alternative path to be seen at present.

“Therefore, I would like to remind you that the agreement with the IMF is an agreement with special importance to restore our economy. However, this situation should be maintained for a short period. Otherwise, if this programme is disrupted, the country will be pushed to a far more dangerous place than the state it was during February-March 2022.  At that time, many people thought that salaries would be lost, pensions would be lost, jobs would be lost, industries would be closed, schools would be closed, etc. We have controlled this situation to a certain extent. However, if the groups that can influence the society disrupt the programme that we have proposed through various measures, the social alternative that will emerge from it will be extremely dangerous. It could lead to period of unprecedented woes in our society.

“I must say one thing, right now the dollar price is going down. If this country had collapsed on July 9, this situation would not exist today. There was no support from anyone at that time. I would like to express my thanks to the armed forces and the police who acted to uphold peace in the country. As a result of their efforts, we have fuel and electricity today. Also, before long, dollars will be available. Therefore, we will not allow these sinister forces to destabilise this programme.

The country’s income situation should improve especially by mid-June. Accordingly, it is from there that decisions could be made. Once the IMF agreement is reached, the agreement would be tabled in Parliament. I request the House to accept it or give an alternative.

“Following that, we will bring a new draft on the Government’s way forward and road-map. I will also give it to the National Council. I will present a long-term and mid-term plan after Parliament has discussed and reached an agreement on it. At present, several reports have been received from the National Council and Committees of Parliament. I am thankful for that. But we were able to complete this work within a short period of 08 months. I declare that we will take advantage of it and move forward.”