Polls, it's all about the rupee
President Maithripala Sirisena seemingly threw cold water on the UNP's demand for dissolution of Parliament on 23 April 2015, by saying reforms first and parliamentary election second. (See yesterday's Ceylon Today).
Ceylontoday, 2015-03-20 02:00:00
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Polls, it's all about the rupee
President Maithripala Sirisena seemingly threw cold water on the UNP's demand for dissolution of Parliament on 23 April 2015, by saying reforms first and parliamentary election second. (See yesterday's Ceylon Today).
Under the present Constitution, the President is empowered to dissolve Parliament after the latter has been functioning for at least a year. The present Parliament was elected in 2010 and can go on till next year when it completes its six-year term.
However, the UNP has threatened to resign from the coalition government and, in a further act of belligerency, has also said that they will launch street protests in the event Parliament is not dissolved on or by the magic date of 23 April.
The Maithripala Sirisena-Ranil Wickremesinghe coalition government is effectively run by UNP Leader Wickremesinghe, with most of the Cabinet portfolios in the hands of his MPs. Therefore, in the minds of the Sri Lankan voter, it's the UNP and not the SLFP nor the UPFA, which calls the shots in respect of the workings of the present government.
However, the UNP has threatened to resign from the coalition government and, in a further act of belligerency, has also said that they will launch street protests in the event Parliament is not dissolved on or by the magic date of 23 April.
The Maithripala Sirisena-Ranil Wickremesinghe coalition government is effectively run by UNP Leader Wickremesinghe, with most of the Cabinet portfolios in the hands of his MPs. Therefore, in the minds of the Sri Lankan voter, it's the UNP and not the SLFP nor the UPFA, which calls the shots in respect of the workings of the present government.
The leader of the SLFP is Sirisena. The SLFP is the predominant partner of the UPFA coalition of parties which commands the majority in the House. Due to a bipartisan arrangement, on account of an SLFP President in power, the SLFP/UPFA, which currently functions as the opposition, has lent its support to the UNP-controlled government.
However, what the public doesn't realize is that Sri Lanka is sitting on a balance of payments (BoP) crisis volcano. This BoP crisis has been brought about by profligate spending first by the previous government, followed by the incumbent.
These have come about in order to woo votes. Therefore, one may consider such reliefs or election handouts temporary. No sooner a stable government is in power, it may sound the beginning of the end of such reliefs.
The end of such reliefs may be via allowing the free float of the rupee. That would cause its depreciation. A depreciated rupee would make Sri Lanka's imports more expensive. And, Sri Lanka is an import dependent economy.
Currently, the country even imports its staple food rice because of the failure of its last two harvests due to the vagaries of weather. Therefore, a weak rupee would make such essentials more expensive to the consumer. With an election looming round the corner, the present government will not want to make any reforms to the exchange rate because that will make imports more expensive to the consumer.
Therefore, such reforms can be done only after an election. If however such reforms are done before an election, the present government will be committing political suicide. Hence, the urgency for the UNP to have an election, so that they could push through with the exchange rate reforms, without having to fear for another election for the next six years.
In the interim, i.e. before 2021, when the next general election is due according to the present Constitution, i e in the event a premature general election is held this year and the UNP wins it, expected Foreign Direct Investments (FDI), would then to take the wind off depreciating pressure on the rupee.
However, no foreign investor will want to put his money into a country, particularly FDI, if there is an unstable government in power.
But, if elections are delayed, it will further bleed the country's foreign reserves, by serving the dual purpose of defending depreciating pressure on the rupee by selling the same at a discount to the market, coupled with meeting the government's foreign debt servicing commitments.
Therefore, the longer the present interim government stays on in power (it can go on till next year when polls are due, if not dissolved before), the better it will be for the opposition (SLFP/UPFA), but worse it will be for the government (UNP).
In the present context, the government will not be able to carry out the necessary reforms, exchange rate or otherwise, while without FDI it will be difficult for the government to provide employment to the 400,000 youth who annually enter the job market.
Therefore, if the present Parliament is allowed to run its full course till next year, it will be worse for the UNP if it's still calling the shots in government due to rising unemployment at an election.
But, Sirisena's point is reforms to the constitution must come first and elections later. Meanwhile, his party, the SLFP, is not only agitating for constitutional reforms, but for electoral reforms as well.
In the context of electoral reforms, Elections Commissioner Mahinda Deshapriya has said if electoral reforms are to be implemented, then elections should be held after a year such reforms are implemented, to enable the voter to digest the finer points of the new electoral reforms, before going to vote. (See also yesterday's editorial of this newspaper and its Wednesday's issue).
However if the current status quo prevails, probably the best political course of action left for the UNP is to resign from the government and hand over the reins to the SLFP/UPFA, where the opposition leader Nimal Siripala de Silva has said that they are willing to form a government in the event the UNP quits.
Ceylon FT
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