Sirisena-Wickremesinghe administration has caused massive economic turmoil by

Viyathmaga professionals blame current economic crisis squarely on incumbent rulers’ folly

August 14, 2016, 9:52 pm

By Shamindra Ferdinando

A group of professionals on behalf of Viyathmaga, an organization promoting good governance and accountability, asserts that the Sirisena-Wickremesinghe administration has caused massive economic turmoil by increasing the public sector salaries by Rs. 10,000.

Viyathmaga alleges that the national economy cannot afford the staggering increase in the expenditure on the state wage bill and is now struggling with no prospect of finding new funding sources or enhancing productivity.

Prof. Janitha Liyanage, Professor S. R. D. Rosa, Raja Gunaratne, Jayampathi Molligoda, Dhamitha Wickremesinghe and Shermila Rajapaksa recently launched a booklet on behalf of Viyathmaga in accordance with their overall objective to educate the electorate regarding the rapidly worsening economic situation.

The national economy couldn’t sustain the staggering increase in recurrent expenditure to Rs. 1,702 bn in 2015 from Rs 1,323 bn in the previous year due to enhanced public sector emoluments listed in interim budget in January 2015, they pointed out.

State Finance Minister Lakshman Yapa Abeywardena early this year publicly acknowledged that the government was in crisis today due to unprecedented increase in public sector salaries. Subsequently, Minister S. B. Dissanayake attributed the current financial crisis to the unprecedented public sector salary increase.

Viyathmaga alleged that many times modified November budget had badly failed in respect of fiscal consolidation. The experts listed 12 causes of the current economic downturn while identifying the public sector salary increase as one of the major factors.

Viyathmaga accused the government of implementing fiscal policies contradictory to Prime Minister Ranil Wickremesinghe’s economic policy statement.

Asserting that the previous government had been successful in what it called a sustained fiscal consolidation exercise during 2010-2014 period, Viyatahmaga alleged that the incumbent government had been compelled to implement measures to enhance revenue regardless of consequences. The organisation pointed out that the enforcement of Super Gains Tax (SGT) as a key measure to increase revenue had caused irreparable damage to the national economy. Although, SGT had been applicable to 2015 only, it had caused grave concerns among major private sector investors, leading to a crisis in the Colombo Stock Market. Asserting that the government had been able to rake in about Rs. 60 bn through SGT, Viyathmaga alleged that the move had a far reaching impact on the investor community thereby causing widespread turmoil.

Viyathmaga alleged that the national economy had been affected severely due to commitment of foreign reserves to maintain the value of rupee during January 2015-August 2015 period. It accused the 100-day administration of wasting foreign reserves in the run-up to August 2015 general election thereby transforming a healthy BOP (Balance of Payments) surplus of $ 1,369 mn in 2014 to a deficit of $ 1,489 mn in 2015. Viyathmaga examined the failure on the part of the Monetary Board to take tangible measures to tackle the situation. In fact, Monetary Board had contributed to the current crisis by turning a blind eye to politically-motivated and ill-advised decisions taken by the rulers, Viyathmage said.

Commenting on the state of Sri Lanka’s foreign reserves, The Viyathmaga said that due to massive commitment of foreign reserves to defend the rupee during 2015, the country had lost nearly $ 1 bn. The experts alleged that for want of proper policies, the country could not benefit from plummeting price of crude oil.

The Viyathmaga also faulted the government for the alarming increase in local and foreign borrowings; particularly short-term transactions due to short-sighted policies, the government lacked the wherewithal to pay back loans and it continued with the dangerous practice of issuing short-term Sri Lanka Development Bonds (SLDBs). According to Viyathmaga, approximately $ 3,100 mn had been borrowed through SLDBs since March 2015 to May, 2015 whereas only $ 1,500 had been obtained between 2011 to 2014.

Unprovoked suspension of the flagship Chinese port city project as well as unsubstantiated allegations pertaining to economy in the run-up to January 2015 presidential polls had damaged Sri Lanka’s credibility, thereby causing unease among potential investors. The outfit of intellectuals alleged that the incumbent rulers had caused massive crisis by accusing the previous administration of manipulating economic data.

The Viyathmaga pointed out that Central Bank bond scams, politically motivated investigations undertaken by the Financial Crimes Investigations Division (FCID), budget 2016, which couldn’t be largely implemented, continuing political uncertainty and global economic downturn had contributed to the current crisis.

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