• Linnean medallist, scientist, and public policy advocate Rohan Pethiyagoda on the  Government’s behaviour in 2023

To say that last year (2023) was turbulent would be an understatement. We have had various indicators throughout the year or positives and negatives. 

The economy seems to be back on track. Sri Lanka has got the promised funding from the International Monetary Fund and the creditors. The reforms seem to be on track. And tourism has had a good year. But, exports had a mixed year. The brain drain has been unstoppable. And, Budget 2024 brought some massive surprises in terms of revenue collection. We are heading into an election year (2024), which also means empty promises by politicians. The increase in Value Added Tax and the removal of nearly all exemptions will see citizens tightening their belts once again. The economy may suffer and the most vulnerable will face severe hardship while the middle class will undeniably get squeezed. To recap 2023 and give some predictions for 2024, we had one of our regular guests who consistently delivers astute views on the State of the nation, 2022 Linnean medallist, scientist, and public policy advocate Rohan Pethiyagoda on Kaleidoscope this week.  

Following are excerpts from the interview:

If you look back, what’s the good, the bad, and the ugly in 2023 ?

Let’s look at this dispassionately. On the good side, compared to 2022, we had a much better social, political, and economic level of stability. What characterises 2023 are those three features. That has been good for us all, for employment, the Government service, economic efficiency, and the private sector. On the bad side, the Government has been behaving like a nightwatchman in cricket. They are playing not to get “out”, with business as usual, inefficient and unimaginative. The General Certificate of Education Ordinary Level and Advanced Level Exams are good examples. Delayed by more than a year, it has taken the Examinations Department almost six months to correct the papers. This suggests that a Government has no will to get the job done. The impact on the hundreds of thousands of students who are losing valuable years from their lives is incalculable. The damage done to them is outrageous and this damage spills over into the university admission system and to the universities’ output. The idea that the Government doesn’t have a purpose to it and is just lashing around without direction is a widely embedded idea in the consciousness of the country. Another instance that embeds this is the World Rugby Council and the International Cricket Council blacklisting Sri Lanka due to political interference. The new broom that President and Minister of Finance, Economic Stabilisation and National Policies Ranil Wickremesinghe was supposed to have brought in last year didn’t materialise. It has been the same sort of Government that we have been seeing from 2005 onwards. 

We began 2023 on the back foot so to speak. How far have we come?

We’ve come a long way in terms of stability. The very difficult bet that the Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe placed last year was that by shrinking the economy, inflation could be controlled. It paid off. He was very unpopular at that time, but, we can see now that the year-on-year inflation (which was running at 100% last year) is now down to almost deflationary levels. Food prices have held steady in the past 12 months. Even when it comes to headline inflation, it was 60% in 2022 and was down to 5% last year. A year ago (in 2022), former CBSL Governor Dr. Indrajit Coomaraswamy said that by Christmas last year (2023), he expected that inflation would be under 10%. I thought that it was such an outrageous claim that I cut out the newspaper article where I read the statement from and filed it. I was wrong. Sri Lanka performed even better than he had hoped for. Even as far as the exchange rates are concerned, we had a better performance with the United States Dollar ($), which went to Rs. 360 and then came down to Rs. 330. Lending rates have also come down. We saw therefore some great economic performances last year, and we should be grateful for that. 

In the process of concentrating on getting the economy back on track, what has fallen between the cracks?

Privatisation has been the elephant in the room of the economic reform process and it failed. The President announced that he would privatise Sri Lanka Telecom and Lanka Hospitals (the low-hanging fruit, in this case) and he appointed Suresh Shah for this campaign. Shah did really good work to prepare these entities for listing, but then, the Government lost its nerve and privatisation was pushed under the carpet. In terms of loss making enterprises, the SriLankan Airlines lost Rs. 75 billion, which is only half as much as it lost in 2022, but nevertheless is a huge amount of money. Its total debt at this point is more than Rs. 500 billion. Politicians can’t seem to decide whether to shut it down or sell it off. No decision is being made and so the Airline continues to bleed Rs. 1.5 billion per week. The simple things that the Government could have done including halting land grabbing by politicians and influential people, and improving the environmental performance have also been neglected. Since 2019, 1,300 wild elephants have been killed – that’s five elephants a week. What kind of environmental governance do we have in the country? Even the easy things haven’t been addressed by the Government and that is a shame. 

2024 is not going to be a cakewalk. How is the year looking?

I think that Sri Lanka will keep stonewalling its creditors. We owe them $ 50 billion and we haven’t paid a cent for the last 20 months. The Government is being very crafty about putting them off. I suspect that Wickremesinghe will stall until after the Presidential Election in 2024, so we don’t have to start dwindling our pittance of a foreign exchange reserve. Also, the Treasury is estimating a deficit of Rs. 3 trillion in 2024, which is crazy. The President says that Sri Lanka will be paying that much in debt servicing in 2024. Half of that goes in for local debt servicing, but, the rest of it, he hopes, will be paid to overseas creditors. I don’t think that that’s going to happen. The CBSL’s reserves at the moment are only $ 3.6 billion and have been that amount for the past several months. We cannot start to build up a reserve to start servicing debts anytime soon. It seems that we will continue in this bankrupt situation for another year, at least. In an election year, I cannot see the Government starting to service debt. Where is the money going to come from? Year 2024 will be dominated by the Presidential Election. The question is whether the political parties can unite to form a coalition either with the Janatha Vimukthi Peramuna led National People’s Power (NPP) or against the NPP. I also think that for the first time in a Presidential Election in history, Sri Lanka will see no party obtaining 50% of the vote, leading to a count of the preference votes at the end of it. To me, Wickremesinghe is a one-term proposition, unfortunately. 

Policy-wise, where will we see changes?

It’s too late for policy change in the tail-end of a Government. This Government only has nine months to get anything done and policy requires a much-longer timeframe within which to be implemented. Year 2024 is going to be about holding the fort, giving out some sweets to keep the electorate happy, and buying some votes. Towards the end of the year, the Government will start printing money, so it can give out more largesse – whatever it takes to win an election. Fitch Ratings has made a prediction that prices will rise by 9% in 2024, but if the Government prints money and devalues the Rupee, all bets are off.

You mentioned the Presidential Election; do you think that the voter is older and wiser?

The voter is certainly older, but I don’t think that anyone’s much the wiser. It doesn’t really depend on the voter. Regardless of which party you elect, you have the same problem: the Rs. 3 trillion deficit. People say that we can raise taxes or collect more taxes; even if you collect every single last cent due to the Government, Sri Lanka will not be able to meet this huge deficit. Our Pay As You Earn tax is barely enough to meet the SriLankan Airlines’ loss for the year. When it comes to defence, education, health, and the public service sector, these cannot really be paid from tax revenues. Tax revenues are just about enough to service our debts – about Rs. 1.5 trillion a year. Whichever Government comes into office, they will have this massive problem to deal with. 

Which industries do you see succeeding as we move into 2024 and which do you feel need to transform?

Tourism should be focused on. Arrivals doubled in 2023 compared to 2022 and the hope is that it will double again in 2024. But, the problem is that election years are always unstable. Additionally, 2025 is going to be an election year as well and that election will probably be declared at the peak of the tourist season at the end of 2024. Sri Lanka is looking at a politically turbulent country until at least the middle of 2025. Tourism is unlikely to respond positively to that environment. Another factor is that in the final year of every Government, the public service begins to work to rule. There are strikes and they become inefficient – basically, they just stop working properly. This slows the Government down as well. Going into September 2024, Sri Lanka will see the Government becoming increasingly paralysed in terms of the flexibility to respond to challenges, which means that the country will slow down until a new Government is elected. 

In a nutshell, the do’s and don’ts for 2024?

I think that in every mother’s mind, the biggest “do” is to get her children out of the country, to emigrate. More and more people are getting on the first plane that they can to whichever country they can and getting themselves a job. This is the sad reality. Sri Lanka is churning out graduates who go to work abroad. The cream of our intellectual capital is being whittled away to the West. Another big “don’t”, for me at least, is to keep savings in the bank or in financial institutions in 2024. It would be better to buy inflation proof assets, like land for instance. Don’t keep cash around, because inflation is really going to eat into it.

What does this do for the poor?

The poor are going to become more and more stressed, but the poor have always been with us. Our job is to provide the best possible safety net that we can, through food relief and through a system where everybody is assured of a minimum basic income. In these times, it is even more difficult for people on low or no incomes to survive, because of healthcare becoming very difficult and an inefficient Government sector. The Health Ministry is starved for funds. People are having to seek healthcare in the private sector, which is very expensive. The poor are being squeezed in this situation, and that translates into social unrest at some points. 

(The writer is the host, director, and co-producer of the weekly digital programme ‘Kaleidoscope with Savithri Rodrigo’ which can be viewed on YouTube, Facebook, Instagram, and LinkedIn. She has over three decades of experience in print, electronic, and social media)