• Numbers look generally okay, but ground situation has gotten a lot worse
• IMF programme stuck without agreement on external debt restructuring
• Proposals made by ISB holders don’t look at all beneficial to the public
• The Public Debt Management Bill is a very strong piece of legislation
• Any government will have to by and large follow the IMF framework
• SJB not criticising for the sake of it; understands Govt. complications
• People in Govt. don’t want some things COPF takes up to be taken up

While the numbers are moving in the right direction, the ground situation is another matter altogether, with poverty more than doubling and most people unable to make ends meet, charged Samagi Jana Balawegaya (SJB) Member of Parliament (MP) Dr. Harsha de Silva, in an interview with The Sunday Morning, pointing to the disappearing middle class.

As for the status of the ongoing International Monetary Fund (IMF) programme, he said it was presently stuck due to the lack of concrete progress on external debt restructuring, while the proposals made by the International Sovereign Bond (ISB) holders did not look beneficial for the people.

“Without external debt restructuring, you can’t get the next tranche. China has to sign a document, the Paris Club has to sign a document, and India has to sign a document. But that has not happened; they want to see what the deal is with the ISB holders. In my view, the proposals made by the ISB holders don’t look at all beneficial to the public of Sri Lanka,” he added.

Commenting on the host of new legislation coming into play, Dr. de Silva said that things were moving when it came to legislation – citing the tabling of the Public Finance Management Bill and the Economic Transformation Bill and the approval of the Public Debt Management Bill over the last few days – but without the external debt restructure, the next IMF tranche would not be released.

Responding to a question on whether a future SJB government would follow the same legislation, he responded in the affirmative, stating that the framework had to be followed by and large immaterial of which government was in power. 

“It’s not necessarily the IMF; this is our own discipline that we need to bring in,” he emphasised, noting however that the SJB did not agree with some of the IMF measures and would not observe the agreement to the letter. “In fact we have categorically told IMF Senior Mission Chief for Sri Lanka Peter Breuer that there are certain changes that we ought to make in this agreement,” he added.

Speaking on the work of the Committee on Public Finance (COPF), which he chairs, Dr. de Silva said that it was currently looking into two controversial matters: “One is this electric vehicles scam and the second important thing is the visa matter. What happened is absolutely unacceptable.”

He also expressed optimism in relation to making effective changes in the State administration system through COPF, which has taken up many controversial issues under his chairmanship. “This committee was appointed for checks and balances and there is a reason why the Standing Orders say that it must be chaired by a member of the Opposition. I am trying to bring about effective change and we have seen some success,” he added.

Following are excerpts:

How do you assess the current state of the economy?

If you look at the numbers, they look generally okay, but if you look at the ground situation, it has gotten a lot worse, with poverty more than doubling from 2019, the middle class basically disappearing to poor, and essentially most people unable to make ends meet. There are two sides to it. 

Do you believe that the measures taken by the Government on economic recovery have been successful?

The numbers seem to be moving in the right direction in terms of tax revenue, primary balance, etc., but what has happened is that revenue has gone up because of all the taxes that have been imposed on people. 

For instance, PAYE Tax went up from 18% to 24% to 36%; Income Tax went up to 36%; Corporate Income Tax – some went from zero to 30%, some went from 18% to 30%, and some went from 24% to 30%; then Value-Added Tax went from 9% to 12% to 15% to 18%. The easiest way is to capture those revenues from people who have no option but to pay. 

The numbers are looking good because they have done the easiest thing to do, along with revising prices of fuel and electricity to reflect cost, but by doing that, you have extracted from the people. The issue is, when you extract from the people, it becomes difficult for some segments of society to cope and they fall from where they are. That’s really the issue. 

The middle class won’t openly say that because they want to maintain a certain lifestyle, so they may be digging into their savings, borrowing from their parents, or selling things that they have in order to maintain outward appearances. Inside, it might probably be only the husband and wife who know the real situation in the family.

What is your assessment of the ongoing IMF programme and related legislation?

The IMF programme is stuck right now because you have to get the external debt restructuring done. Without that you can’t get the next tranche. China has to sign a document, the Paris Club has to sign a document, and India has to sign a document. But that has not happened; they want to see what the deal is with the ISB holders. 

In the case of the ISB holders, the IMF is not looking for a signed document, but it wants to see that there has been agreement. Implementing that agreement can take some time but some agreement has to be reached. In my view, the proposals made by the ISB holders don’t look at all beneficial to the public of Sri Lanka. There is a comparability with what the Employees’ Provident Fund (EPF) had to undergo, for instance; what these guys are going to be let off with is very different. 

Currently there has been a lot of legislation that has come in. Today (22) they tabled the Public Finance Management Bill; then they tabled the Economic Transformation Bill; and then today in my committee [COPF], we approved the Public Debt Management Bill, which is a very strong piece of legislation. 

Legislation wise, it’s moving, but without the external debt restructure, the next tranche will not be released.

If an SJB government were to come into power, would it follow the same legislation?

By and large we have to follow the framework; whichever government it is is immaterial. It’s not necessarily the IMF; this is our own discipline that we need to bring in: stop printing money, balance your budgets, ensure that losses of State-Owned Enterprises (SOEs) are not dumped on the people, etc. The issue really is, how does one implement it on the ground?

What are your views on the new economy-related legislation introduced by the Government?

We didn’t vote against the IMF, as you know. We abstained. That is because we understand the complications that whoever is in office is facing now. We are not just criticising for the sake of doing it. We didn’t oppose the new Central Bank Act and so on. 

We have therefore shown that we are a serious political party and that we understand the complications that the Government has to face, but at the same time we have been very critical of some of these measures. Therefore, we are not going to observe this to the letter; in fact we have categorically told IMF Senior Mission Chief for Sri Lanka Peter Breuer that there are certain changes that we ought to make in this agreement.

Parties like the National People’s Power (NPP) have raised opposition over the new financial legislation being moved. Is that for the sake of opposing or do they have valid points?

They voted against the IMF so there is no way they can now say they are for it or that they will follow it. They voted against the Central Bank Bill. That means they are opposed to the independence of the Central Bank, they are opposed to the IMF programme. 

I don’t know how they can have two policies, whereas what we are saying is that we are not opposed to this, but there may be certain changes that we will have to make to continue with it. These are two distinctly different things.

The Committee on Public Finance has taken up many controversial issues under your chairmanship. What follow-up action can the committee take regarding irregularities that have surfaced in relation to key institutions?

It is a very tough job that I have. I am a member of the Opposition and I have to chair a very important committee in Parliament. Obviously people in Government don’t want some of the things I take up to be taken up and won’t necessarily agree with me on the steps that I take. Having said that, I must say, however, that generally they have been supportive. 

With reference to the two current controversial things that I am looking at, one is this electric vehicle scam. I have appointed a committee consisting of officials from the Central Bank, the Treasury, Customs, and the Labour Ministry to give the COPF a comprehensive report on what has happened here. The reason is, when in committee, one agency finds fault with another agency, which in turn blames somebody else. The ball was getting passed from one place to the other and therefore this joint committee was appointed; they will have to agree on what exactly has happened. 

There was an objective in passing that legislation; we want to see if those objectives have been fulfilled or not. If they have been fulfilled, then well and good; if not, then the committee will decide what it needs to do. 

The second important thing we are looking at is this visa matter. What happened is absolutely unacceptable. This is something that never happens in Parliament, in that Parliament orders are not adhered to by officials. The Constitution gives Parliament full control over finance and Parliament has full authority to summon anyone. 

Now in this case, the COPF, which looks into all matters related to the revenue and expenditure of the Government, summoned these people and they didn’t show up. You can’t just not show up; this is public money. We have brought it to the attention of the Speaker on privileges and we will take necessary action.

But what is the highest level of action that the COPF can take without powers of litigation?

Well, the parliamentary powers are very broad. Under the Parliament Powers and Privileges Act, one can take legal action against these people, if it goes to that. I am not saying that is what the Speaker will do, but I have asked the Speaker to take the necessary action. We will continue with this examination during the coming Parliament week. 

Do you believe that effective changes can be made in the State administration system through COPF?

Yes, we have ensured that effective changes have happened. This committee was appointed for checks and balances and there is a reason why the Standing Orders say that it must be chaired by a member of the Opposition. I am trying to bring about effective change and we have seen some success.