Even as the powers that be choose to collectively bury their heads in the sand ostrich style, oblivious to the reality staring in their face, it also appears that fellow travellers are expected to follow suit and see no evil, hear no evil and speak no evil. The summary dismissal of a State Minister last week served notice on any potential detractors within the ruling cabal that those holding office do so at the pleasure of the Head of State and more importantly, that there is zero tolerance for dissent. However former President Maithripala Sirisena, who is also a member of the Government parliamentary group and has been firing all round lately, was quick to set the record straight, that such so-called ‘disciplinary action’ depended on the individual as many others who have uttered far worse than the State Minister remain cosily ensconced with those calling the shots.
If the Government is of the opinion that it can hide reality from the very people who are experiencing it on a daily basis, then it is only fooling itself. The refusal to admit that there indeed is a genuine problem is self-defeatist and the end result of that denial could well be a greater and more complex issue that is likely to be beyond anyone’s control. The sacked State Minister was one among a handful who have had their ear to the ground by actually mingling with the people and feeling their pulse. Therefore, the sacking displayed the growing disconnect between the rulers and reality, which does not augur well for a Government that is yet to even make it to the halfway mark of its tenure.
As for how long the charade can go on is for history to judge, but what is becoming increasingly clear is that the citizenry is losing patience and demanding quick answers to the ever-growing litany of woes. Two weeks ago, the Governor of the Central Bank tweeted that Sri Lanka’s official reserves had strengthened to over $ 3 billion by the end of 2021. If that indeed was the case, then by now the strangulation of the economy should have eased to some extent but the ground reality has been the opposite. Cargo ships continue to be anchored in our harbour unable to unload due to payment issues, while thousands of containers carrying essential items remain stuck in port due to importers being unable to cough up the dollars required for their release.
Despite the Governor’s bombast, it appears that the Central Bank has now begun to even run through the country’s meagre gold reserves, which is usually the last resort in a financial crisis. Last Friday the Central Bank was compelled to admit that gold reserves had declined by over 50% in just the month of December from $ 382 million at the end of November to a paltry $ 175 million by end December. It goes without saying that this is the wealth of the nation and the government of the day is only the custodian of this wealth. It is not at liberty to do as it pleases without being accountable to the nation. The people to whom this gold belongs to are yet to be informed as to the purpose for which it was utilised. Then again this is the very same Central Bank that boasted reserves had risen to $ 3 billion 10 days ago when in fact half of it was a swap arrangement with China that had been arranged in March last year and is only available in the Chinese currency for imports from that country. How such an arrangement will be useful in making urgent pending payments in USD denomination is left to be seen.
However, despite this strangulation, the People’s Bank on Friday released $ 6.9 million as payment to a Chinese company for a stock of fertiliser thrice rejected by quality assessment agencies in the country. Needless to say, the entire procurement process of this shipment has been mired in controversy and there has been little or no willingness on the part of the relevant authorities to get to the bottom of it even though the Agriculture Minister himself has remained opposed to this particular shipment. What is clear from this episode is the clear lack of coordination within Government on how best to utilise the meagre financial resources at its disposal.
The impact of such uncoordinated procurement is likely to have a domino effect as it will deprive funds for more important and urgent imports such as pharmaceuticals which are already in short supply at State hospitals. There is no doubt that the business sector has been severely impacted by the evolving crisis. According to reports, foreign banks have reduced discounting Letters of Credit issued by local banks, while others are providing credit based on the standing of the bank issuing LCs. The situation appears to be more acute in India, with the banks there being overly cautious of trading with their peers across the Palk Straits. It has been reported that payments against bills of exchange, which normally take place on presentation or within a week, are now taking over a month, which has led to some banks halting credit and operating on collection basis.
Besides it is not only the Government and the business sector that is feeling the crunch of the forex crisis; it has now reached a point where even individuals are being penalised. Despite the Central Bank Governor claiming that there is no directive to forcibly convert USD deposits held by Sri Lankans in local banks into rupees, social media is inundated with personal experiences of it taking place. Not only that, many Sri Lankans who have had reason to go abroad have had to face severe difficulties owing to arbitrary spending caps imposed on overseas usage of credit and debit cards. Here again although officialdom lives in denial of such an issue, social media accounts of personal experiences paint a contrary picture. Some have even been stranded, missing flights due to the inability to settle bills on time owing to card payments being declined.
If one was to anticipate some sort of respite in the short term, that expectation might as well be banished in light of the spending spree announced by the Finance Minister last week. It boggles the mind how a Government that is struggling to pay a maturing ISB of $ 500 million later this month is willing to spend an amount equivalent to over $ 1.1 billion on a so-called relief package. The package envisages providing a Rs. 5,000 monthly allowance for State sector workers numbering over 1.5 million and all pensioners. A further Rs. 1,000 monthly allowance will be provided to Samurdhi beneficiaries while a flour subsidy will be provided to the estate community and the purchase price of paddy has been increased by Rs. 25, all of which make up a grand total of Rs. 229 billion.
Coming less than a month after Budget 2022 was passed in Parliament, where no mention was made of the relief package, the Finance Minister is yet to explain how he intends to fund the exercise, making a mockery of the budgetary process and parliamentary control of finances. In the absence of an explanation, continued money printing appears to be the mechanism in place, which is likely to result in a further spike in inflation even though the Governor of the Central Bank continues to insist that there is no link between the two. Interestingly this additional spending will require a fresh supplementary estimate, which also contradicts the Finance Minister’s own commitment during the Budget to refrain from supplementary estimates this year.
Given the immense hardship faced by the people, there in no question on the need for relief, but it also flies in the face of the austerity measures that the Government has called for. While we are not aware if there has been a policy reversal in this regard, what is clear is that the right hand does not appear to know what the left hand is doing.
Left, right and centre
08 Jan 2022
Left, right and centre
08 Jan 2022
Even as the powers that be choose to collectively bury their heads in the sand ostrich style, oblivious to the reality staring in their face, it also appears that fellow travellers are expected to follow suit and see no evil, hear no evil and speak no evil. The summary dismissal of a State Minister last week served notice on any potential detractors within the ruling cabal that those holding office do so at the pleasure of the Head of State and more importantly, that there is zero tolerance for dissent. However former President Maithripala Sirisena, who is also a member of the Government parliamentary group and has been firing all round lately, was quick to set the record straight, that such so-called ‘disciplinary action’ depended on the individual as many others who have uttered far worse than the State Minister remain cosily ensconced with those calling the shots.
If the Government is of the opinion that it can hide reality from the very people who are experiencing it on a daily basis, then it is only fooling itself. The refusal to admit that there indeed is a genuine problem is self-defeatist and the end result of that denial could well be a greater and more complex issue that is likely to be beyond anyone’s control. The sacked State Minister was one among a handful who have had their ear to the ground by actually mingling with the people and feeling their pulse. Therefore, the sacking displayed the growing disconnect between the rulers and reality, which does not augur well for a Government that is yet to even make it to the halfway mark of its tenure.
As for how long the charade can go on is for history to judge, but what is becoming increasingly clear is that the citizenry is losing patience and demanding quick answers to the ever-growing litany of woes. Two weeks ago, the Governor of the Central Bank tweeted that Sri Lanka’s official reserves had strengthened to over $ 3 billion by the end of 2021. If that indeed was the case, then by now the strangulation of the economy should have eased to some extent but the ground reality has been the opposite. Cargo ships continue to be anchored in our harbour unable to unload due to payment issues, while thousands of containers carrying essential items remain stuck in port due to importers being unable to cough up the dollars required for their release.
Despite the Governor’s bombast, it appears that the Central Bank has now begun to even run through the country’s meagre gold reserves, which is usually the last resort in a financial crisis. Last Friday the Central Bank was compelled to admit that gold reserves had declined by over 50% in just the month of December from $ 382 million at the end of November to a paltry $ 175 million by end December. It goes without saying that this is the wealth of the nation and the government of the day is only the custodian of this wealth. It is not at liberty to do as it pleases without being accountable to the nation. The people to whom this gold belongs to are yet to be informed as to the purpose for which it was utilised. Then again this is the very same Central Bank that boasted reserves had risen to $ 3 billion 10 days ago when in fact half of it was a swap arrangement with China that had been arranged in March last year and is only available in the Chinese currency for imports from that country. How such an arrangement will be useful in making urgent pending payments in USD denomination is left to be seen.
However, despite this strangulation, the People’s Bank on Friday released $ 6.9 million as payment to a Chinese company for a stock of fertiliser thrice rejected by quality assessment agencies in the country. Needless to say, the entire procurement process of this shipment has been mired in controversy and there has been little or no willingness on the part of the relevant authorities to get to the bottom of it even though the Agriculture Minister himself has remained opposed to this particular shipment. What is clear from this episode is the clear lack of coordination within Government on how best to utilise the meagre financial resources at its disposal.
The impact of such uncoordinated procurement is likely to have a domino effect as it will deprive funds for more important and urgent imports such as pharmaceuticals which are already in short supply at State hospitals. There is no doubt that the business sector has been severely impacted by the evolving crisis. According to reports, foreign banks have reduced discounting Letters of Credit issued by local banks, while others are providing credit based on the standing of the bank issuing LCs. The situation appears to be more acute in India, with the banks there being overly cautious of trading with their peers across the Palk Straits. It has been reported that payments against bills of exchange, which normally take place on presentation or within a week, are now taking over a month, which has led to some banks halting credit and operating on collection basis.
Besides it is not only the Government and the business sector that is feeling the crunch of the forex crisis; it has now reached a point where even individuals are being penalised. Despite the Central Bank Governor claiming that there is no directive to forcibly convert USD deposits held by Sri Lankans in local banks into rupees, social media is inundated with personal experiences of it taking place. Not only that, many Sri Lankans who have had reason to go abroad have had to face severe difficulties owing to arbitrary spending caps imposed on overseas usage of credit and debit cards. Here again although officialdom lives in denial of such an issue, social media accounts of personal experiences paint a contrary picture. Some have even been stranded, missing flights due to the inability to settle bills on time owing to card payments being declined.
If one was to anticipate some sort of respite in the short term, that expectation might as well be banished in light of the spending spree announced by the Finance Minister last week. It boggles the mind how a Government that is struggling to pay a maturing ISB of $ 500 million later this month is willing to spend an amount equivalent to over $ 1.1 billion on a so-called relief package. The package envisages providing a Rs. 5,000 monthly allowance for State sector workers numbering over 1.5 million and all pensioners. A further Rs. 1,000 monthly allowance will be provided to Samurdhi beneficiaries while a flour subsidy will be provided to the estate community and the purchase price of paddy has been increased by Rs. 25, all of which make up a grand total of Rs. 229 billion.
Coming less than a month after Budget 2022 was passed in Parliament, where no mention was made of the relief package, the Finance Minister is yet to explain how he intends to fund the exercise, making a mockery of the budgetary process and parliamentary control of finances. In the absence of an explanation, continued money printing appears to be the mechanism in place, which is likely to result in a further spike in inflation even though the Governor of the Central Bank continues to insist that there is no link between the two. Interestingly this additional spending will require a fresh supplementary estimate, which also contradicts the Finance Minister’s own commitment during the Budget to refrain from supplementary estimates this year.
Given the immense hardship faced by the people, there in no question on the need for relief, but it also flies in the face of the austerity measures that the Government has called for. While we are not aware if there has been a policy reversal in this regard, what is clear is that the right hand does not appear to know what the left hand is doing.
Kapruka
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Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!