Discussions with IMF to reach productive level - Dr. Bandula Gunawardena | Sunday Observer

Discussions with IMF to reach productive level - Dr. Bandula Gunawardena

11 December, 2022

Minister of Transport, Highways and Mass Media Dr. Bandula Gunawardena said he is confident that it would be able to get some sort of relief in the first quarter of next year through debt restructuring and IMF assistance. The Minister in an interview with the Sunday Observer said he believes the ongoing discussions with the IMF would definitely reach a productive level before April next year.

Dr. Gunawardena said: “What we need is to get more and more foreign reserves. We should adopt the strategy to go for private-public partnership or privatisation to attract more foreign exchange to Sri Lanka. Without being confined to narrow minded politics, as Sri Lankan citizens, we should seriously consider why our entrepreneurs go to Bangladesh, Ethiopia, Kenya, Vietnam and Oman to start their business ventures. That is mainly because they can get more concessions, benefits and facilities from those countries.” He said perhaps a political crisis has a political solution but an economic crisis only has an economic solution.

Excerpts of the interview

Q: Sri Lanka will now be able to access financial assistance usually granted to least developing countries through the World Bank International Development Assistance Program. Do you think this will help address the economic crisis to some extent?

A: That is also there as yet another strategic approach. However, I mostly think a stable situation will be created mainly due to rescheduling loans under the IMF program. Some say if the IMF program is successful, we will receive only US$ 2.9 billion. However, that is not so. When credibility is restored, the ability to obtain loans from other countries and financial institutions will also be increased.

For example, as the Highways Minister, I could get money under a Bulgarian credit line to commence the construction work on the Kohuwala flyover and Gatambe flyover. At present, both these projects have come to a standstill. If our debt restructuring program is not implemented and if we are not in a position to pay our loans, then the loans given to us by foreign countries using their taxpayer’s money will be stopped. It is not only US$ 2.9 billion IMF loan but all other projects will also come to a standstill.

For example, the second phase of the Bandaranaike International Airport development project commenced under JICA funds. At present, it has also been stopped. Therefore, the picture of our international monetary situation is not so pleasant.

I hope we will be able to get some sort of relief in the first quarter of next year through debt restructuring and IMF assistance. What we need is to get more and more foreign reserves. During the recent past, we were not able to find even US$ one billion per year through foreign investments when some countries earn from US$ 50 billion to US$ 400 billion annually. We should see how countries like India, China, Vietnam, Singapore, Malaysia, Oman and Dubai attract foreign investments. That is mainly due to various concessions and benefits generously given to foreign investors by those countries.

Today we are not trusted. One time, we privatised Sri Lankan Airlines and again we took it back. We allowed constructing the Port City but the next Government which came to power suspended its constructions for about one and half years. We pledged to offer the East Terminal of the Colombo Port to some country and after public protests, we refused to give it. When a foreign investor comes to Sri Lanka, various restrictions are imposed to demoralise that person.

Australian billionaire businessman James Packer came to Sri Lanka with the intention of making some massive investments. Then he was vehemently criticised and sent back. Indian billionaire industrialist Adani was also criticised and was prevented in such a manner. A distorted situation to demoralise foreign investors which cannot be seen in any other country has been created in Sri Lanka.

Countries such as India, Nepal, Bangladesh, Pakistan, Australia, Singapore and Malaysia have private universities affiliated to their medical colleges. However, it is not allowed to open such private universities in Sri Lanka. Will foreign investors come to our country? If internationally recognised foreign universities are opened in Sri Lanka, then we will be able to attract foreign students from countries such as the Maldives, Bangladesh, Nepal, Bhutan and Indonesia. This would pave the way to create an educational hub in Sri Lanka.

Some hypocritical politicians cannot see that some international foreign universities hire the BMICH to conduct educational fairs and exhibitions to attract our local students to their universities. Nearly US$ 3 billion is spent for this annually. Then how do we find this money? When US$ 3 billion is allocated on education, there is no foreign exchange to purchase drugs for patients. At least a dialouge should be created at university level regarding this. Instead of listening to mere slogans put forward by the JVP and the Frontline Socialist Party to promote hatred politics, university lecturers, professors, economists, intellectuals and professionals should appear for an alternative system to get the country out of the current crisis.

Q: What is the progress with regard to the IMF credit facility? Will Sri Lanka be able to get it at least by April-May 2023?

A: After we were declared bankrupt, we are not in a position to resolve this issue in a simple manner. We also have a lack of knowledge and expertise regarding this. Therefore, various discussions are going on with regard to conditions between the two parties. As a result, the situation before December has been changed.

Therefore, we believe the discussions would definitely reach a productive level before April next year. For example, as we have no expertise on debt restructuring, we called for international companies which are specialised on the matter.

Accordingly, 28 applications were received. Of them 20 were evaluated by a separate committee. That committee selected France-based Lazard as financial advisor and Clifford Chance LLP as legal advisor to support the country on debt restructuring. If any Opposition MP has an idea to resolve the debt issue in a simple manner, we can give him the dollars that we give to Lazard.

If a group of our lawyers can come forward on behalf of the country to give legal advice, they can ask Clifford Chance to go back.

Actually, no Opposition politician has realised the gravity of the issue. They think if the power is shifted the issue will also be changed but that will not happen. An economic crisis doesn’t have political solutions. Perhaps a political crisis has a political solution but an economic crisis only has an economic solution. If the politicians cannot agree to an economic solution, I don’t think such politicians will be able to take over the country’s future and continue at least for two to three weeks.

Q: Why is the Government silent on the US$ 40 billion allegedly parked in overseas accounts by various politicians, businessmen and so on? Are there any steps being taken to bring back this money?

A: If the politicians have such money in overseas accounts, the person who makes the allegation should have acceptable reasons to prove that. There can’t be a country which doesn’t have properties and other assets.

Exporters in our country don’t bring their entire dollar income here and they have invested them and purchased some properties and assets in other countries. As said by Justice Minister Dr. Wijeyadasa Rajapakshe, a fresh law will be introduced if some politician or anybody has any property or money in an overseas country, the person who makes the allegation should come forward and provide information.

Sometimes, such issues can also be dealt with under the Money Laundering Act. Otherwise, nothing can be done based on mere gossip. The Justice Minister also informed the Cabinet of Ministers that if some foreign exchange to be received by the country is hidden somewhere, it has also been decided to introduce a new law to bring that money to Sri Lanka.

When attempts were made by the then Central Bank Governor in 2017 to change the Exchange Control Act, I continuously opposed that at parliamentary committees. I requested not to do that as our foreign exchange would rapidly go out of the country. As to how those officials seriously put forward facts, they even refused to include the word ‘exchange control’.

Then they changed the Exchange Control Act in 2017 and allowed people to bring money as they wish. As a result, our foreign reserves dropped to zero.

I even went to the Supreme Court in 2017 and pointed out saying that it would be very harmful and disadvantageous to the country to change the Exchange Control Act in such an arbitrary manner. There are lots of officials who were influenced to take wrong decisions and should be held responsible for the present economic crisis.

Q: SLPP National Organiser and former Finance Minister Basil Rajapaksa has said that the SLPP made the ‘right choice’ by backing Ranil Wickremesinghe for the President. Do you agree with this view and if so, why?

A: Yes. Otherwise, an anarchic situation would have been created in the country. If there is no ability to maintain the law and order situation in the country, ‘jungle law’ comes into operation.

During the 1988-89 terror period, we could see schools and universities were closed some days while buses and trains were not operated due to various orders. Those who violated those orders were brutally killed. Armed gangs entered houses by force and asked parents and children to kneel down. It was strictly prohibited to attend the funerals of those who were killed by those gangs. I still remember it was only when actor Vijaya Kumaratunga was killed, the people couldn’t be prevented from attending his funeral. At that time, there was nobody to give an interview to a newspaper on Vijaya. I gave an interview to journalist Bandula Padmakumara that Vijaya was a great human being. We experienced the same anarchic situation in the country on May 9, 2022. Those who have a lack of understanding on printing money, interest rates and exchange rates and international debt payments, they can never run a Government.

Some people can conduct meetings and just utter something. Sometimes, the people are very pleased to listen to those speeches. However, a country cannot be ruled in such a manner. We categorically tell the country that internationally recognised foreign universities should be set up in Sri Lanka. It would help to prevent the foreign exchange from going out of the country and increase the foreign exchange inflow into the country. This would also help to gain a quality education under a more competitive atmosphere. This is our policy and we openly say it.

Q: Do you think that people are tired of Aragalayas and want to live a peaceful life now that most of the services have returned to normal? However, the Opposition is saying that an Aragalaya to topple the Government is inevitable.

A: Those who engage in an Aragalaya can never capture power. In future, the political parties will have to give an undertaking to the people that they would commit themselves to safeguard the fundamental human rights. The Constitution has ensured the right of each citizen to move freely and live in their home.

At the next election, the people should vote only for those who can create such an environment in the country. Otherwise, it would lead to a disaster. If the people’s free movements are obstructed and deprived of their fundamental human rights, they will have to decide whether they should vote for those who obstruct such movements or not.

If some person cannot live in his own house with his family and his house is burnt down, then the Sinhala, Tamil and Muslim people will not be able to live peacefully live in this country. Therefore, religious leaders and others will have to get an undertaking from all political parties which contest forthcoming elections whether they will commit themselves to protect the fundamental human rights.

Q: There are also allegations from the Opposition that the Government is trying to postpone the Local Government elections. Is the Government scared of facing an election?

A: There is no issue of conducting an election at any time. However, conducting an election will not provide any solution to the existing crisis in the country. The President and others say the expenditure of the Local Government institutions is so high. That is mainly because of the distorted electoral system. In some local Government institutions the Opposition have captured power.

At present, there are about 8000 Local Government members. It is more appropriate to conduct an election after reducing the existing 8,000 members of Local Government bodies to at least 4000. It would help to provide a more efficient public service through the Local Government system.

Q: Allegations are levelled by certain sections that various laws are being brought to control the social media. As the Mass Media Minister what is your comment?

A: First they should tell what is the law introduced by the Government to control social media. There is no such law introduced by the Government.

Q: Will the three leading Government-owned media houses (SLRC, ITN and ANCL) be privatised or broad based?

A: Some sort of change has to be made because the Government doesn’t provide money to maintain these media institutions. If we are not in a position to maintain the large number of employees in these State media institutions through various means, finally we will have to close them down. I am trying my level best not to close down any media institution and somehow Minimise the debt burden and increase their revenue sources by adopting various commercial strategies.

If we make such an attempt, we would be able to safeguard these media institutions. These days the ANCL has been able to minimise its losses and turned into the profit making level. However, the situation in the future seems to be in danger compared to price fluctuations in the world market and increase of employees in the State-owned media institutions.

Therefore, these media institutions should find out new commercial business ventures. I also told the ANCL to find reputed university lecturers, professors and researchers and start a company to publish their books. We can also commence other commercial printing businesses using the skilled employees of the ANCL and its modern sophisticated equipment. We have to diversify the ANCL. Otherwise, it would be difficult to maintain the ANCL, the country’s flagship media house, by just selling newspapers.

Q: The economic crisis has stalled many transport projects such as bringing in electric buses. Do you think these could be implemented next year once our forex reserves are strengthened?

A: Under foreign aid assistance, we will implement a project next year to convert three wheelers into electric vehicles. I also hope to bring an investor even under a Build-Operate-Transfer (BOT) system to develop the Kelaniweli Railway Line from Avissawella to Colombo to operate an electric train. This would help to solve the transport issue in the area to a great extent. As the Government doesn’t have funds, I am willing to offer the project to an investor under the BOT system so that he can continue the project for a couple of years and then hand it over to us. We hope to commence this project next year. Under the Indian Credit Line, we have also discussed with the Indian High Commissioner and Indian Government to get US$ 400 million to develop and modernise the infrastructure facilities in the railway sector.

If the Indian Government provides assistance to us, there are lots of opportunities to develop the railway sector to a great extent. Railway Engine Drivers’ Association, Railway Guards’ Association and the Railway Station Masters’ Association have realised the prevailing situation in the Railway Department and have extended their support to overcome it. That is a very good tendency. We have to think afresh. We cannot operate trains in the same old manner.

Q: Any possibility of a major reduction in diesel prices which will bring goods and passenger transport costs down?

A: There is a price formula for diesel and petrol. At each fuel price revision, there is no possibility to amend the bus and train fare. The bus fare is decided on by the private sector, Government and the National Transport Commission.

Politicians cannot decide on it. There is an accepted price formula with 12 facts. Following discussions, bus fares are decided based on these 12 facts. We have to introduce the same price formula for the railways as well to decide on the train fare. If the cost reflective price formula is implemented everywhere in the State sector, private sector and cooperative sector, it would ease the burden of the people.