The present state of Affairs in Sri Lanka needs urgent steps in two directions, politically and economically. At first with a stern focus on the economy.
Sri Lanka was in need of a professional economic expert cum banker. Fortunately the former Central Bank (CB) Board Member Dr. P. Nandalal Weerasinghe, a Sri Lankan economist and banker was appointed as the 17th Governor of the Central Bank of Sri Lanka.
Flown in from Australia as an economic surgeon and firefighter at the same time, Dr. Weerasinghe in his first working days administered a virtual bail out for the ailing SL banking sector. That is only to prevent a looming bail out on the horizon, which would have put Sri Lanka’s economy in a freefall on its knees.
His decision to unilaterally suspend external debt payments and thereby keep a least quantum of foreign reserves, was largely welcomed by the banking sector in Sri Lanka.
On ‘prima facie’ the raising of key interest rates has been seen as a relief and as a magnet to trigger a more positive sentiment for new FD investments within Sri Lanka’s business community among others who are financially well off.
On one hand the drastically increased 700 basis points key interest rates resulted in cheers by depositors who were less attracted in recent times by un-attractive interest rates. For debtors the interest hike meant a very bleak future outlook.
The SME segment reacted with less enthusiasm on the interest hike. SMEs see CB’s increment of interest rates as no suitable solution to fiscal and external imbalances in the first place. It is seen as the wrong path burdening debtors to its rims. Amid increasing bankruptcies for non-performances on existing loan payments, more negative fall-outs are waiting around the corners.
Dr. Weerasinghe’s next bold proposal to international Bondholders to accept Sri Lankan Rupees as a currency for settlement or even capitalised interests. It sounded like an affront to the seemingly unassailable status of US and Euro as the only currencies with unchallenged global acceptance.
The CB Governor might have been inspired by the latest Russian approach to pry out the US Petrodollar payment system to accept only Russian Ruble in exchange for their oil and gas exports as the only legitimate currency. Russia selected an intelligent move after the international banking sector expelled Russia’s CB from the global SWIFT system. China and Saudi Arabia will be next with tickets on the same train.
What major changes should be implemented to turn the disastrous path on our Island. The appointment of the CB Governor can be seen as an example with significance into the right direction. Professionals and Academics to lead government and not to only serve Governments as advisors.
The direct and unhindered involvement of University Heads of Departments covering a huge field of expertise and with professionals in all Industries to build task forces starting with the three main GDP contributors, Apparel, Foreign Employment and Tourism among other Export oriented industries. Assuming that these task forces are set up with experts their final recommendations should be implemented as policies without being altered or bypassed even by elected popular politicians. Expertise over Popularity could be the measure of all things.
Singapore once visited Sri Lanka to learn from us. Today it is time to learn from Singapore. The Prime Minister of Singapore Lee Hsien Loong is a Bachelor of Mathematics in Cambridge and in Harvard. The Minister of Trade Ong Ye Kung is a Bachelor cum Master of Engineering (Cambridge). Minister of Ports S. Eswaran with a degree in Economics and a Master Degree of Public Administration in Harvard. Singapore’s Finance Minister Lawrence Wong has a Master Degree in Economics and a Degree in Economics from 2 Universities in Wisconsin and Michigan.
Singapore enjoys a AAA Rating from all International reputed Rating Agencies while Sri Lanka had been downgraded to CCC, which equals the meaning “in default with little prospect for recovery” According to the latest assessment of the IMF, Sri Lanka’s debts are presently unsustainable.
The immediate task is to mitigate the adverse impact on the poor and vulnerable.
The writer is a sociologist, financial analyst and tourism sector expert