By Dr Rohan Pethiyagoada is a Sri Lankan biodiversity scientist, amphibian and freshwater-fish taxonomist, author, conservationist, and public-policy advocate. Excerpts from a recent interview with the Kaleidoscope YouTube channel.
“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.”
Exports had a mixed year. The brain drain has been unstoppable.”
“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 economy may suffer, and the most vulnerable will face severe hardship while the middle class will undeniably get squeezed.”
“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 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.”
“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 (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.
“Privatization 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, Sri Lanka Airlines lost Rs. 75 billion, which is only half as much as it lost in 2022, but nevertheless a huge amount of money.”
“The simple things that the government could have done, including halting land grabbing by politicians and influential people and improving 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?”
“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.”
“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”
. “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 obtain 50% of the vote, leading to a count of the preference votes at the end of it.
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.”
“The voter is certainly older, but I don’t think that anyone’s much 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 Sri Lanka Airlines’ loss for the year.”
“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.
“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.
