Joint Opposition MP Bandula Gunawardene in an interview with the Dailymirror, speaks about the status of economy, future challenges and the global situation. He shared the following:
Q How do you analyse the end result of the implementation of the current budgetary provisions?
If you look at the country’s status of economy in 2017 from an objective and economic point of view, you can foresee a number of challenges lying ahead. One is the drastic depreciation of the rupee value posing a threat to economic stability. Secondly, the fast dwindling of the country’s foreign reserves is there. It is a challenge for the government to strengthen the reserves from the current level. Thirdly, the unprecedented rise of interest rates is a problem. As for the fourth factor, the local entrepreneurs and the private sector are disenchanted. It will lead to a drop in investment. Then, the cost of living is bound to rise further. These are grave economic challenges. In 2012, the rupee value against the US dollar remained at 127. It depreciated to 129 in 2013 and 131 in 2014. At that time, the foreign reserves stood at US $ 8.2 billion. We did not control the exchange rate artificially as otherwise the reserves should have dropped. During the last couple of years, more than US $ 4000 million had been sold in the market. At that time, the Central Bank (CB), in fact, bought over dollars.
The government could actually save around US $ 4 billion because of the drop in global fuel prices. That saving appeared to have been spent to prevent further depreciation of rupee rather than investing in productive purposes. The government is struggling to maintain the reserves at least at the current level. It should be increased at least up to US $ 7.8 billion.
Q However, the government attributes the current predicament in the economy to the global trends and heavy debt burden it inherited. What are your views?
That is being trumpeted over and over again. The government cries foul over borrowings during the MR rule. In the budgetary report, there are graphic details about state borrowings. In these details, the years 2009, 2010, 2012 and 2013 had been identified as the periods in which state revenue was insufficient for debt services. Next, 2014, 2015, 2016 and 2017 have been seen as years without any problem in this respect. When MR assumed office, the total borrowing stood at 102 as a percentage of the GDP. However, it dropped to 70% by the time he relinquished office. It rose again to 76% in 2015. The increase of government borrowings has been portrayed through bar charts in this report presented to Parliament. Going by it, the current government goes down in history as the administration that borrowed the highest in a year. Actually, the country faced the biggest debt crisis in 2002, 2003 and 2004. In fact, the MR rule addressed this crisis as shown in these details presented in the form of graphics and charts. Public representatives are unable to read these graphical details even. It is a tragedy. Only the present government has started borrowing at exorbitant rates. In a developing country, it is always advisable to have a single digit interest rate.
We used to burrow from the Bank of Ceylon at that time at 8% interest rate. Now, the Bank is to raise money from people by issuing debentures with the offer of an interest rate of 13.5%. Only people went to the Bank for loans. Today, the Bank is going after people asking for money at the interest rate of 13.5%.
The government and the CB should be held responsible for the present mess in the economy. On February 27, 2015, a daylight robbery took place in the form of a Bond scam. The credibility of the CB suffered so much that it was even graver than the damage caused by the LTTE bomb attack on it.
We, the Joint Opposition, laid siege to the CB. We complained it to the International Monetary Fund (IMF). Those with subject knowledge understood the gravity of this financial crime. As a result, around US $ 2 billion, invested in Treasury Bills, was withdrawn by investors and taken elsewhere.
Q How would the interest rate hike of the US affect the local economy?
The US interest rate hike is talked about. Nobody is talking about the drop of oil prices in the world market. Only the MR regime met with the biggest oil crisis in the world. The price shot up to US $ 127 a barrel. It is an unbelievable crisis for Sri Lanka which is not producing oil at all. It is an external shock on the economy. Economic management is the ability to withstand such external pressures.
The MR government stood up to it. No government had met with such external economic crises in the history of Sri Lanka. First, it is the oil crisis that left the whole world reeling, and secondly the global food crisis. People fought over food in the world. Then, the international financial crisis was there. The international banks collapsed. It was a war situation in Sri Lanka. So, investment could not be attracted. Investors did not have an iota of hope of putting their money on the ground. This was the government that had to cope with four such economic shocks in history starting from the time of arrival of Arahat Mahinda to fund Buddhism on this land. I challenge any academic to prove me wrong if possible. Overcoming all these difficulties, that government developed the economy. I have published a book detailing out all these. If any Professor or university academic writes a book that runs counter to what I proved, I myself will sponsor publication of it. Economic matters should not be analysed from a political point of view. Such politically biased analyses have already been injurious to the country.
Q Actually, I want to know the impact of the US interest rate hike. How is it?
It is relatively a small external shock. Now we can see what President elect Donald Trump is doing there. He is trying to reverse outbound investments of the US. On the instruction of former President Mahinda Rajapaksa, I, along with MP Dallus Alahapperuma, went to the US during the presidential election campaign there. We went to Los Angeles (LA) and spent 10 days. We visited all the Buddhist temples there and engaged the Sri Lankan community. They held the opinion that US, rather than interfering with the affairs of Sri Lanka and other countries such as Syria, should look after its interests. They, as US citizens, want all US investments outside the country to be brought back. For example, General Motors, a leading US automobile company, headquartered in Dubai.
Another leading company manufacturing cookies had been relocated in China. We informed them that other candidate Hilary Clinton constantly interfered with the affairs of Sri Lanka. When we were about to finish off the war, it was dubbed as the gravest humanitarian tragedy in the world. We explained to them that it would be detrimental to the interests of Sri Lanka if she were elected to presidency.
The present government of Sri Lanka hurt the sentiments of investors at the beginning. It suspended the port city project. It, at that time, accused us of converting Sri Lanka to a virtual Chinese colony. It talked about the need to scale down the presence of Chinese in Sri Lanka to curb corruption. It whipped up anti-Chinese sentiments in this manner. Those accused of the CB Bond scam were given even better positions in the government. The government is yet to cancel even the licence of Perpetual Treasuries.
Q What is the position of the Joint Opposition on the Private-Public Partnership model proposed by the government to revitalize loss making bodies?
It is not the ownership that matters in the development of any institution. It is the management that matters. Anywhere in the world, we find public sector institutions run successfully with better management systems. Banking, insurance and telecommunication institutions are run properly in this manner despite them being sensitive areas of economy. Privatization is not the panacea for all.
Merely being vested with the hands of the private sector is not the sole factor for success. Then, how could hundreds of private banks have collapsed during the recession?
The state institutions should be restructured in a manner that is advantageous to the country at the end. When the PPP model is implemented, majority shares should be vested with the government. Or else, there should be a win-win situation. The government has, however, proposed to hand over a stake of 80 percent of the Hambantota port to a Chinese company. It is not done anywhere in the world. It is to be leased out for nearly 200 years. China has launched its maritime silk route project. A canal is being dredged in the sea close to Thailand. So, this port is strategically located. This becomes a very important port in the region. The government even tried to humiliate the Mattala airport by using it for paddy storage. That is because it does not have any vision for the future.
China is investing US $ 46 billion in building a land route to Pakistan. A Canal is being dredged to bypass Thailand and Singapore in navigation. Only Hambantota has the advantage in this case. That was why, the then government made borrowings for the construction of this port. But, political hypocrites dubbed it as a white elephant.