Fighting a war on empty coffers

By Dharisha Bastians
The Mahinda Rajapaksa government is in a bad way, financially speaking. With respected economists warning of imminent economic collapse, the business community taking a massive beating from the downturn of the country’s macro economic factors in the year 2007, and the common man’s wallet being almost always empty given the ridiculous prices of items essential to life, to say things are negative, monetarily speaking would be the understatement of the year.

So strapped for cash is the incumbent administration, that it has of late been resorting to unethical and economically unsound manoeuvres aimed at refilling the state coffers. The US $ 500 million bond from a private bank and more recently, the Treasury’s take over of a section of the Ceylon Electricity Board’s Employees Trust Fund amounting to billions of rupees that has irked the energy unions, is ample indication that the government’s fiscal policy is extremely skewed.

Overall, last year almost all businesses suffered debilitating losses, resulting from decreased consumer spending and the skyrocketing production costs. The number of times fuel prices were increased in the year alone was unprecedented, and while the government claims that the high prices were determined by world market prices, the fact remains that consumers were granted no relief even when the barrel of oil was trading at US $ 60 in the world market a few months ago.

Fuel & energy costs
Sri Lanka’s fuel and energy costs are among the highest in the world – unfortunately these are also the key factors crucial to a healthy business environment and sound fiscal health overall. The man on the street has received no respite in over two years and three budgets, his burden becoming heavier with each passing day.

The average Sri Lankan is being asked, time and again, to endure for the sake of the military effort underway in the north and east – that is when he is not being advised by the likes of Minister Bandula Gunewardane that being unable to afford milk food would do wonders for his waistline and his potential diabetes risk! Talk about calling the kettle black – has Mr. Gunewardane taken a look at his own expanding pot-belly recently? One can’t help but wonder. Each time Gunewardane opens his mouth to speak of the economy and cost of living in fact, it becomes more and more obvious that he has been placed in that position in the full knowledge that he would make an absolute fool of himself. The government is perhaps hoping to get a little of its own back after Gunewardane tore apart the ‘Chinthanaya’ economic policy week on week while he was in the opposition, using his economic teaching skills and sheets of numbers that made all the statements look pretty professional. More recently Gunewardane put his foot in his mouth again when he said that the unbearable price of the coconut (touching Rs. 40 a nut now) would promote peace between communities, since the Sinhalese man and the Tamil man would now be compelled to ‘share’ their coconuts and all enmity between them shall cease – goodwill towards men and all that sort of thing. Which begs the question, why on earth spend Rs. 583 million on the war every day (by UNP calculations) when all that would be necessary is to increase the cost of living further until we’re all compelled to live in communes and share our scraps of food? By Gunewardane’s reasoning, Sub-Saharan Africa should be the most peaceful place on earth.

Utopian
Enticing as such a ‘solution’ might be, Gunewardane’s utopian outlook on resolving the conflict is not the same as his master’s. President Mahinda Rajapaksa and his brothers have made it abundantly clear that the war will be fought at all costs, even if we’re all driven to the poorhouse because of it. Mind you, any such economic fallout of the war would have to be borne by the poor suffering masses alone – the political fat cats have nothing to worry about on that score.

The problem with the war at any cost strategy, is that it would be all well and good if the country was economically sound. Instead, the military push is literally eating us out of house and home at a time when the next meal is pretty darn hard to come by as it is. President Mahinda Rajapaksa handles the economic problems in the country in his signature style. He says ‘yes’ to everybody. A businessman recently noted that even taxation was imposed on various sectors based on this, ‘hail fellow, well met’ strategy that the President has going. He cited the example of how taxation was imposed one day and two days later, it was removed with very little fuss and to the astonishment of all players in the industry. Further investigation revealed that the tax had been imposed on a whim because the powers that be had been ‘approached’ by an ‘interest’ and removed later because another ‘known’ party had registered protest. In other words, if it hasn’t become obvious to all and sundry by now, the government has absolutely no economic policy, and just like in all other areas, with regard to managing state coffers and the national economy too, the Rajapaksa regime adopts a ‘live for the day’ approach.

Sound economic status
Sadly, if anybody in the administration was to do some reading they would realise that a sound economic status has been crucial to a war effort since time immemorial. Half the battle is economy when it comes to Sri Lanka’s conflict too, and expenditure to the tune of 500 million rupees a day can only be sustained if the economy is also booming simultaneously. If this downward spiral were to continue on the other hand, it is extremely likely that somewhere along the way, especially if the government and the military was unable to stick to its deadlines in terms of ‘finishing’ the war, Sri Lanka would find itself unable to lift its head, let alone fight this final battle with the LTTE.

Rumours were rampant last week that a cabinet reshuffle was in the offing, and current Treasury Secretary Dr. P.B. Jayasundera was to be appointed Finance Minister in the new cabinet. President Rajapaksa currently holds the Finance Ministry and perhaps some wise advisor has now advocated that a professional be allowed to handle the job lest the country slip into financial collapse sooner rather than later. With the rupee deteriorating every day and inflation at record levels, the question economists are now asking is how long before the Sri Lankan currency becomes entirely worthless and we are reduced becoming another Argentina? If the new Finance Minister is in fact appointed, he will have a gargantuan task on his hands.

189 billion – 583 million – 24,000 a minute