Explain the causes for the crisis

Call it a ‘free float of the rupee’, ‘liberalisation of foreign exchange transactions’ or in any other convoluted jargon in economics, it is plain devaluation of the rupee. This ‘free float of the rupee’ will end up in the rupee being devalued to Rs 100 per US dollar of even Rs 120, say businessmen and economists.

What is galling about this whole exercise is that the people have not been told the truth about the state of the economy. Since 1994 we have been told that the economy which ‘has been ruined by 17 years of UNP misrule’ but since then, the PA government had put the economy back on even keel. Stable conditions to sustain economic development had been started in 1994 ending the massive ‘recklessly amassed mass budget deficits that averaged over 13 percent over a long period of time’ imposing intolerable burdens on the people, it was said. In 1997 an economic growth of 6.4 percent was achieved and the growth rate was expected to be over 5.0 percent despite the East Asian crisis it was claimed. It was even said that the growth rate in the first quarter of this year would be around 7.0 percent. Unemployment was down, so were interest rates and the current account deficit of the balance of payments had declined, we were told.

But now what has happened? The rupee has been systematically devalued since October from about Rs.75 per dollar to now Rs 89 and further devaluation is definitely on the cards. The Central Bank press releases sound pure gibberish to the man- on- the- street. All what he knows is that with devaluation he will have to pay more for what is being imported—his milk powder, dhall, clothing, building materials etc. Rises in commodities used by the common man invariably results in all round price hikes of all commodities. And if the rupee ‘floats’ to Rs 100 per US dollar there will not only be a financial crisis but very likely a political crisis as well.

Despite being faced by such a situation, neither the Finance Minister, President Kumaratunga and now her two Deputy Finance Ministers (for efficient functioning of the economy we are told) are telling the people what exactly is wrong with the economy.

For the past 17 years we have been told the main reason for all our economic ills is ‘ the war’. Certainly defence expenditure gobbles up about 1/3rd the budget. But what do we do with the other two thirds? Yesterday’s report of the devaluation in ‘The Island’ had a senior bank official saying: ‘Further determination of the movement of the dollar would be dependent on the country’s balance of payments position. If imports increase then naturally the rupee will be devalued further’.

If increased imports is the cause or is one of the causes for the devaluation, what is the government policy on imports? Are we attempting even to restrict imports that are causing problems to the public such as the unrestricted importation of vehicles? Air pollution on public highways has reached intolerable levels and is causing respiratory and cardiac diseases as was pointed out last Saturday in ‘The Island’ by former Chief of the Cardiology Unit Dr. D.P. Athukorale. But each day, more and more vehicles are rolling out on to the roads from the Colombo harbour. Globalisation may prevent total ban on imports but surely increased duties could be imposed?

Yesterday in parliament, Dr. Karunasena Kodituwakku, the UNP spokesman said that according to President Kumaratunga herself, corruption and inefficiency had gobbled up 40 per cent of development funds during the past six years. What does the government propose to do about eliminating corruption and reducing inefficiency? Decentralisation and the appointment of more legislators to executive posts seem to be the solution thought of. But even a humble worker knows that it will lead to multiplying corruption and inefficiency by many folds.

Faced with a dire economic crisis, it will be obvious that capital expenditure, which will not be of immediate use to the public, will be halted. But we now have reports of a billion rupee parliamentary residential complexes for the Speaker and the President coming up near parliament. Are these palaces the need of the hour?

Another reason given has been the hike in oil prices. True, oil prices had risen but during nine years oil prices fell to very low levels in world markets —to about six dollars in 1998. But did the Sri Lankan consumer benefit? Now once again the price of oil has dropped by about ten dollars per barrel in the past few months but do we see a corresponding reduction?

In a crisis of this kind, it is imperative that the people should be informed why they have to bear these burdens. The President as the Finance Minister of this country should explain to the people the causes for this crisis as well as the countermeasures (if any) that will be taken or that nothing can be done about it.

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