Could A ‘National Government’ Resolve The Crisis?

By Laksiri Fernando –

Sri Lanka has been heading from crisis to crisis during the last two years, the acuteness of the calamity peaking during the last three weeks. Whatever his past weaknesses or present biases, Ranil Wickremesinghe’s acceptance of the Prime Minister position is clearly commendable given his experience, background, and creditability among sections of the international community. Although ‘one-man’ representative of the UNP in Parliament at present, he has a vast experience as a Prime Minister, a leader of the opposition, and in politics. He was also the Prime Minister of the last government.

This is what people expect him to put into practice without getting into ‘conflictual political controversies’ under the present circumstances.

Interim or National?

There is a controversy as to ‘what kind of a government’ is desirable under the present circumstances. While more political sections of Parliament call for an ‘interim government,’ the intendant position of many advocates is for a ‘national government’ going beyond the interim tasks. Thus a ‘national council’ is proposed, consisting of all political parties in Parliament to take place.

Whether the second objective could be achieved is still not clear, particularly given the divisive and conflictual nature of political parties and groups in Parliament. Violent incidents, instigated by the former PM Mahinda Rajapaksa, is one example of the confusing status of parliamentary politics. While the advocates of a ‘national government’ give priority to economic conditions of the country, among other matters, the promoters of an ‘interim government’ focus more on political matters believing that political correctness might resolve even the economic problems.

Roots of Crisis

Sri Lankan crisis should not be taken in isolation. Covid 19 should be taken as a worldwide warning, the lessons of which have not properly been drawn by almost all countries and international organizations. Power struggles are also looming as the Russian invasion of Ukraine signifies. Instead of cooperation, competition, conflicts, violence, and armed struggles are exacerbating the situation within countries and internationally.

As the Bloomberg newspaper has warned (18 May), ‘Sri Lanka Default Hints at Trouble Ahead for Developing Nations.’[i] Among other countries, Pakistan, Egypt, Tunisia, Ethiopia, Ghana, and Peru are particularly mentioned. Sri Lanka has decided to default over $12 billion foreign bonds this year. This will affect the country negatively in the long run. If the country had a proper scheme and plan to overcome the difficulties, say early last year, this situation could have been ameliorated.

Of course, there are national roots of the situation. Mismanagement of public funds, failure to balance income/expenditure (budget), and most importantly foreign exchange (balance of payments) are some of the root causes. Excessive power within governments had given impetus for the Ministers to take arbitrary decisions disregarding both economic and political consequences. At the heart of these decision making has been a close family rule.

Sri Lanka has also been promoting a development path based on ‘infrastructure development’ unproportionate to the actual development of industries, production, and exports. It is to promote ‘this path’ that sovereign bonds were sold in foreign markets and loans were taken to build ports, airports, and highways. Even the Treasury or the Central Bank did not have proper financial records of the country’s debt obligations. Politics seem to dominate economics.

Other Reasons

Covid pandemic undoubtedly hit a decisive nail. Sri Lanka always kept around $ 7 billion dollars as foreign exchange reserves. This was marginally sufficient. During 2020 and 2021, tourism earnings (always aimed) at around $ 500 million came down to more than half of it. A similar target from foreign remittances also came down, further depleting the foreign exchange reserves. What revealed was the absence of a ‘contingency plan’ to face a foreign exchange crisis, going to IMF or not.

There are other decisions. President has admitted that ‘he was wrong’ in banning the importation or use of chemical fertilizer in agriculture. Apart from his mistaken decision to go for ‘organic fertilizer full scale,’ foreign exchange shortages also must have motivated him to impose the ban, which finally led to more and more expenditure than the country was used to spend on ‘chemical fertilizer.’ This was the first disaster of the government, ruining the agricultural sector and affecting tea exports.

It was not only a foreign exchange crisis that the country was facing. Undue tax concessions in November 2019 budget exacerbated the already depleted coffers of the country. Vat rate was slashed from 15% to 8%. Whatever the thinking behind, the country lost around 500,000 taxpayers each year in 2020 and 2021.

The state sector, without rationalizing its operations for productive purposes, undoubtedly is a burden to the economy and country. Most of the state sector operations are unproductive. People are employed not because of their qualifications, but for political affiliation. At present there are around 1.5 billion people working in the state sector. This has been the case for some decades now. It is in this context that the new Prime Minister’s declaration that ‘Sri Lankan Airlines’ would be privatized could be appreciated. Sri Lanka undoubtedly needs a strong state sector. However, it should be professional, productive and should serve the economy and the people.

Rationale for a National Government

If the competitive party system is the norm of democracy, ‘national governments’ could be considered the exception or even the ‘ideal’ under certain circumstances. National governments could be utilized for different purposes, including ethnic reconciliation. It is a common pattern to form national governments during wars and economic crises. Sri Lanka fits into the second situation today.

Crisis does not necessarily or completely mean negative. There is a possibility of finding solutions if proper investigation, research, and open dialogues are conducted. Whatever the nuances, the Chinese word for crisis (wei-ji) broadly signify the possible dichotomy within such a situation. Wei meaning dangers and ji meaning opportunities. Even in Buddhist philosophy, when there is dukkha, there are samudhaya for the situation.

The above does not necessarily mean that a ‘national government’ would succeed in Sri Lanka. For the purpose however, there should be at least a brief Manifesto with a ‘vision,’ ‘mission,’ and ‘primary objectives.’ At least the attempt is commendable although this is not the first time that this idea was promoted.

Rationale for a national government also emerges from the international context. If Sri Lanka had too much aligned with China during the (Mahinda) Rajapaksa period, there appears now a more balanced relation with India, Japan, and Western countries under the present circumstances. If Sri Lanka went before the IMF last year, many of the ‘scarcities and ques’ could have been avoided with necessary foreign exchange and managing the balance of payments rationally. Sectarian or ‘irrational nationalism’ prevents this, apart from several self-interests. Of course, Sri Lanka should bargain properly with the IMF for the country’s interests.

It is not just a ‘national government’ that the country needs. Rule of law should prevail and for this purpose, particularly the ‘police service’ should be reformed. Bureaucracy should also be reformed with professionalism, post-graduate qualifications, research and independent decision making for the betterment of the economy, people, and the country. The slogan or the concept of ‘National Government’ should go along with ‘Rule of Law.’

[i] Sri Lanka Default Hints at Trouble Ahead for Developing Nations – BNN Bloomberg

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