GR’s Gamble With RW

By Ameer Ali –

When Mahinda Rajapaksa’s plot to end aragalaya with mob violence misfired and ended in his own resignation, President Gotabaya Rajapaksa (GR) was left alone to face the mounting anger against the troubled regime. The beleaguered president looked for an escape route to deflect this anger away from him and picked Ranil Wickremesinghe (RW), at least to share that anger, and appointed him as replacement premier. RW had his own credentials to that position, not from his past career but from his recent performance in the parliament. Firstly, when there was strong demand for fresh elections for a new government from inside and outside the legislature, which could have ended in a historic rout for Rajapaksa’s SLPP, it was RW who persistently reminded the nation that it was not the right time for elections but time to join hands to revive the economy. Secondly, he was among the earliest to insist that MR government should approach IMF for assistance before situation became intolerable. Thirdly, he was calling for a reformulation of Sri Lanka’s foreign relations with stronger tilt towards India and the West without damaging relations with China. And finally, he was also talking about seeking help from a consortium of countries to get out of the dollar crisis. In sum, while other party leaders were prioritizing political change ahead of economic reparation, RW was taking an opposite view. His words were music to GR, and the President took the gamble in appointing WR as the new Prime Minister. As expected, the focus of criticism has begun to shift towards RW giving some badly needed respite to GR to plan his future moves. To that extent the gamble has worked. But will it produce political stability and economic relief?

On a positive note, however, there is fresh hope for additional economic support from international quarters. For instance, the US-India-Japan-Australia Quad, and within that Quad India and Japan in particular have come forward with special programs of assistance to overcome Sri Lanka’s immediate needs such as food, fuel and medicine. US for her part would be expected to work through IMF and World Bank to provide generous assistance. This new resolve from Quad is more geopolitical in intent than altruistic. Sri Lanka’s geographic location in the context of the US-China cold war, and China’s penetration deep into Indo-Pacific waters meant that the declining super power could not afford to sit tight watching Sri Lanka turning into a strategic theatre of action to China. The latest security deal between China and the Solomon Islands obviously had sent shock waves to the US and her allies in the region. To India especially, which has been practically surrounded by China along the northern border, any attempt to encircle her from southern waters would be deadly to India’s territorial sovereignty. Hence, India’s extra readiness to rescue the island’s economy. When looking from another angle, Sri Lanka’s economic crisis is a God’s end to India, because it provides a golden opportunity to drag the island into India’s zone of influence. Kachchativu may soon fall into India’s hands in return for economic assistance. In a way, India is now trying to recover what she missed to capitalize on opportunities that opened up soon after the civil war. It should also be noted in passing that the Sinhala Buddhist demagogues who endlessly preached anti-Indian hatred by exhuming buried memories of medieval Tamil invasions from the south, are now forced to eat humble pie and receive food charity from Tamil Nadu. This is history’s punishment for misreading and misusing its lessons.e Siunh

RW government has also built high hopes for assistance from IMF, World Bank (WB), Asian Development Bank (ADB) and other international institutions. To these lending institutions, and to the first two in particular, what matters when a country approaches for assistance is not who governs that country but how efficient and clean its governance is. Therefore, subject to certain stipulated conditions, IMF would assist in overcoming balance of payments difficulties while WB would extend help for long term development projects. For the moment however, IMF had insisted that Sri Lankan authorities should pursue policies to achieve macroeconomic stability as precondition for assistance. Such policies would involve adoption of tight monetary policy with higher interest rates and flexible exchange rates, which the new CBSL Governor had announced already; undertaking fiscal reforms by way of increased taxes, cutting public expenditure and subsidies; and reforming loss-making public enterprises, among others. RW as the new minister of finance had announced some of these measures to be implemented from October 1st. Would these be enough for IMF to expedite assistance?

WB has denied agreeing to a $700 million bridging fund, but said instead, to consider, “repurposing resources from previously approved projects to help the government with some essential medicines, temporary cash transfers for poor and vulnerable households, school meals for school children of vulnerable families, and support for farmers and small businesses”. But to extend this assistance and receive funds from IMF, RW government should show evidence that it has an accountability mechanism in place to prevent the funds being wasted. This is where GR’s gamble to revive the economy through RW would fail, because the existing administrative mechanism is so rich in corruption that funds coming from outside are systematically siphoned off by intermediaries and they rarely reach in full intended destinations. This is a perennial problem and that is why aragalaya demands systemic change, which IMF and WB are aware of. Quite a number of the present 225 in parliament are past masters in benefiting from foreign help.

On top of these is the issue of debt sustainability and debt restructuring. This is going to be an expensive and drawn-out affair that may delay IMF assistance by months if not a year at least. Whether IMF would release some emergency funds before that without an overhaul of existing local distributive agencies as part of a systemic change is doubtful. Even with such funds, economic recovery in the medium or long-term is not guaranteed. RW is completely silent on accountability mechanism while proposing a number of commissions and committees, which are time consuming devices unaffordable in present context. A government without a mandate from people would not have the strength to change the system. Aragalaya demands systemic change.

The immediate headache for RW government therefore is the aragalaya, which had gone beyond its fiftieth day of its existence, and its momentum and longevity set to grow once the interruption from public examination season is over. With the expected entry of trade unions in support of aragalaya it is going to be a testing time for the new regime. Although GR and RW had sanctimoniously expressed willingness to allow the struggle to continue and Gothagogamas be left untouched as long as they remain peaceful, yet, their inner wish and resolve is to bring them to an end as soon as possible. Aragalaya lacks effective leadership at the moment. Whether political parties like JVP/NPP and FSP or the trade unions would provide such leadership is not clear yet. With an effective leadership aragalaya would present a formidable challenge political stability in days to come.

Finally, no one knows what countermoves that China has under its sleeves to checkmate the Quad in Sri Lanka. Having invested so heavily in infrastructure development in the island China is not going to walk away that easily. Earlier, to counter Indian moves in the north of the island, China tried to test the waters in Jaffna to win support of Tamils but was rebuffed by TNA stalwarts. Lately, the Chinese Ambassador in Colombo and his entourage had visited Batticaloa in the east with 10,000 food packages, met local Tamil leaders, discussed possibilities of economic aid to the region, visited a mosque even and had stressed the need for inter-ethnic cordiality knowing very well simmering tensions between Muslims and Tamils in that region. What really lies behind these moves should unfold soon.

Will GR’s gamble with RW succeed in bringing political stability and economic revival? To answer this question, let me end this piece with a quote from the former President of US, Ronald Regan: “you aint seen nothing yet”.

*Dr. Ameer Ali, Murdoch Business School, Murdoch University, Western Australia

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