By Uditha Jayasinghe
Sri Lanka is on the precipice of an “economic abyss”, warned prominent members of the United National Party (UNP) yesterday, calling on President Maithripala Sirisena to accept the decision of Parliament so Budget 2019 could be presented at the earliest and approved by the House.
UNP MPs Mangala Samaraweera, Dr. Harsha de Silva and Eran Wickramaratne were harshly critical of President Maithripala Sirisena’s actions on 26 October and insisted that both he and MP Mahinda Rajapaksa should accept responsibility for what they termed the economic crisis heading in Sri Lanka’s direction.
The trio emphasised that the political turmoil, which has resulted in international rating agency Moody’s downgrading Sri Lanka’s credit rating yesterday, would result in the country having to pay higher interest rates when it needed to raise funds from international capital markets to repay pending debt in 2019.
According to rating agencies, Sri Lanka has to repay an estimated $ 12 billion in debt repayments from 2019-2022 with about $ 3 billion tagged for next year.
Samaraweera contended that as Speaker Karu Jayasuriya had stated in Parliament that he did not recognise any Prime Minister or Cabinet and the government of President Sirisena and MP Rajapaksa stands dissolved after the no confidence motion there was no legal Finance Minister in Sri Lanka.
All ministry secretaries also cease to exist under the Speaker’s ruling and actions by them are null and void, stressed Samaraweera. If ministry secretaries take steps after the Speaker’s ruling under Article 48 (2) of the Constitution such action could be punishable under the Public Property law and other relevant legislation. However, President Sirisena has refused to accept the no confidence motion, which has resulted in a stalemate between the Executive and Parliament, which is now in its fourth week.
“As a result, all payments of the Government from 1 January 2019 are illegal and cannot be affected by public servants. Some of the critical areas include public sector salaries, pensions, welfare payments including Samurdhi and all debt repayments,” Samaraweera said.
Samaraweera pointed out that it was Parliament which had authority over public finances and as no Budget or Vote on Account had been presented the entire State sector was in danger of getting gridlocked from the start of 2019. He went on to say that since Parliament did not recognise the Sirisena-Rajapaksa Cabinet formed after 26 October of which Rajapaksa is the Finance Minister, any funds obtained by him from the consolidated fund would be done so illegally.
“As a result of these actions, Sri Lanka is on the brink of economic anarchy and chaos as never experienced before. The cavalier and irresponsible actions of the President starting on 26 October, based on personal animosities and precipitating a series of illegal acts, places at risk Sri Lanka’s ability to meet its immediate debt obligations. In early January 2019 we have to repay $ 1 billion of Rajapaksa debt taken in January 2014, the repayment of which is also under the purview of Parliament,” he said.
The Central Bank last week sought to downplay debt repayment concerns by outlining its plans to raise $ 1 billion for the repayment needed in January and a further $ 500 million in April.
Central Bank Governor Dr. Indrajit Coomaraswamy assured that efforts were underway to raise money from a variety of sources including swap arrangements, funds left over from the handover of the Hambantota harbour and borrowings from key state banks. He also noted that the Central Bank could continue to raise funds even if the formal approval of a Budget gets delayed.
Dr. Coomaraswamy also said that the issuing of a sovereign bond had not been ruled out. Given the rating downgrade by Moody’s, such an effort could result in Sri Lanka having to pay higher interest rates.
“The actions of 26 October have irreversibly undermined Sri Lanka’s credibility in global markets – risking our ability to service future debt as well. We are being pushed towards a state of economic collapse,” charged Samaraweera.
“The only way to rescue Sri Lanka from this unfortunate and unnecessary crisis is for the President to recognise the Prime Minister and Government that was in place prior to 26 October and continues to command the clear majority in Parliament. It is necessary for all like-minded people, regardless of political affiliation, to come forward to save the country from an otherwise impending economic collapse, by supporting efforts to re-establish the supremacy of Parliament and the Constitution.”
Dr. Harsha de Silva was concerned about the potential impact of the two other international rating agencies, Fitch and Standard and Poor, following Moody’s course and appealed to them to give them a week to resolve the constitutional impasse. Dr. de Silva noted that the Central Bank had already appealed to the rating agencies not to downgrade Sri Lanka and give it breathing space for the constitutional issue to be resolved.
“Since this crisis began the rupee has been deprecating more rapidly and interest rates have increased. This will discourage investors and reduce trust in Sri Lanka’s economy. This is a very dangerous situation, which we could have avoided easily were it not for the actions of the President. He and Mahinda Rajapaksa should take full responsibility for this situation. If we cannot pay the salaries of public servants and manage the affairs of the State, imagine the situation this country will be pushed into. Who is going to protect the people from these terrible decisions?”
The Appropriation Bill that has already been presented to Parliament had several people-friendly policies, including raising fund allocations for agriculture from Rs. 24 billion to Rs. 63 billion, MP Eran Wickramaratne said. Budget 2019, which was expected to be presented on 2 November, also built on policy priorities such as protecting local businesses from unfair international competition, giving support to encourage women to enter the formal workforce and improve the healthcare and education sectors.
“Our Budget would have benefitted all Sri Lankans but now all these efforts have been derailed. We appeal to the President to accept the decisions of Parliament immediately so that we can present and pass this Budget for 2019 and start to reverse this decline by mid-January,” Wickramaratne said.