Not long ago, the stooges of Mahinda Rajapaksa, and MR himself, spewed some fanciful justifications for the contested ( and obviously unethical) sacking of Ranil Wickremesinghe, and MR’s appointment as prime minister in one Friday night quirk by President Maithripala Sirisena.
One argument was that MR was appointed to salvage the crumbling economy.
That Ranil though had a vision, was a poor implementer of his own economic policies provided some credence to the claims of saturation of economy during his tenure. However, MR, the purported prime minister for over a month, has presided over an accelerated economic collapse. The Rupee continues to depreciate under his watch, hitting yesterday, the all-time low of Rs.181against the US$.
The initial depreciation of rupee during the previous months correlated to a world-wide trend of emerging market currency depreciation against the Benchmark as a result of rising interest rates and boost in Capital investment in America. However, the current slump of the Rupee is taking place while other emerging market currencies are appreciating against the Dollar.
Soon after his appointment as the Prime Minister cum Finance Minister MR tried to stall rupee depreciation by selling the foreign reserves. That momentarily halted the slump, but, after burning hard earned dollar reserves, the rupee is continuing its downward spiral. Still, the government of MR is not short of clowns. Trade Minister Bandula Gunawardene claims that plans are afoot to boost the rupee to reach a ratio of Rs.160 a US$. When quacks rule the roost, a nation is forced to live a big economic lie. That is until it bursts.
However, this false complacency cannot last longer. Last week, International credit rating agency, Moody’s downgraded Sri Lanka’s sovereign debt; IMF delayed the release of US $ 250 million fifth tranche of a US $ 1.5 billion IMF extended loan facility , ‘pending political clarity’.
In an interview with Kelum Bandara of this newspaper, German Ambassador Jörn Rohde,who had been vocal, (rightly so), of Sri Lanka’s deliberately inflicted political impasse , spoke eloquently of the economic loss impacted upon on the country by the current crisis.
In the Down South, hoteliers complain that 30% of pre-booking orders have been cancelled. Tellingly, all that is after the Lonely Planet named Sri Lanka as the best travel destination for 2019. There is a looming danger of the suspension of GSP Plus trade concessions. The agreement on a US$ 460 million grant by the Millennium Challenge Cooperation, which was to be signed in December is likely to be delayed. A Japanese concessionary loan for the Colombo mono rail project could well suffer the same fate. In the meantime, the government has turned to China for another US $ 500 million loan to finance debt repayment.
German envoy Jörn Rohde was vocal, (rightly so), of Sri Lanka’s deliberately inflicted political impasse, spoke eloquently of the economic loss impacted upon on the country by the current crisis
The full scale of unfolding catastrophe is not yet felt , partly due to the Western countries that had rebuilt the bridges with Sri Lanka during the Yahapalana government, are still reluctant to burn them. The measured tone of international concerns also underpins the geopolitical interests especially of Japan, India and the United States, at a time China is salivating at an opportunity to reclaim its influence. Pushing Messrs. Sirisena and MR to the corner would force the duo to turn to China for a sense of legitimacy, ego boost and hard cash.
However, whether the West’s rewarding of an illegitimate government would serve their long term interests, and also Sri Lanka’s domestic interests of democracy is open to question. Mollycoddling the current regime, which has refused to accept the verdict of a Parliamentary majority, would only embolden intransigence. The government that lacks legitimacy back home, sooner or later would lose legitimacy in the eyes of the civilized world. That in turn would push the regime further into the embrace of authoritarian states. After all, there is an observable correlation between the extent of democratic values of the ruling elites, and the trajectory of their foreign policies and their rapport with the democratic world.
If the constitutional coup persists against saner advice, the international community would lose patience at some point and cut Sri Lanka lose. However, the government would characterize such international measures, especially the economic ones, as part of a broader anti-Sri Lankan conspiracy. Retrograde nationalism and gutter fanaticism would be mobilized to legitimize an undemocratic regime and intimidate its opponents. Sinister tactics of intimidation of not so long ago would be reincarnated. The recent apparently politically instructed release of the suspects of anti-Muslim violence in Digana and rejuvenation of BBS are torch bearers of a government strategy which would come into action in the near future.
There is also a looming prospect that the Western nations may go for targeted sanctions against the key protagonists of the purported government and their immediate families. That would include travel embargoes and asset freeze. The US State Department has on multiple occasions frozen assets of cronies of Kremlin and members of ruling cohorts of Venezuela, Nicaragua and Iran’s Red Guard, among others. The recent silence of MR’s American passport-holding siblings is reportedly attributed to these concerns.
Targeted sanctions on the regime elites are a far more effective tool in taming them, than indiscriminate economic sanctions. That is because politics in this part of the world is a hostage to the personal ambitions of the ruling elite. The current crisis itself is a product of that dynamic. Degenerative effect of such personalized political gambles can best be tackled by targeting what those opportunistic elites hold dear to their hearts, i.e. their selfish interest, much less the national interest. Such measures would also have a far reaching delegitimizing effect; regional leaders who otherwise hobnob, would be dissuaded to do so. Even the electorate would be less inclined to elect such personalities.
Tagging a pariah as a pariah, rather than the country as a whole is what the international community should resort to if it is short of options on Sri Lanka.