A Wake Up Call: An Open Letter To State Minister Of Finance & State Minister Of National Policies & Economic Affairs

By Chandra Jayaratne –SEPTEMBER 14, 2018

Chandra Jayaratne

An Open Letter to the State Minister of Finance & State Minister of National Policies and Economic Affairs, Copied to the President, Prime Minister & Finance Minister

Dear Younger, Professional and People’s/Nation’s Prosperity Committed State Ministers,

“A Wake Up Call”: Urgent Need for Change Management Leadership Initiatives to Rebalance Growth Priorities & Expert/Lobbyist Advice with Political Realities & Expectations of the Marginalized

This appeal is to review this submission, reflecting back on the guiding principles and value commitments that compelled you to enter politics and seek a mandate to be People’s Representatives, instead of continuing with your respective high reward option careers in the private sector.

In the above context, please reflect on the following recent statements of acknowledged experts, which you have surely made note of already:

1. “Sri Lanka has to keep on a path of reducing budget deficits, broaden revenues, keep the exchange rate flexible to conserve forex reserves and move towards inflation targeting. Sri Lanka has high debt and low tax revenues which have made previous episodes of global downturns difficult to navigate. Sri Lanka is vulnerable because of its current account deficit, low US dollar reserves position and high debt rollover requirement ” -Eteri Kvintradze, IMF Resident Representative Sri Lanka.

2. “Prepare for the Unexpected Risks”- “I don’t think we can stop being vigilant. There are good reasons why people are feeling happier, why the global economy is doing better, but I think on the financial side we’re far from saying we’re in the clear. And with the asset prices very heavy, with leverage up, the risks are not small.- December 2017– Raghuram Rajan, the former governor of the Reserve Bank of India.

3. “World Unprepared for Next Financial Crisis” –“One of the consequences of the crisis has been completely underestimated, in my opinion: the populism that is appearing everywhere is the direct outcome of the crisis and of the way that it was handled after 2011/2012, by favouring solutions that were going to increase inequalities. Quantitative easing (by which central banks inject liquidity into the banking system) was useful and welcome. But it is a policy that is basically designed to bail out the financial system, and therefore serves the richest people on the planet. When there’s a fire, firemen intervene and there is water everywhere. But then you need to mop up, which we didn’t do. And because this water flowed into the pockets of some, and not of everyone, there was a surge in inequality.”- Dominique Strauss-Kahn, a former chief of the International Monetary Fund

4. “Debt vulnerabilities of the country need to be managed with extreme care, including re-examining military spending given the “social changes the country has undergone” since the war ended nine years ago”.  “There are at least three complementary options that deserve to be considered. First, boosting domestic demand through various channels, including progressive tax reforms, expanding social benefits and increasing minimum wages, among other measures; the resulting improvement in GDP growth would increase fiscal revenues. Second, opening the discussion on whether the military budget reflects the fundamental changes the country has undergone in the last years, in particular in the fields of peace and economic development. And third, renegotiating the debt with creditors in order to expand the fiscal space to boost domestic demand and generate revenues to ensure that nobody is left behind. Fiscal, monetary, economic and social policies need to be fully consistent”

“Warning against any cuts in social spending to repay increasing debt, also raised concerns over Sri Lanka’s strategy to stabilize the economy by strengthening the fiscal and external sectors, as recommended by the IMF, by rationalizing social security benefits.”  “Trying to achieve fiscal adjustment by reducing public expenditure in education, health and social transfers actually hinders long-term development and may have negative effects on social and economic stability,” “It is my view that such cuts should at least be compensated through cash transfers targeting those in need and ensuring that they reach the beneficiaries in a timely and efficient manner. Investments in the rural economy should be directed at supporting the livelihoods of these small-scale producers including technology transfers, market access and physical and natural resources, so they will be resilient against these subsidy reductions.”“In my view, while maintaining macroeconomic stability is an important concern, this aim should not prevent human rights assessments of these planned reforms, in line with international human rights standards.”  “While commending the Government on its effort to streamline taxes, he called for further measures to be taken to broaden the tax base and curb money laundering. He also advocated that the Government close the legal gap that exists to enlist the help of the banking system to curb tax evasion. In his preliminary report he also raised concerns over increases in VAT noting that “the cost of such tax is borne by the poorest part of the population.” According to the report in 2017 the Government raised 56.5% more revenue from VAT than it did in 2016.”- United Nations Independent Expert on Foreign Debt and Human Rights, Juan Pablo Bohoslavsky,

5. “Government measures to address countrywide indebtedness were insufficient. The Government should establish a proper legal framework to regulate microfinance institutions to cap interest rates and prevent abusive collection practices. The moratorium would prevent vulnerable groups, particularly women, from exploitation and abuse by lenders”. UN Independent Expert on Foreign Debt and Human Rights, Juan Pablo Bohoslavsky

Please next reflect on the under noted, few heart-wrenching stories from the Gammadda door-to-door campaign:

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