Sri Lanka: Financial Meltdown, Time For Reforms & Re-Start

By Harsha Nagahawatta –APRIL 24, 2022

Harsha Nagahawatta

An economy, political and social system of a country is inseparable and intrinsically linked. This is well demonstrated by two recent events. One in my birth country, Sri Lanka and the other in my adopted country, Australia.

A week ago, on the first day of the election campaign, opposition leader Anthony Albanese could not recall the official cash rate and unemployment rate. A test of his preparedness of holding the highest office in the country. History repeating, a similar event happened to a previous leader, and his campaign derailed soon after that. In the developed world, that is how people, choose their representatives to the legislative council, through rigorous questioning. Australia has an economy worth US $1.6 trillion, 13th largest economy in the world, it needs competent people at the highest echelon of the decision-making process.

In the same week in Sri Lanka, the economy collapsed due to years of mismanagement, now heading for a political showdown, the country is officially bankrupt, unable to service the debt-ridden economy. This has been further exacerbated by external factors such as the Covid outbreak and the Russian-Ukrainian war.

Some were surprised by the events. People with little economic training, who know how to handle a household budget or a small business, would know that the writing is on the walls since years of budget deficits and balance of payment crisis by successive governments since independence. Without meaningful inflows, some in the society, including top rank politicians wants to maintain their French reverie lifestyle, money must run out sooner or later. What has happened is self-inflicted, sheer incompetency in financial management.

It is important to understand, what has led the country to its current situation. It is also time to ask, why some countries do well, even without basic resources, why a country like Lanka failed economically, politically, and socially and why economic management is an important element of any country.

Post independent Lanka

The country was occupied by three European invaders, occupied for over three and half centuries before gaining independence in 1948 from Britain. Although, all colonial European powers have looted Lankans wealth, the British handed over the country’s economy to a chosen few in a reasonable shape, subsequently governed by two parties, both with few political dynasties, pattern continues until today. The patriarch of the Rajapaksa family was in the first legislative assembly in Ceylon (former name before gaining full independence in 1972), hence governing of the country has been a family affair nearly 74 years.

First, Second youth uprising and ethnic conflict

The first challenge to family rule came in 1971 with the first youth uprising, an arm struggle followed by a second uprising in late 1980s. An ethnic conflict between majority Sinhalese and minority Tamil youth in the North that lasted nearly thirty years. All these conflicts had costed many lives, suffering, and a huge burden to the economy.

One thing that’s common to all these conflicts is, demand for a fair go, a just society, so all have the same opportunities, irrespective of ethnicity, social status, religious beliefs and political affiliation.

Although youths were influenced by communist ideology at the time, however, many were driven to fight against injustice of the system dominated by few families and their cronies.

Both youth uprisings were quelled by ruling dynasties with the help of Lankan Army, where also family members were dominated in high ranks.

Current and third youth uprising April 2022

The current uprising is unique, not driven by any known political party but by Millennials and Gen Z, inspired by the Arab spring uprising in the Middle East. There are thousands of citizens in the street protesting day and night, condemning nepotism, they have no leaders, but everyone is a leader, a real people’s movement.

They have demands, but no leaders to negotiate with. Their demands are very straightforward, a simple message, they want all politicians, who have been involved with corrupt practices, and looted the country for 74 years, relinquish their powers and hand the government to the people.

New Constitution and a system change

The constitution of any country determines the relationship of citizens with the government. Which is currently completely broken, people do not trust all elected representatives, irrespective of their political persuasion. It also specifies limits of power of the government and rights of citizens, which is essential to create a harmonious society, otherwise the constitution is not worth the paper it is written on.

If the constitution is weak, a toothless tiger, where it has no provision for individual liberties, checks and balances, accountability, transparency but allows few people to rob the country’s assets and move overseas, then there are serious flaws in that constitution.

Lanka needs meaningful constitutional reforms. The current executive presidency, reasons for all evil, has been misused by every head of state who have come to power for personal gains, since first introduced in 1978.  They all agreed to abolish executive presidency close to elections, but once in power, have not bothered to act. Perhaps, they all realised, what a honeypot is.

Only a few years ago, executive powers were further strengthened by the incumbent with 20th amendments. One would wonder how that happened, the truth of the matter is people voted with a two third majority, so it happened with the blessing of the general masses. So, the public also must take some responsibility for the current crisis.

In the current constitution, the president is above the law. Upon 20th amendment, the present incumbent had released a convicted murderer, who is a buddy, after the supreme court, highest jurisdiction of the land with a majority sentenced him with a life imprisonment, showing very little regard to judiciary, third pillar of the governance.

The same person who emphasis importance of ‘rule of law’ and ‘one country, one system’, has taken such decisions either through sheer ignorance or blatant disregard to the law. So many wonders, his suitability to hold the highest office in the country. Slogans alone would not be sufficient, they need to walk the talk.

With such decisions Lanka has become a laughingstock of the world. All signs of a crony capitalistic system, in which nepotism is encouraged and conflict of interest is non-existent. A whole mark of a system and a playground for dictators and despots.

When first introduced in 1978, by the JRJ, perhaps, he never anticipated such a blatant disregard by the regimes that followed after him. If he rose from the grave today, it’s quite plausible that he will be the first one to give his blessing to remove the current rotten system.

This current system needs to be uprooted, given it’s last rites and cremated, not to be reintroduced anywhere in the world. Lanka needs to go back to its old two-tier parliamentary democracy, where power is decentralised, second chamber (senate), should be given the right to scrutinise all bills. So that checks and balances are in place, so one individual, his cronies and few families should not be ransacking a country and bring a nation to its knees, that is a no brainer.

Also, citizens need to have faith in the system rather than playing the person, but the policy.  Lankans should come out of this aged mentality, where a single person is their saviour and expect miracles at the end of the electoral cycle, then be disappointed and elect a different person every few years.

Simply, if the system is robust enough that will keep elected representatives honest. This reminds me of a great line by Australian democrats in the senate (upper house) many years ago, saying that their job is to keep ‘bastards honest’ (elected representatives in the lower house).

Corruption and misuse of public assets

Systematic corruption and misuse of public assets by people who enjoy powerful positions within the government and in the bureaucracy has been a well-known fact among average citizens, considered as a normal, and accepted norm in Lankan society for decades.

All political parties should declare the source of their funding and be subjected to an independent audit.  Over the years, a well-known view among many, is that by becoming a politician is a fast path to a rich quick scheme – a lucrative job for friends and families.

It is time to end these practices, not only by politicians, but by average citizens, who consider what they pilfer is small and petty compared to elected officials. A massive cultural shift would be required to turn this tide through re-education. The corruption has infiltrated every facet of Lankan society, it is deep rooted and has costed dearly – it needs to be completely uprooted.

Freedom of information (FOI), whistle blower laws should be tightened and encourage investigative citizen journalism to expose corrupt practices of individuals and institutions.

Separation of powers and institution building

Independent democratic institutions managed by citizenry are the backbone of a functional democracy. The political parties and politicians come and go every few years, but institutions stay. Though these institutions are responsible to carry the mandate of the elected political party of the time, however they should also have freedom to advise the elected government impartially without political interference. These institutions should be headed by competent professionals with subject matter expertise. Unfortunately, in Lanka today, all these institutions are highly politized, only serving the agenda of the political party of the day.

All elected officials, politicians and higher officers should be held to high moral and ethical standards, declare their assets and interests before taking office and these requirements should be constitutionally mandated.

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