Sri Lanka Brief
FeaturesA body blow, but who lives it up?

A body blow, but who lives it up?

Namini Wijedasa
President Mahinda Rajapaksa urged people to tighten their belts during the war and they did. When three years after the Tigers were defeated Sri Lankans are still expected to scrimp, they want to know why.  Since fighting ended in 2009, the Central Bank and other government agencies have used thrilling statistics and grand rhetoric to describe the economic situation.

They cited high growth rates while boasting that Sri Lanka was impervious to the world economic crisis. The Central Bank governor and ruling politicians (it is argued there is now little difference between the two) reeled off impressive figures, bragged of robustness, of keen investor interest, of peace dividends and of soaring development.

The government slashed duties on consumer items such as vehicles and electrical appliances to encourage more purchasing. It cut interest rates so that people would borrow more, both to import and to buy.

Money, even if it was on credit, circulated. For a while everything was good. But the country was living beyond its means.

A press release issued by the Central Bank in April 2011 is typical of the stance adopted at the time. The country’s economy recorded an impressive growth of eight percent, it said, the highest annual rate of growth reported in three decades. Sri Lanka was seemingly doing better than it had done in thirty years.

“This remarkable achievement reflects a fast recovery from the setback suffered in 2009 and a move to a high and sustainable growth path,” the statement glowed. All key sectors of the economy reflected commendable performance in 2010, “underpinned by the peaceful domestic environment, improved investor confidence, favourable macroeconomic conditions and gradual recovery of the global economy from one of the deepest recession in history.”

Less than a year later, the bubble has burst. The ‘peaceful domestic environment’ is routinely disturbed by strikes and protests—including in the Free Trade Zone, the university and schools, health, agriculture, fisheries, electricity, water, transport and postal sectors. The reported ‘improved investor confidence’ has not translated into foreign direct investment. And by no measure are the macroeconomic conditions ‘favourable’.

On 2 April 2011, while the president was in India, the government raised petrol by 10 rupees a litre and diesel by three rupees. On 30 October 2011, while the president was in Australia, petrol went up by 12 rupees and diesel by 8 rupees. On 12 February 2012, while the president was in Pakistan, petrol rose by 12 rupees, diesel by 31 rupees and kerosene by 35 rupees.

It is unlikely that fury over the last fuel price adjustment will dissipate. The steep increases coincide with other policy changes that will see the cost of living spike in coming months. The Central Bank continues to mouth platitudes but patience is running thin. Bombastic jargon and inflated statistics mean nothing to a man that cannot stretch his wages to even the middle of the month.

Large numbers are joining or staging demonstrations against the high cost of living. This is likely to worsen as resentment and the public’s anti-incumbency sentiments take precedence over gratitude for the war victory. With nobody to blame for poor economic management but itself, the government is overreacting by authorising the use of violence against legitimate protests. A fisherman is already dead in police fire. On Thursday and Friday, police discharged teargas and water cannons at demonstrators. These are signs of a nervous government that is uncertain how to cope with dissent—or thinks that the only way to do so is to use force.

The people’s anger is worsened by blatant waste among members of the regime. The president and his extended family are abusing the country’s resources without accountability. They travel expensively with retinues. They acquire property and build lavish residences. They embark on prestige projects that bring no return. They enrich themselves and flaunt it.

There have been no cutbacks in emoluments to ministers and deputies. People are not only expected to bear the burden of increased fuel prices, they are expected to support the cost of an inflated, under-performing cabinet. The public would reason from appearances that Sri Lanka’s rulers don’t feel the pinch. And nothing rankles more than that.

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