economic war and politics
the government under attack over the crippling cost of living amidst
opposition plans to submit a no confidence motion, Prime Minister Ranil
Wickremesinghe last week decided to declare war on inflation and go
public with the ails that are afflicting the nation.
so doing through an address to the nation where he is expected to place
on record the state of the economy the UNF inherited from the PA
administration of President Chandrika Kumaratunga, Wickremesinghe will
also announce new measures the government plan to adopt to reduce the
cost of living in addition to his new developmental plans.
as the blueprint for the government's economic plans were drawn, a
political strategy to obtain the two third majority in parliament for
the conscience vote was also set in motion with the likes of Samurdhi
Minister S.B. Dissanayake assuring the prime minister the two third
majority was in the bag.
the same time, the noose was also tightened around President Kumaratunga
with Finance Minister K.N. Choksy, the chairman of the cabinet sub
committee probing the luxury vehicle issue submitting a damning note to
the cabinet, wherein Kumaratunga has been called upon to answer a number
of queries, which could well be incriminating. (See page 9)
the stage thus set, the government focused on the 18th amendment last
week and initially the government had to decide whether or not it would
include the amendment to revoke the president's power to dissolve
parliament at the end of one year together with the conscience vote,
whereby a member could vote against the party whip without running the
risk of losing his or her parliamentary seat.
it was after weighing the pros and cons of introducing the amendment to
curtail the president's powers together with the conscience vote that
the government decided to proceed with both amendments, confident the
numbers were available to get it through parliament with a two third
majority. Failing which, the government decided to look at the general
the government would in July introduce a constitutional amendment
covering two grounds, that is giving MPs the right to vote with their
conscience as well as revoking the president's power to dissolve
parliament at the end of one year.
to taking this decision, as stated earlier, the government at a top
level meeting where Prime Minister Ranil Wickremesinghe, Power Minister
Karu Jayasuriya, Constitutional Affairs Minister G.L. Peiris, Samurdhi
Minister S.B. Dissanayake and UNP Chairman Malik Samarawickrema were
present discussed the pros and cons of introducing the amendment where
the possibility of calling a snap general election in October was also
mooted in the event the two third majority was not forthcoming.
moving this idea, Minister S.B. Dissanayake said though there were some
rumblings in Colombo over the cost of living, the popularity of the
government was very high in the provinces due to the ongoing peace
process and record prices the farmers were getting and the UNF could
easily increase the majority at a general election where unlike in 2001,
the state machinery too would not be in the hands of the PA.
the two third majority is there with a large number of PA MPs now
pledging support. But even if we fail there is no problem because we can
go for an election and ensure a clear margin of victory after which
getting the two third will be very easy in parliament," he said.
thought to this proposal, the prime minister requested Minister Peiris
and the team to work out the statistics of the local authority election
results and verify by what margin the UNF can increase its
representation in parliament and this they did.
compared the 2001 general election results with the local authority
election results of 2002, it was observed that the UNP's percentage of
votes had increased from 45.62 percent to 56.66 percent while the PA's
had declined from 37.19 percent to 30.69 percent while the JVP too
dipped from 9.12 percent to 7.25 percent.
raw figures the UNP vote had increased from 4,056,026 to 4,134,260
despite a lower voter turn out, whereas the PA vote dropped dramatically
from 3,330,815 to 2,257,678. That is a decline of over a million votes.
Likewise the JVP plummeted from 815,353 votes to 461,547 votes.
analysing these results, in terms of parliamentary seats, the UNP would
have gone up from 109 to 132 while the PA dropped from 77 seats to 59
though the JVP will manage to keep its 16 seats. In addition, the Muslim
Congress running alone in given areas would according to the local
authority results secure one seat and the Tamil National Alliance 17.
such a situation, the UNF would have the required 150 MPs for the two
third majority without a single PA MP voting for the government.
considered these figures it was decided the amendment would be
introduced in July with the option of calling for a snap election in the
event of failure to muster the two third majority.
that policy decision taken, the prime minister focused on the economic
crisis where reports submitted by various sub committees dealing with
the different sectors came to be considered.
it was on Tuesday, June 25, the economic affairs committee met with the
prime minister to discuss the reports available and work out a strategy
to kick start the economy and reduce the cost of living. Among those
present at this meeting with the prime minister were Ministers K.N.
Choksy, G.L. Peiris, Bandula Gunawardene, Milinda Moragoda, Treasury
Secretary Charitha Ratwatte, R. Paskaralingam, Central Bank Governor A.S.
Jayewardena, Faiz Mohideen of the External Resources Department and
specific area focused on at this meeting was the escalating fuel prices
and the impact the rising prices were having on the cost of living and
it was decided Ministers G.L. Peiris, K.N. Choksy, Bandula Gunawardene
and Milinda Moragoda would work out a formula for a price reduction
before the end of the week to enable the prime minister to make the
announcement in his address to the nation.
thinking was that if the fuel prices were reduced by around Rs. 3 to 5
per litre it would immediately ease the pressure on industry as well as
consumers, helping in turn to reduce the cost of living.
transpired at these discussions that the Ceylon Petroleum Corporation
due to serious mismanagement was running a huge debt and in a bid by
former Minister Anuruddha Ratwatte to overcome this crisis, the previous
government had agreed with the Asian Development Bank to peg fuel prices
to international market rates whilst topping it up with a further
increase in the local market to recover the losses from the people.
increase in addition to the international rates was deemed necessary
since the CPC had been borrowing huge sums of money from the Peoples'
Bank which as a result was facing liquidity problems and the strategy
was to levy an increased rate from the public and pay the Peoples' Bank
the monies due.
cost of living
to the agreement worked out by the previous government with the ADB, the
plan was to pay off the debts through the increased burden on the people
over a period of two years.
the International Monetary Fund in considering the structural adjustment
facility for Sri Lanka too had pushed for the implementation of this
agreement within the two year period, placing the new government on
somewhat of a bind.
is to overcome this situation that it was decided to explore another
scheme whereby fuel prices can be reduced without falling foul of the
lending institutions, thereby easing the cost of living burden on the
if the standby facility was to be proceeded with, which meant taking
tough measures in the short term, no adjustments could be made on fuel
prices for example and the government thus looked at a long term
solution for the economic crisis at this meeting.
having considered available options over a period of time, the prime
minister suggested they look at the poverty reduction and growth
facility of the lending institutions whereby the government could go for
a long term loan at a lower interest rate provided necessary economic
reforms to put the economy back on track is agreed to.
if an agreement with the lending institutions can be worked out for the
poverty reduction and growth facility, the government would not be bound
by the commitments on the standby facility, thus enabling it to proceed
with the reduction of fuel prices, paving the way for the easing of the
cost of living burden.
would for example mean privatising some of the assets of the CPC, such
as the refineries and also in other sectors that are loss making.
another option discussed was to renegotiate the standby facility where
the recovery period of the monies through the CPC by placing an added
burden on the people could be extended from two years to three. It is to
work out a scheme on these issues that Ministers Peiris, Gunawardene,
Choksy and Moragoda were given the weekend deadline.
the same time, the depreciating rupee was also causing concern in
government circles and at this meeting Central Bank Governor A.S.
Jayewardena was specifically asked what pressures will be on the rupee
given fears it will go over the roof compared to the dollar in the
Central Bank governor explained that the rupee normally depreciates by
about 8 percent per annum against the dollar but would go higher this
year though there was no danger of the rate going over the roof.
However, he said inflation was running high at 11 percent and steps
should be taken to arrest that development.
addition to these problems, the government last week also ran into
difficulty over the introduction of the Value Added Tax (VAT) system due
to it being challenged by the Consumer Protection Society in the Supreme
VAT system was to come into effect on July 1, but with the court action
pending, the government was left with no option but to put it on hold.
fact, a concerned prime minister inquired from Attorney General K.C.
Kamalasabayson whether the government cannot proceed with the VAT scheme
pending the Supreme Court decision, an issue the Finance Ministry too
discussed with the attorney general on Tuesday, June 25.
the Finance Ministry specifically asked the attorney general was whether
they could recover VAT from July 1 pending the Supreme Court decision to
which Kamalasabayson responded in the negative.
his decision to Ms. Rose Cooray of the Finance Ministry, the attorney
general said no collections can be made till the court decision is known
since there would be no way of reimbursement in the event the order goes
against the government.
cannot assume the decision will be in the government's favour," the
attorney general had said.
with dates fixed for next week for the case, the government would have
to wait at least till the second week of July before it will know
whether the Supreme Court would reject the petition paving the way for
the government to introduce the VAT system, which it hopes will also
help reduce prices, hence the decision to wait till August 1.
any event, once the decisions on the economic reforms are arrived at,
the prime minister plans to present it to cabinet for final approval
where no doubt President Kumaratunga will have her own input, fully
realising the government is placing the entire economic crisis facing
the country at her feet, having been finance minister for over seven
fact was evident even at last week's cabinet meeting when the
appropriation made by the Treasury to the provinces came up for
the Treasury having slashed the appropriation recommended by the finance
commission by almost 20 percent, President Kumaratunga took issue
stating the recommendations of the finance commission should have been
carried out without cutting down on the figures.
the issue to the government's stated commitment to the devolution of
power, the president asked why the government was cutting down on the
allocations to the provinces if it was committed to greater devolution.
finance commission recommendations should be implemented fully and
tabled in parliament. The Finance Ministry should not tamper with
it," the president said.
of course it is to the PA's advantage to have more finances allocated to
the provinces since it controls all the councils bar the Central
Province and hence Kumaratunga's concern.
Prime Minister Wickremesinghe dissented, telling the president the
finance commission's recommendations were those made during the previous
regime and as such was the position of that government and not his.
up the prime minister were Ministers G.L. Peiris and K.N. Choksy who
pointed out, parliament was supreme and since the budget was tabled and
approved in parliament, there was no need to table the report again.
that as it may, the problems in the economy and the slowing down of the
peace process has also led to a crisis of confidence in the government,
giving rise to internal dissent as well as was evident at the
pre-cabinet meeting last week.
pre-cabinet meetings are held without President Kumaratunga where the
UNF can focus on strategy and key issues without an enemy within and it
is at this meeting last week trouble erupted over the handling of the
the prime minister spelling out the ground realities, it was clear to
all ministers present that the legacy they inherited from Kumaratunga
was one of economic ruin and the consensus was that the given reality
should be effectively communicated to the people.
is on this issue that Consumer Affairs Minister Ravi Karunanayake raised
issue targeting the Chairman of the Public Enterprises Reform
Commission, P.B. Jayasundera and Central Bank Governor, A.S. Jayewardena,
both of whom were also Finance Ministry secretaries under Kumaratunga.
asked how the government can with any justification blame the
Kumaratunga regime for the economic crisis facing the country when the
two key officials responsible for the mess together with the president
were retained by the UNF in key positions.
minister went on to point out that Jayasundera in particular had in a
press interview on April 10, castigated the government's budget while in
another article in the Lankadeepa on
May 15, whitewashed President Kumaratunga.
are called upon to play as a team and we must, but then we cannot have
such people pulling the rug under our feet," he said.
Reforms Minister Milinda Moragoda, under whose purview Jayasundera
serves, however, was of a different view and said the government should
not penalise public officials on political grounds but judge them on
said the public service would otherwise be totally demoralised and the
negative effects of such a development would be on the government and
went on to say in any event, given the difficult task entrusted to him,
he needs a good team to work with.
if there is any impropriety on the part of P.B. Jayasundera, I will take
action but not on political grounds," he added.
Moragoda had to wage a lone battle with all the ministers who spoke out
on the issue coming hard on Jayasundera with Minister S.B. Dissanayake
the first to speak after the economic reforms minister.
said Jayasundera's head was swollen to such an extent during
Kumaratunga's tenure, none could get close to him, adding on one
occasion after Kumaratunga slashed the Samurdhi allocations, the then
finance secretary had told all concerned it was done "at my
has lied to protect her," Dissanayake said, a view buttressed by
Minister G.L. Peiris.
Peiris commenting on the issue said he knows for a fact Jayasundera ran
the Finance Ministry as if it was his private property.
served as deputy finance minister, I know what he was upto. He did
everything in his power to bring back the PA to power transcending his
role as a public official," Minister Peiris added.
in with similar criticism was Justice Minister W.J.M. Lokubandara with
Cooperatives Minister A.R.M. Cader going to the extent of saying not
only should Jayasundera be ousted, but fined for mismanagement.
are getting scolded for the mess he has left behind," Cader went on
to say while Interior Minister John Amaratunga, Lands Minister Rajitha
Senaratne, Minister Tissa Attanayake and Urban Development Minister M.H.
Mohomed also made their own criticisms on Jayasundera.
those comments made, Karunanayake once again chipped in to say if
special teams are requested, it should be given to everyone and that as
for impropriety, Jayasundera has to, together with Kumaratunga, answer
for the multi million dollar luxury vehicle purchase without tenders or
on the Air Lanka issue, he is responsible. How could the order for
Airbuses be placed in January when the agreement was signed only on
March 31, 1998. There are enough issues when it comes to
impropriety," Karunanayake charged.
his credit, Moragoda weathered the storm and stood by his official but
called upon his colleagues to furnish whatever material they had against
Jayasundera stating he would take action if any impropriety is proved.
prime minister who listened to the exchange no doubt realised, the sins
of the past government were visited on him but nevertheless would have
to take drastic steps to put the economy on track lest it starts telling
on his government, especially with the focus shifting from the peace
process due to the delay in getting the talks started.
Wickremesinghe has the work cut out for him and it remains to be seen
what message he has for the nation to put things right when he goes
before the people this week.