Sri Lanka is facing an acute economic crisis. What do you think is the reason for this?
We are facing multiple crises—shortage of essential medical drugs, food items, construction material and, more importantly, energy. Core issues are the financial crisis and scarcity of foreign currency and local Sri Lankan rupee. Net foreign assets owned by the banking sector are in the negative by 5 billion dollars, whereas the rupee deficit in the Central Bank is around LKR 650 billion. We are heading towards sovereign bankruptcy. Core reasons are uncontrolled rupee and dollar deficit.
After 2005, we obtained short-term commercial loans—international sovereign bonds, Sri Lankan development bonds and other commercial loans from Exim banks—and invested the money in long-term, low-return mega projects without adhering to feasibility studies. In the meantime, financial costs inflated and stolen money was siphoned off. It was estimated that $19 billion had disappeared from Sri Lanka between 2004 and 2014. Total forex debt was $24 billion in 2014.
Where do you see Sri Lanka in the next few months?
With or without swap arrangements from friendly countries like India, Sri Lanka is heading towards sovereign bankruptcy. Our main problem is that access to foreign financial market is reduced owing to the derating by rating agencies.
Sri Lanka is a signatory to the Belt and Road Initiative (BRI). Do you think the Chinese debt contributed to the present crisis?
As far as Sri Lanka’s total debt is concerned, China’s loan component is around 10 per cent. But it is 23 per cent in the foreign loan component. Sri Lanka got loan from China to develop their infrastructure.
The BRI created two economic centres—Colombo and Hambantota; all expressways are connected to these two economic centres. Sri Lanka has not received 10 per cent of the revenue to repay its loan for these mega projects.
What do you think about president Gotabaya Rajapaksa’s handling of the situation?
President Gotabaya’s actions accelerated the financial crisis. His 2019 tax relief package caused derating of our financial status, thereby leading to debt repayment at a huge social cost. So we have no food, no medicine, no fuel or electricity. His mishandling during the early stages of the pandemic aggravated the economic situation.
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Artificial fixing of dollar rate, disrupting free market mechanism, crony capitalists ruling the market, creating black market, suppressing rule of law, militarising public institutions, egoistic approaches to economic problems and 100 per cent organic farming have added fuel to the burning economic woes. He and his government have lost the people’s trust. As per a recent survey, 83 per cent of the population believes the president and his government have deteriorated the economic situation.
What do you have to say about India’s line of credit to Sri Lanka?
We are scared that we are sandwiched between a global power struggle in the Indian Ocean. What had happened in the 1980s may repeat again. We appreciate the Indian credit line without attaching economic or political strings. But we will oppose if India is going to be the lifeline of the corrupt Rajapaksa family rule in Sri Lanka.
Why is the opposition not capitalising on the unpopularity of the Rajapaksas?
We must avert the imminent bankruptcy. To do that, we should have a common minimum agenda that can be implemented by the caretaker government in parliament. Otherwise, extreme right-wing and left-wing political movements may emerge and spoil our future.