13 August 2019 12:10 am Views - 5914
Q What is your general assessment of the economic situation?
I am happy to note the faster-than-expected rebound after the Easter Sunday attacks. We expected the rebound to be slower otherwise. On that score, we are back to we were in terms of economic activity. The currency rate is fairly stable. It has appreciated by four per cent. Interest rates are coming down. Inflation is fairly stable. If you look at the macro-economic variables, you cannot complain.
Revenue is down. That is to be expected with such a shock to the system. Imports are down. Proceeds from tourism are down. We were hit by a 70 percent reduction in arrivals after the attack. Therefore, tax collection has been difficult. We will have a gap of more than Rs.150 billion for the current quarter in terms of revenue. It is just exogenous to the financial management by the Treasury. With that, we have no option but to cut down on spending to meet budgetary constraints. I saw some media have projected it as a great difficulty. The fact is that our revenue has fallen.
Q How will it affect the economy?
It is about where we cut. That is about cutting expenditure in areas which are not necessary. That includes areas such as foreign travel. It won’t affect ordinary people as much. We spend as much as Rs. 80 billion under our Gam Peraliya programme. It is creating wealth at least in small quantities across the country. Every village, we find projects. Then, the Enterprise Sri Lanka loan programme is underway. That is taking root. We are pushing investment in agriculture, tourism, manufacturing and so on. I see reinvigoration happening.
Q You said inflation had stabilized. Is it because of any macro-economic achievement or the reduction of people’s consumption level?
Inflation is always a monetary phenomenon. The fundamental importance of controlling inflation lies with the Central Bank. It accommodates the fiscal aspect of expenditure. If there are droughts, floods as shocks to the supply side, the Central Bank has to accommodate one time increases of prices. The new monetary law has suddenly been blocked. It is a progressive piece of legislation. It completely restricts the government from dictating to the Central Bank. This is a utopian state in items of Central Bank independence. The value of our currency and inflation is ultimately what matters to people. In that sense, the management of these two variables is the Central Bank which must be sufficiently independent to take the right decision outside the influence from Treasury. There is a spectrum. On the other hand, is absolute independence of the Central Bank. In poorly governed countries, you are in the dominance of monetary policy. If the government doesn’t have money, it will ask the Central Bank to print money. It results in inflation on the one hand and currency depreciation on the other hand. Many poorly governed countries are here. In some countries, the independence of Central Bank is written into the Constitution. In New Zealand, the Central Bank governor can be sacked. These are two extremes. What Sri Lanka needs to do is to move towards a better-governed country where the fiscal dominance of momentary policy becomes less and less. It is quite ironic that the government proposed this.
Q Why is it suddenly blocked then?
I don’t know. The President has told Prof.Lalith Samarakoon to look at it. The Central Bank and the Treasury have been looking at it for months working with global experts. You cannot switch it off like an electric bulb. If the government says no more money printing tomorrow, how can it manage things? It is a very responsible piece of legislation.
Q You gave serious thought to such a piece of legislation after the bond fraud committed by the Central Bank at one point?
Yes. It was among the recommendations in the report of the Commission that looked into the bond fraud.
- We want scientific portfolios. It has to be limited. We have to have a professional who can deliver. It is not that we lack professionals. It is the question of delivery. We have to deliver. I promised to deliver. I have delivered. I am referring to the ambulance service. I have been told that it is the best such service in the developing world. We will work on it with the WHO. We have saved lives
- I don’t know. The President has told Prof.Lalith Samarakoon to look at it. The Central Bank and the Treasury have been looking at it for months working with global experts. You cannot switch it off like an electric bulb. If the government says no more money printing tomorrow, how can it manage things? It is a very responsible piece of legislation
- It is just exogenous to the financial management by the Treasury. With that, we have no option but to cut down on spending to meet budgetary constraints. I saw some media have projected it as great difficulty. The fact is that our revenue has fallen
- Revenue is down. That is to be expected with such a shock to the system. Imports are down. Proceeds from tourism are down. We were hit by 70 percent reduction in arrivals after the attack. Therefore, tax collection has been difficult. We will have a gap of more than Rs.150 billion for the current quarter in terms of revenue
Q When you compare the economic situation now and then, you were elected in 2015 with a mandate to elevate the economy to the next level. In retrospect, the country is down in all economic indicators today. There are some reasons beyond your control like adverse weather conditions and Easter Sunday carnage. Other than them, why did you fail in reviving the economy to the next level?
We took office in 2015. The growth rate in 2014 was slightly above four percent. In 2013, it was 3.5 percent. If somebody said the growth rate fell from 7-8 percent to 3 or 4 percent, it is wrong. The facts that it was 3.5 percent and it rose 4 percent later. Afterwards, it has been stagnating. This economy cannot grow anything better than this unless we do reforms.
Q Why did you fail in implementing these reforms?
It is because there are two ideologies in the government. Here, there is an empty terminal- Eastern Container Terminal of Colombo seaport. It has been empty for the last four years. Why don’t we have cranes?
Q What are the reforms you advocate here?
That is further opening up the economy. When we tried to do reforms, we were asked not to do it. We were asked to follow protectionism. Protectionism does not help us. For example, Vietnam signed a Free Trade Agreement with the European Union. They are part of the largest trade blocks in the world.
Q Vietnam is far ahead of Sri Lanka in terms of the Ease of Doing Business Index. Isn’t it the reason, not the reforms?
Otherwise. They both go hand in hand. I take pride in saying. I was given a challenge of heading a steering committee to improve the Ease of Doing Business Index for Sri Lanka. As I said, we improved from 111 to 100 in the index. That is because we understood the issues. After that, we went after them. We fixed the problems. When you do the reforms, these things happen. I am the chairman of the steering committee working on the soft infrastructure for the Port City. We are working with a team of lawyers. We are now bringing the law. It will make doing business in Sri Lanka much easier. When there is a single-window operation, there is no need for you to go before 18 different institutions to get your approval to build a hotel. You got only to one place.
Q How big is corruption issue in Sri Lanka?
Very big. I say this country is corrupt.
Q You were in power for the last four and half years. Isn’t it long enough for you to correct the situation?
It is like this. How do you tackle corruption? You have to take discretion away. If you give discretion to people, they will become corrupt. For example, setting prices can be taken. Why are ministers given the power to set prices? Ministers should never be involved in setting prices. I am moving all price-controlled essential commodities into a defined, transparent legislative structure. If prices are to be changed, there is a mechanism. At the top end, we do not want retail prices to move up and down.
Fighting corruption is transparency. I am only one of four MPs who declared their assets publicly.
Q The growth rate will be slowed to three percent this time. What is your view?
The measurement of economic growth must move with time. Let’s take Uber Eats for example. It is a bid. Every ‘Dosai Kade’ is listed on Uber Eats. There is no way to measure Uber Eats as a service in the economic sphere. We are behind in measuring these things. I have asked the Department of Census and Statistics to improve the measurement of our GDP. I think the black economy is far bigger than what it is. The actual growth numbers are much higher than what is reported.
Q You were not into welfare measures during your initial years in power. But, now you increased salaries and pensions. You give Samurdhi benefits. You are doing all these with elections around the corner. Are these vote-catching gimmicks?
All these are based on the salary committee. It is independent of the government. The committee recommended it. The salary adjustments started in 2015 to be completed over a period of five years. Since then, the salaries of public servants have gone up by 107 percent.
Q Coming to politics, are you ready to nominate Minister Sajith Premadasa as your candidate?
Everything appearing in the media is not true. We had live, positive discussions. We discussed the presidential candidates. I believe we need a broad alliance. We have to have well developed, articulated policies for the next five years. We need to know who will be responsible for what. We want scientific portfolios. It has to be limited. We have to have a professional who can deliver. It is not that we lack professionals. It is the question of delivery. We have to deliver. I promised to deliver. I have delivered. I am referring to the ambulance service. I have been told that it is the best such service in the developing world. We will work on it with the WHO. We have saved lives. It is the most loved public service in this country. We take 700 people to emergency medical care every single day.
Q For you to all these things in the future, you need power. For that matter, you have to win the upcoming elections. Who is your candidate?
I will not tell you. I am 100 percent that we will win the elections. We will have an alliance. We will have the person with the best appeal. We will have a team. We don’t count on one person, family. The UNP is a democratic party. We do things by majority vote. We will decide at our parliamentary group and Working Committee.
Q Is it true that one group of the party including you ask for the nomination of the candidate before forming an alliance?
Yes, we should agree internally on the UNP candidate. We can do it democratically. We can then propose our choice to the alliance. That is what they want as well.
Q Is Minister Sajith Premadasa your candidate?
My candidate is the one who can win the presidency. It certainly looks like it is Sajith who can beat Gotabaya.