Ceylon Today Editorial

Hard times

28 December 2016

The New Year is just four days away. And, if the VAT hike and Central Bank of Sri Lanka (CBSL)'s Treasury (T) Bond scandal took centre stage in the old year, the new year is likely to be dominated by a falling rupee and what conclusions the UN would arrive at, when they are alleged to discuss the Sri Lanka question once more at their human rights sessions in Geneva in March. Therefore, the New Year may be a tougher year than the old year.

The negative performance of the rupee, a hackneyed reason for this, which, nevertheless, paradoxically, may be worth repeating, is all due to the USA. Since October, when the market sniffed at the possibility of the Federal Reserve System raising its key policy rate, the Fed Fund Rate (FFR), at the end of its open market committee (OMC) meeting this month, that led to an exit of foreign funds from the government securities market (GSM), to US based assets.

This demand for US dollars caused depreciative pressure on the rupee. As expected, the Fed, after the conclusion of its OMC meeting on 14 December, after a year's hiatus, raised the FFR by 25 basis points (bps), for it to be currently in the range of 50 to 75 bps. The reason for this hike is the continued recovery of the world's largest economy after the global financial crisis of 2007.

The Fed, after the end of its December OMC meeting, also announced the possibility of three further hikes in the new year. As such, those foreign exits continue from the GSM even to date, giving no rest to the beleaguered rupee, with those outflows being re-parked in US based assets, ostensibly to give 'better' returns to investors.

Its fall however may have had been somewhat blunted due to a rise in remittances, a phenomenon which takes at this time of the year (once more repeated during the 'Avurudu' season in April), coupled with exporter conversions to meet commitments to employees such as bonus payments.

But, with the foreign exchange (FX) market expected to be virtually in a desert for at least another three months till the 'Avurudu' inflows once more start rolling in, that, hopefully, may lead to the strengthening of the rupee. However, until such time, the rupee will continue to be under siege. Nonetheless, the remittances magic didn't work to uplift the rupee this Christmas season. In fact the local currency continued to collapse, pushed down by exiting foreign investors, followed by panicky importers.

As such there is no guarantee that just because of the forthcoming 'avurudu' season, the rupee will not escape the fate that befell it this Christmas season, due to continued foreign exits, being repeated once more. One way of overcoming this situation, to use another oft repeated statement, is for the regulator, the CBSL, to raise its key policy lending rate. Such a hike causes a chain reaction, affecting real interest rates as well.

When real interest rates rise, it will be a disincentive for importers to borrow rupees in order to buy dollars, as their borrowing costs will become expensive. Such an action will lessen the demand for dollars and would bring some sort of sanity to the rupee. And to use another hackneyed statement, rising rates may also induce foreign funds to once more invest in the GSM, thereby further boosting the rupee. Considering the fact that Sri Lanka is an import dependent economy, a stable rupee may be sine qua non to assure political, 'economic' and social stability in the country.

On the other hand, with the money market enjoying a sudden surge of excess liquidity in the past few days, it may not make sense for CBSL to raise its key policy rate.The choice then before CBSL may be to allow the rupee to continue to fall and be prepared to face the consequences. CBSL, on Friday (30 December), after markets close, will make known its monetary policy stance for the current month, then.

Whatever policy measures CBSL may take, the future looks bleak for Sri Lanka. The other Achilles' heel is Geneva in March. Sri Lanka, more than a year ago, gave a commitment to the international community that it will allow foreign jurists to investigate alleged war crimes committed by the Government of Sri Lanka and its agents, especially during the closing stages of its war against the LTTE.

Foreign interference on this score may irk the ire of the island's 70% Sinhala Buddhist majority who consider such personages who may be investigated as war heroes. With the possibility of an ever rising cost of living, made worse by an enhanced VAT charge in November and now, helped by a falling rupee, such a scenario may just be what the likes of Mahinda Rajapaksa would allegedly want to see in order to create social instability in the island and thereby attempt to wrest control of the government. Sri Lankans may have to brace themselves to hard times in the coming year.

Daily News Editorial

A step against corruption

28 December 2016

Office-bearers of political parties who fail to hand over their assets and liabilities declarations are to be reported to the Commission to Investigate Allegations of Bribery and Corruption, Election Commission Chairman Mahinda Deshapriya has said. According to the Declarations of Assets and Liabilities Law, it is the Commission to Investigate Allegations of Bribery and Corruption which has the power to initiate action against any violators of the law.

This is a commendable move, considering that out of 64 political parties in the country, around two thirds of office-bearers have not submitted their assets and liabilities declarations for the previous year. Some Parliamentarians are reportedly among the party office-bearers who have not submitted their assets and liabilities declarations.

Accordingly, the Elections Commission is to report the office-bearers of all political parties who have not furnished their assets and liabilities declarations, subject to verification whether some have submitted their asset declarations to Parliament. However, the Commission is yet to hear from Parliament about any officials handing over their declarations. According to the regulations, MPs are supposed to submit their asset declarations to the Speaker. The ministers should submit theirs to the President. The officials of political parties are supposed to provide their declarations to the Elections Commissioner. However, if the secretary to a certain political party is an MP as well, that person may submit his or her declarations to the Speaker.

Civil society organisations including the People’s Action for Free and Fair Elections (PAFFREL) have praised the Election Commissioner’s move to report officials who have abstained from submitting documents of assets declarations to the Bribery Commission. As the PAFFREL clearly points out, “the purpose of submitting such a declaration is to identify and inspect, if these public representatives have abused official powers to accumulate personal wealth financially or otherwise”. No one can find fault with this reasoning, because the core aim to stamp out corruption. All public representatives are required to submit their annual assets declarations by March 31.

The only reason that we can surmise for not wanting to submit the assets and declarations is that certain MPs and party officials are apparently unable to legally account for their wealth. There are plenty of instances of politicians who did not even have a push bicycle travelling about in luxury limousines after a few years in office. There is only one word that can explain this phenomenon – corruption. These persons have certainly accumulated wealth through unethical, if not entirely illegal, methods.

Take the controversial Duty Free car permit, for example. There are no laws that expressly prohibit an MP from selling his or her duty free permit or the luxury vehicle itself and earning millions of rupees, but it is a question of ethics especially in the context of the common man having to pay exorbitant duties and taxes even for an average car. Thus it is not illegal to sell one’s duty free car or permit, but it does not look all that good from the point of view of the public.

Another factor that has received little attention is spending on elections campaigns. In many other countries, candidates are supposed to reveal their funding sources and there is also a donation and/or spending ceiling. One of the major faults of the current Proportional Representation (PR) system is that candidates have to campaign throughout an entire district to canvass votes as opposed to the former First Past the Post system where one only had to concentrate on a particular electorate. This means that candidates have to spend a vast amount of money for propaganda activities and some candidates have been known to spend over Rs.100 million.

This creates a vicious circle where candidates are compelled to seek funds from various donors and if and when they are elected to Parliament (or other political office), they are indebted to the donors. These donors and funding sources naturally get first preference for tenders and contracts. The nexus between big business and politics is well known in any case. Thus there should be clear laws and guidelines on how much candidates can spend and how much each donor can provide to a particular candidate. Hopefully, the proposed new electoral system, apparently containing a mixture of the best features from both PR and First Past the Post systems, will address this issue for good.

If stern action against corrupt elements in politics and other sectors is delayed, it might send a wrong signal to the society that one can get away with corruption. There has been some discontent in society over the very slow rate of progress of investigations into acts of corruption during the previous regime. While we understand the authorities’ concern that there should be 100 proof and evidence, these probes should be expedited and the wrongdoers punished to send a strong signal that corruption cannot and will not be tolerated now and in the future. The Yahapalanaya Government must not renege on that premise - and promise.

The Island Editorial

Stale toddy in a new pot

28 December 2016

 

Ports and Shipping Minister Arjuna Ranatunga was cock-a-hoop the other day about the completion of his artificial Christmas tree on the Galle Face Green. He fought quite a battle to neutralise his critics. The record-breaking project, however, does not seem to have found favour with some prelates; Archbishop of Colombo Malcolm Cardinal Ranjith, delivering his sermon on Christmas Day, looked askance at the waste of resources on decorations and ‘trees’ in the name of celebrating the birth of Jesus.

The giant Christmas tree, however, will figure in Minister Ranatunga’s election posters in the Gampaha District, which has a sizeable Christian community. It is hoped that neither Ranatunga nor any other minister will undertake to put up the tallest Vesak thorana or pandal next May.

Many Sri Lankans hit the sack on empty stomachs and children die in their thousands a month for want of life-saving medical and surgical care. The country is in dire financial straits. Therefore, the government ought to set an example to others by curtailing its wasteful expenditure and pressuring its big guns to desist from extravagance, profligacy and dissipation.

Minister Ranatunga has apparently missed the port for the Tree, so to speak. A terminal of the Colombo Port will be handed over to a neighbouring country, we are told. There is no reason why the veracity of this claim made by a proponent of yahapalanaya and ardent supporter of the present regime should be doubted. The stage is now set to hand over the Hambantota Port to the Chinese. The deal was struck without Ranatunga’s knowledge.

Vast extents of land are being leased out to foreigners for 99 years. At the rate state ventures under the purview of various ministries are being sold or leased out to foreigners the day may not be far off when there are many ministers without portfolios; Ranatunga is very likely to be among them.

Roman rulers, unable to live up to public expectations, with their empire disintegrating, used bread and circuses (panem et circenses) to prevent popular uprisings against them. The present-day Sri Lankan rulers are using circuses sans bread for that purpose. Marie Antoinette got into trouble by asking the protesting masses to eat cake if bread was not available. The present-day Sri Lankan leaders are lucky that they are not troubled by popular uprisings though their economic mismanagement has caused the bread and rice prices to go into the stratosphere. A wag says those who converge on the Galle Face Green and keep looking up have to check for the safety of their wallets. For, the nearby Finance Ministry is full of nimble-fingered politicians and mandarins!

Meanwhile, the grand opening of the Galle Face Christmas tree was marred by the presence of an erstwhile pet of the Rajapaksas. He and others of his ilk who went places by licking the then rulers’ sandals were also responsible for their masters’ pratfall. This politician was a law unto himself in the Galle District during the previous regime. Regrettably, he continues to enjoy legal immunity having switched his allegiance to the present government. The mere sight of him made one’s gorge rise. There were many others like him including the notorious thug who crowned himself as the king of Kelaniya and flouted the law with impunity because he was close to the Rajapaksas. The previous government also shielded a sex maniac in the garb of a local government politician who, according to the late Ven. Maduluwawe Sobitha Thera, used to throw parties after raping women. He was one of the organisers of the SLFP’s May Day rally in Galle this year! Their association with the current administration makes one wonder whether yahapalanaya is the Rajapaksas’ stale toddy in Sirisena’s new pot.