Constitutional coup costs billions | Sunday Observer

Constitutional coup costs billions

Dr. Harsha de Silva and Eran Wickramaratne
Dr. Harsha de Silva and Eran Wickramaratne

Government lawmakers assert that the net result of the recent political coup is a huge loss of around Rs. 21 billion being only the interest costs while the cost to the tourism industry was far above of US$ 250 million. Apart from these, there are other economic and financial setbacks such as loss of confidence, investments and the associated delays in investment plans. However, the actual losses of this constitutional coup have yet to be computed.

State Minister of Finance Eran Wickramaratne told the Sunday Observer that the total cost of the loss of the constitutional coup is in fact immeasurable. But if you look at the losses in terms of interest the fact remains that all the rating agencies downgraded Sri Lanka and there is an interest loss. The rupee interest rates also went up apart from the dollar interest rates which are approximately about Rs.21 billion.

In addition, there are revenue losses such as the tourism industry which may be in over of US$ 250 million. Other losses such as the loss of confidence, investments and delays in investment plans have to be taken into consideration. However, we are yet to assess the actual losses resulted from this constitutional coup.

He said other costs of this political coup cannot really be estimated. We lost millions of dollars of foreign reserves. The highest reserves of US$ 9 billion was recorded in April last year. It has come down to US$ 7.9 billion in October and had further dropped by end December. He said “the challenge this year is the scheduled debt payment, but I can emphatically say that we have never defaulted and we will be meeting the debt obligations in January”.

Asked what action would be taken to overcome the situation, State Minister Wickramaratne said the first thing is to normalise the situation as early as possible. It is for this reason a delegation led by Finance Minister Mangala Samaraweera will visit Washington and engage with the IMF since there was some money due to us based on the tranches.

He said they would also engage with other multilaterals. We wanted to get some money for our development from the Millennium Challenge Fund which was a complete grant and we wanted to sign its agreement in December last year and that was also put on hold. Then we were due to get another loan of US$ 1.8 or 1.9 billion on very low interest rate of 0.1 percent with a 12 years grace period and 40 years for repayment. That was put on hold by JICA. There are many programs like this with the Asian Development Bank and so forth. We are trying to normalise the situation by activating many things that were basically put on hold.

According to State Minister Wickramaratne, politicians who are responsible for the constitutional coup which paved the way for the collapse of the entire economy should be punished without delay. There is a cost to the Constitutional crisis and those responsible for it should be punished. Members of Parliament should not be allowed to take refuge behind Parliamentary privileges.

If any ordinary citizen acted in a similar fashion, he would have been behind bars. Parliamentary privileges are not meant to breach the laws. However, the country’s democratic institutions stood up and that is something we really have to be proud of. The Parliament stood up and its independence was also protected. The independence of the judiciary was also safeguarded and that was really a hallmark. Even the independent commissions stood up and reversed the decisions of the Executive. It shows that Sri Lankan democratic system stood firm against all odds.

Addressing a press conference at the Parliamentary Complex on Thursday Non Cabinet Minister of Public Distribution and Economic Reforms Dr. Harsha de Silva said that the Central Bank has assessed the macroeconomic impact of the events linked to the October 26 political coup. He said the Central Bank has published the findings of a report which states that there are challenges ahead and the country will have to rebuild investor confidence to stabilise the economy. Until last week, we were not able to borrow a single US dollar due to the result of this political coup.

Dr. de Silva said the newly enacted Active Liability Management Act has provided the background to develop the country. But the Government’s efforts were hindered by the constitutional coup. Our rupee dropped along with the currencies of other countries but failed to bounce back.

The currency swap of US$ 400 million from the Reserve Bank of India changed this last week. We will use Panda Bonds and Samurai Bonds while rebuilding investor confidence.

He said the biggest hit the country took during the constitutional crisis was the poor ratings. During the 51 days, Moody’s reduced the rating from B1 to B2, S&P from B+ to B and Fitch Ratings from B+ to B affecting the entire economy and reducing investor confidence.

“The UNF Government will present a Budget that will win votes at the next election and we are committed to fulfill our duties as a responsible Government. The people vehemently condemned the political coup orchestrated by a section of opposition politicians to oust the democratically elected Government and grab power,” De Silva said.