State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal categorically refuted certain foreign and agency reports that there is an impending food shortage in the country.
The State Minister in an interview with the Sunday Observer said that those are totally unwarranted and untrue reports filed by certain people. He said that there is plenty of food in the country, but an artificial shortage has been created by certain unscrupulous traders to increase the prices of some popular commodities, which has now been dealt with effectively by the Government.
Excerpts
Q: You have said Sri Lanka cannot afford a lockdown citing reasons that half of the population is not able to face its fallout. Could you explain?
A: There are lots of people who are small and medium scale entrepreneurs and others who are having daily income. All of them have serious commitments to settle. Some of them have their loans and rents to pay and their children’s commitments. If the country is stopped for many weeks, those people will find it difficult to continue their livelihoods. Lives are important no doubt, but give the opportunity for the people to continue their livelihoods according to health protocol.
For example, the Police, Customs, Port, Health Department, Tri Forces are performing their duties as usual. Factories are also working and the newspapers are printed. If all of them can work according to health protocols, why can’t others work? If road construction workers can continue their work, why can’t the people who are making string hoppers work? Give them also the opportunity to work in line with health protocols.
The estimated economic loss would be at least Rs.15 billion if the country is closed for one day. For a day, Sri Lanka’s GDP is about Rs. 41 billion. Of that, nearly Rs.15 billion will be irrecoverable if we close the country. If we lockdown the country for 20 days, it will be Rs. 300 billion. It is not something that we can afford. It will impact our other macro fundamentals as well.
For example, the debt will appear to be higher and other elements which are expressed as the percentage of the GDP will also look bad. Because the GDP is now getting smaller and smaller. We have to ensure that growth is maintained. That is why it is important to open the country and work.
Q: Some say the state revenue has decreased drastically as the economy is facing a crisis due to the Covid-19 pandemic and it was not sufficient even for recurrent expenditure. Your comments?
A: As far as our revenues and debt payments are concerned, that weakness has been there for some time. We are addressing that. That is why we have enunciated the strategy where we are talking about non-debt inflows coming into the country. We are keen to ensure that Government revenues will not be debt revenues, but non-debt revenues. We are taking steps to deal with that on those lines. This year also, we have other inflows than debt-inflows so that we will be able to address that weakness.
Q: Finance Minister Basil Rajapaksa has informed the Cabinet that recurrent expenditure for this year may exceed the estimated amount due to vaccination, additional expenses in the health sector and provision of relief allowance to the people. Has any decision been taken to cut down unnecessary expenditures of the Government?
A: Actually, all unnecessary expenditures are being pruned down. At the same time, there will be certain expenditures that are inevitable. We have spent almost US$ 120 million to get vaccines and some more to be spent as well. But no one will say that is a waste. That is necessary expenditure. It is not only the cost of vaccination, there has to be the cost of syringes, storage of the vaccination and the disposal of the syringes. All those are an additional cost.
Q: Has the country faced any foreign reserve crisis as highlighted by certain sections?
A: I was the Governor of the Central Bank at the time we faced the worst crisis. There was a global financial crisis and oil crisis where the oil went up to US$ 145 per barrel. We had banks crashing and a food crisis. Through all that, sometimes, we had to grow our reserves. That is natural. You have reserves to use at a time of a crisis.
I don’t understand why these people have to scream and shout when we have to use reserves at various instances because that is what reserves are there for. Why do we have savings? That is to be used at the time you have some crisis in your home. You will replace it after some time. That is the way it has to work. Your savings at some stage reduces doesn’t mean that you are unable to go forward in your life. In the same way, we have to use reserves at various times, but every time you have seen the reserves have been replaced with new inflows.
Last week, we had an inflow of US$ 787 million from the IMF, US$ 300 million from the China Development Bank and US$ 150 million from the Bangladesh Bank. On top of that, we have asked exporters to convert their Dollars as well.
This year we have seen a buildup of nearly US$ 800 million in the hands of the exporters who need to convert their Dollars. Last year, there was a buildup of about US$ 1.1 billion in the hands of exporters. Those are massive buildups which actually should have been converted.
We are giving the exporters tax holidays and tax concessions. Normally, people pay 28 percent, but the exporters pay only 14 percent. All that is provided to the exporters so that they will also convert their foreign exchange which would mean that the country will be able to face this difficult time in a strong manner. We expect them to convert their foreign exchange. If they do that without keeping it and building up their own reserves, I think the whole situation would change effectively and quickly.
Q: The Cabinet of Ministers has approved all the recommendations by the Cabinet Sub-Committee appointed to find solutions to teachers’ and Principals’ salary anomalies. But the teachers’ and Principals’ trade unions have rejected the measures announced by the Government and decided to carry on their trade union action. Would you like to comment on this?
A: I have seen many people criticising the fact that these increases have been provided at this time. Even Rs. 5000 allowance given to the teachers has been criticised by certain segments of society. They are of the view that in an economic crisis, it is unreasonable to provide Rs.5000 to the teachers. That is another school of thought. Because many people believe that this is not the right time to make demands of this nature.
When the country is going through a difficult period of time that may not be the time for different trade unions to make demands. Everyone knows that all the countries are going through severe hardships.
That is why many people are criticising this demand and also criticising the fact that the Government has agreed to provide this kind of relief. Because many think it should not have been done. I think these are the different ways in which this problem could be looked at.
I hope the teachers wouldn’t be the only group in the world that has been asking for salary increases during the time of the Covid-19 crisis. No trade union in any part of the world has made a demand of that nature. We can see for ourselves whether it is a reasonable thing or not at this critical juncture. There are many people who have not been able to even work during this period. We have to be sensitive to those types of situations as well.
Q: The President declared emergency regulations relating to the provision of vital commodities with effect from August 30 midnight, in accordance with the powers vested in him. However, certain sections attempt to interpret this as the re-imposition of the emergency regulations. Your views?
A: This was a response to hoarding by certain trades of certain vital commodities and not a food shortage that has been made out to be. This was an isolated set of instances where certain unscrupulous traders have been hoarding certain stocks of popular commodities to increase the prices of those commodities. There is nothing other than that. This was completely an exercise which was unscrupulous and profit-oriented. It has nothing to do with the shortage. That is why the Government had to step in and not allow these people to make this unconscionable profit at this moment. That has been stopped now. But it has been interpreted by certain media that there is a food shortage.
There is no shortage as such. It was an artificial shortage created by certain unscrupulous traders, which has now been dealt with effectively by the Government.
Q: Certain sections of the foreign and agency reports have said that there is a food shortage in the country as Sri Lanka has declared a food emergency. Is there any truth in this?
A: I specifically say those are untrue and not factual reports filed by certain people. There has been no food shortage in the country. The people are well fed. The people have to be given the opportunity to work and that is all. But there is plenty of food in the country.
Q: How do you respond to the JVP’s request that the Government should intervene to regulate the prices of essential goods without allowing cronies to loot the people?
A: They are trying to fish in troubled waters. That is natural. However, what is important for us to recognise is if there has been any attempt by these unscrupulous traders to make a fast buck in this difficult time, that has to be stopped whether it is cronies or anyone else. Whoever the cronies are, we will have to make sure that those cronies are not allowed to succeed. That is what is important. We are taking steps to deal with it.
No one needs to be excited about it. They must adhere to the law and make sure that that kind of a situation doesn’t arrive. If we have to impose emergency law to ensure that food stuffs are not hoarded by unscrupulous traders who want to create shortages, I think that is the right way to go.
Q: The Government has spent over Rs. 700 billion on controlling Covid-19 and providing relief to the people. That is half of the overall income of the country last year which was Rs.1,380 billion. Could you explain?
A: We have not spared any pain or cost when it comes to dealing with human lives. That is why for the dealing of Covid-19, we have spent whatever that is taken to ensure that the people are protected. I think that is the hallmark of a responsible Government. We have done that and the people have to be told what it has cost. That is why the cost of Covid-19 control has been set out.
Sometimes, people think that Covid-19 control has been only at hospitals. That is not so. There are so many instances that people are quarantined. They have to be given food stuff and money when there is a lockdown. During the last lockdown, people were given Rs.5,000 relief allowance. At that time, Rs.35 billion was the cost of handout alone. In addition, there were many other types of expenses.
There are lots of costs that the Government has incurred without stinting. Because we are concerned about the people’s health and wellbeing. We have to find resources to do that. Sometimes, that is a serious challenge because we have to find money for all these activities that have come in addition to the normal activities done by the country.
Q: Has the Government received US$ 787 million Special Drawings Rights (SDR) from the IMF?
A: The IMF has given SDR of US$ 787 million. That is an unconditional SDR payment allocation by the IMF for countries to be able to withstand difficult periods as a result of Covid-19. The IMF board has allocated US$ 650 billion to the world. Sri Lanka’s share has been US$ 787 million.
Q: Do you think that the country has become a victim of the world economic crisis due to the Central Bank bond scam and other acts of corruption during the previous Yahapalana Government?
A: One of the tensions that we are having today is that we have a micro amount of reserves that was handed over to us at the time that we took over. When I was leaving office as the Governor of the Central Bank, the country had US$ 8.2 billion. Thereafter, the Central Bank borrowed a net of US$ 10 billion from the international sovereign bonds. We should have at least US$ 18 billion, but we only got US$ 7.5 billion. The balance was used by the previous Government.
There was no foreign exchange in the reserves. The reserves were much lower than even what we handed over to them. Naturally, there was a certain shortfall. We had to do our activities even with Covid-19. With that reduced amount of reserves and when there was an additional shortage created by the tourism sector coming down, that would have some tension. That is why we have to stop certain imports and leave it in a manner that was somewhat difficult. But we have managed it. That is what this whole economic management is about.