“Untold story of Sri Lankan independence” – one response – The Island

By GARVIN KARUNARATNE Ph.D.

The editorial in The Island on Sri Lanka’s Independence Day says it all: “The challenge ahead is to retrace our steps, figure out where we took wrong turns and move forward in the right direction, as many other nations have already done so. Easier said than done, but there seems to be no other way.

The problem is that even to retrace our steps, there is no consensus among scholars. Addressing the 10th Annual Conference of the Forum of Academic Economists of Sri Lanka on January 27, 2022, Professor Premachandra Atukorale said that “it is impossible to rely heavily on import and exchange controls, without compromising massive economic collapse and social upheaval”. .”

Perhaps, it may be useful to recall how Sri Lanka managed its economy, deciding how we can retrace our steps to the days when we had no food queues and social upheaval, while managing development with great success.

In February 1968, I was posted as an additional Kegalle District Government Officer. I worked there for two years. I didn’t know of any queues for any essential foods during this time. In fact, I was responsible for basic food supplies – as the assistant district food controller. At that time, each area was covered by a cooperative society, and in each division there were cooperative unions which were equipped with stores and trucks; and on a clockwork basis all essential food was distributed through the cooperatives. This included one measure of rice per person per week, completely free, under the rice ration program, which was abolished by President Jayawardena in 1978.

Then there was an important department at work – the food commissioner’s department, headed by a high official, a department which had very large stores full of rice and flour, and also looked after the imports, if necessary. At the district level, there was an assistant food controller who worked directly under me, and it was our duty to ensure that food was always available, without any interruptions. The importation of essentials like dhal, chillies etc was handled by the CWE as reliance on the private sector proved unreliable – the private sector is for profit, service to the people comes then.

Kegalle District included voters of Prime Minister Dudley Senanayake, Minister NH Karunaratne, Deputy Ministers Imbulana, Vimala Kannangara, Beligammana and Dr NM Perera from the opposition. There was never a delay in providing essential food – and that included rice, lentils, chillies and other curried stuff. I had the unenviable task of meeting the Prime Minister every Saturday and Sunday morning, around nine o’clock, at the Warakapola Rest House, and accompanying him to a host of meetings in his constituency, ending late at night, and there has never been a person who had a complaint. The divisional secretaries had to work hard. There were a few bad eggs that I needed to get rid of. Had there been an interruption in the food supply, Ministers would have complained to the Prime Minister or Dr NM would have raised the matter in Parliament.

This was also the situation in Matara, where I was the government agent from 1971 to 1973. There was no minister in any electorate, and only one deputy minister BY Tudawe. There were no shortages except during the JVP uprising of April 1971.

There was no foreign exchange problem, because there were effective controls on the little foreign exchange coming from exports and other sources. There were no currency merchants who managed the currencies like today, and the inflow of foreign currency was a guarded property used first to import essential goods, and small allowances were made to import items utilities such as automobiles and refrigerators. This was the situation even when we had sufficient funds – when we financed the Gal Oya development project – a massive project to build a reservoir three times the size of Parakrama Samudra, Polonnaruwa, bringing 60,000 hectares under cultivation and creating many industries, all carried out with foreigners. funds we had.

In 1970, I worked as the Assistant Director of Small Industries, and one of my duties was to see that each small industrialist had an allowance of foreign exchange, to import any particular item he needed for his manufactures. I can say that every application was reviewed by my industry inspectors – I had about 20 and assessed one, every real small industry received an allowance. Then no foreign funds were allowed for study abroad, but an exception was made to provide foreign funds to Sunethra and Chandrika Bandaranaike, and I had the opportunity to ask the Prime Minister why he l had done, and he replied: “It was the only request I had of my predecessor and I wanted to oblige.

The exchange was then effectively controlled. When I left the administrative service and moved overseas in April 1973, I didn’t get a penny. My wife and three children only received three pounds and five shillings.

It is sad that the most learned university professors in our country did not understand how the country was run at that time. Professor Atukorale said: “It is impossible to rely heavily on import and exchange controls without jeopardizing massive economic collapse and social upheaval.” It is by effectively controlling imports and exchanges that all Third World countries have managed their economy, without economic collapse. India’s economic power itself is indicative of an economy that did not follow the IMF and used funds borrowed from the IMF to foster development by controlling the economy.

Sri Lanka managed its currencies effectively, until President Jayewardene was tricked by the IMF into following the structural adjustment program, which advised him to allow the wealthy to spend foreign currency, as much as they wanted, for endless trips abroad to educate their children abroad. , import all luxury items; and the IMF provided loans for this purpose and busied itself with attracting leaders, even providing grace periods when service and interest charges did not have to be paid. Then-rulers profited and the wealthy gambled with the funds, leaving future rulers to bear the brunt of repayment. It is the process that has brought us to the current abyss.

Then there were two budgets: a local rupee budget to manage all work in the country, including major development tasks, funded with printed money, and a foreign currency budget to manage the foreign currency that was collected. . Recently, Central Bank Governor Cabraal ruled that all foreigners staying in hotels should be charged in foreign currency. This is a decision that should have been taken a long time ago. Other countries, such as India and Thailand, took similar steps decades ago. Unfortunately, we don’t even collect 50% of the foreign currency that comes in today, and it’s time we put in a drag like in the pre-1977 period.

From the period 1948 to 1977, an exception is the period 1974 to 1977, when there were shortages due to the government reducing its emphasis on agricultural development in order to have its own development council program divisions and embarked on land reform that stifled development and caused foreign sanctions. Even Prime Minister Sirimavo Bandaranaike managed to make all the required payments and succeeded without falling into external debt. 1976 and 1977 happened to be the last years our country was run without a deficit. Since then, every year our external debt has increased and today stands at 56 billion dollars.

So the way we managed the economy in the pre-1977 period is a proven model that worked successfully for nearly two decades, and it is the only way out of the current quagmire.

Dr. Karunaratne is the author of How the IMF Ruined Sri Lanka and Alternative Programs of Success: Godage, 2006 and How the IMF Sabotaged Third World Development: Kindle/Godage, 2017.

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