Rajapaksas’ meat poor man’s poison

“Financial assistance is needed for any project, be it Galle port or Norochcholai power plant but, what I say is that the country cannot afford such high interest.” - (TNA) MP, Suresh Premachandran

By Kushali Atukorale, Savani Dissanayake, Aisha Edris and Sarashi Samarasinghe
Despite strong objections of the main opposition, the government is pressing ahead with the US$ 500 million Bond lead-managed by HSBC, JP Morgan Chase and Barclays Capital. While the government claimed that “oversubscription of the US$ 500 million Bond issue as a positive sign that will encourage investors”, The Nation talked to several MPs from the opposition parties, to learn that the opposition parties are weary of such claims.

An economic burden
United National Party (UNP) parliamentarian Ravi Karunanayaka told The Nation that the government is dragging the country into an economic grave. “This is a colossal problem for the country. When the world’s economy is in recession, to take loans at 8.3% interest for 5-years, is insane.”

Tamil National Alliance (TNA) MP, Suresh Premachandran shares Ravi Karunanayaka’s sentiments. He said that the government needed to borrow due to the war situation in this country. “Financial assistance is needed for any project, be it Galle port or Norochcholai power plant but, what I say is that the country cannot afford such high interest.”

UNP MP Lakshman Kirialle agrees. “The problem here is the interest rate. When Ranil Wickremesinghe was the prime minister, he was offered US$ 4.5 billion, of which 50% as outgoing grants and the balance 50% was at 0.5% loans, but the JVP and the Sri Lanka Freedom Party (SLFP) scoffed and said that he was mortgaging the country. Now, the government is borrowing US$ 500 million at 8.25%”

Both MPs held the Central Bank (CB) responsible for this “economic misadventure.”
“The CB is the advisor to the government on monetary and economic affairs and has the responsibility to promote development in the country” Lakshman Kirialle said. “But this Bond issue by the CB, on behalf of the government, is a trap for this country, which already has a staggering public debt of 93% of the Gross Domestic Production.

Janatha Vimukthi Peramuna (JVP) parliamentarian K.D. Lal Kantha speaking to The Nation, said that this loan will only increase the burden on the poor.

“The year we gained independence, per capita debt was only Rs 73 but, by the time of President Mahinda Rajapaksa, it has reached Rs 145,000. It will increase to Rs 200,000, after the Bond,” Lal Kantha said. Vice President and spokesman, Ceylon Workers Congress (CWC), R. Yogarajan added that it will also have an adverse effect on workers in the upcountry. “It is up to the government to make a prudent decision. This could be detrimental to the people as a whole”

Not a positive sign
TNA MP Premachandran commented on Minister Ranjith Siyambalapitiya’s claims that the Bond issue is also expected to serve as a benchmark for other corporate borrowers in Sri Lanka, which have the capability to raise money in international capitals, claiming that the government is using State media to mislead the government.

“The general public don’t know what’s happening. The government is using all print and electronic media to spread an image of great success. All these government officials would say whatever they want but, it would not be worthwhile on the country’s development,” Premachandran added in conclusion.