are the excerpt of an interview
By Gagani Weerakoon
Q: The government initially decided to bring down
interest rates on loans of public servants, now the
government has decided to bring down all interest rates
below 10%. There are thousands of people who depend on
deposit interests. Do you think it was a wise move by the
government to bring down interest rates especially given
that the country is now put on an election footing?
A: There are two sides to the question of interest
rates. When the interest rates are very high it is a
disincentive for business enterprises. People cannot borrow
or invest money in businesses as they have to pay huge
amounts back to the banks as interests. As a result a large
number of small and medium scale industries collapsed and
entrepreneurs had to go into debt because the interest rates
were exorbitantly high. That is one side of the problem.
On the other side we have lots of local savers. Saving
habit is very strong in Sri Lanka. All pensioners,
government servants and various other people put money in
banks and depend on interests monthly or annually. So the
government must balance these two aspects. On one hand the
government must let the economy grow by allowing people to
borrow money if they have good ideas. They borrow money and
invest and make more money and then the economy grows. So we
have to stimulate that. On the other hand we must preserve
the habit of saving.
So what we have done is to reach a balance between these
two necessities. What we are proposing is something under 10
percent is not too difficult for the investors. Of course
they would like for us to bring down the rates even more. On
the other hand we have to think about the man who is saving
and look after him.
A very important thing about interest rates is that it is
related to the inflation. If the inflation is very high and
if someone is saving money, in reality he is losing because
the value of the money they are saving will come down pretty
fast. Faster or higher than the interest they are receiving.
Sri Lanka can now manure because our inflation rate has come
down to one percent. So even if a person is getting 8-9
percent interest is a substantial amount as it is way above
the inflation rates. That is why we took that decision.
Q: The government says it will increase the salaries
of the public sector. Does the government have enough funds
to do so?
A: Yes the government has enough funds but the question
is how to allocate that money. When the salaries and the
pensions increase, the money available for other investments
of the government reduce.
On the other hand the government must ensure that there
is peace in the country. If there are constant strikes and
breakdowns then there will not be a good environment for
economic growth. So we have to satisfy that appetite as well
and keep the work force happy. However, we cannot generate
enough money to provide jobs for all. Many communist
countries like the Soviet Union had this policy of jobs for
all but for a very low salary. It is a total failure as
bright people with good initiative will not want to work for
a low salary. There are two options. One is to provide jobs
for all for very low salaries and the other is to provide
jobs for a selected few for very high salaries. Anyone with
proper sense will not go for a full employment for low
So we have to have a situation where the government’s
commitment will be contained within a certain amount of
money and in the future people will have to go to the
private sector for employments.
Q: You were for the privatisation or reforming public
institutions when you were in the UNP government earlier.
Are you in other words saying that the government should go
ahead with reforming certain public institutions?
A: I am not for privatisation. I am for public and
private sector partnership. In the modern world it is not a
matter whether a firm is owned by the government or the
private sector. What is important is the management and who
manages it properly. Even in big companies in the USA there
are hundreds of shareholders and it really does not matter
who the owner is. They should deliver the goods and make a
better return for the country and the consumer. That is why
Chinese leader Deng Xiaoping once said ‘I don’t care if it’s
a white cat or a black cat. It’s a good cat so long as it
catches mice’. He was not bothered whether they are
socialist or communist or private sector. That is not our
job. They have to do the job and create wealth in the
country. The public sector has failed to create wealth and
they are only wasting money. We have to look at better
Q: It is said that the government is Rs 115 billions
below the targeted revenue for the year. What do you have to
say about this backdrop?
A: When there is a downturn in the global economy,
demand for our manufactured goods also come down. Equally
the tourism comes down. Also people do not bring down
vehicles or machinery so that the government revenue on
those things also will come down. As a result when there is
economic slow down as a result of western market slow down
then your economic targets get reduced.
Q: Are you saying that even other countries have such
a noticeable percentage like 15% of backdrops?
A: Yes. Lots of countries have that problem even India
is facing loads of financial problems as a result.
Q: In Parliament you said that the Opposition MPs
should not be allowed to visit IDP camps in the North. On
what basis did you make such a statement?
A: What I said was it is not a case of Opposition
forever being kept out to see the IDPs or even the media.
When the right time arrives they will be allowed to visit
them right now we are trying to manage a difficult
situation. The Opposition is always trying to capitalise
these and trying to score points. So if they allowed there
they will only create further bad feelings among the IDPs.
So what we feel is till the matter is under control- now
that more than 100,000 were sent back homes and the
remaining too will be sent back to their villages- till all
these matters were settled – we don’t think the opposition
need to come and create problems. For example, when the
human rights matter was being discussed in Geneva, there
were several Opposition MPS who used their mobile phones to
give impression to Geneva that there are lots of problems in
Parliament and MPs being attacked. All those were done just
to influence the vote in Geneva. So until these matters were
solved we don’t want mischief makers be they of the
Opposition or of the media to mess up the situation.
Q: Don’t you think that these elements could use this
situation against the government on the lack of
A: How can there be any problem about transparency. Now
the most vocal critics were in Chennai. A representative
group of Chennai politicians came here and observed the
situation. They said that the situation is not at all as bad
as what they were made to believe. Then we have UN officials
who go there and NGOs are working on de-mining. So why
should we try to follow the agenda of other interested
parties be it the media or political parties. We can work to
our own agenda.
Q. Now the country is put on an election footing and
there are speculations that the former Army Commander too
will enter politics. What do you think about the upcoming
A: It is no matter which election comes first. Whatever
the election is it is a one horse game and the president
will win hands down. In Sri Lanka, being a democratic
country any one can come into politics. But, in present case
President Rajapaksa is so popular and done so much I think
it is very foolish of Gen. Fonseka’s part to enter the fray.
There will be no contest.