What are our main sources of foreign exchange? The biggest loss of Foreign Exchange due to COVID is from Tourism, US$ 6 Billion, and another US$ 5.1 Billion from the Sri Lankan workers in the Middle East. That is nearly 12 Billion US $ per year.
by Jayantha Gonsalkorale CPA
Some salient facts regarding the current situation and what led to this outcome. The writer is in no way downgrading or discounting the suffering faced by our own Sri Lankans but would urge readers to look at the bigger picture and also consider the outcome or the impact of these protests on the very people who are suffering. If these protests or worse violence continue. Would the much needed foreign exchange come from the tourist industry? The writer has nothing to gain and has not had any gains in the past either. Simply looking at the current prevailing situation not just in Sri Lanka but also the rest of the world.
Let's look at COVID. Many prefer not to link the pandemic to the economic effects suffered, not just by Sri Lanka but also first world countries like the US, UK, Denmark, France, Australia and even New Zealand. The degree of impact has been linked to a country's population, foreign exchange reserves and its balance of trade as the latter dictates the inflow and outflow of foreign exchange.
Countries like New Zealand and Australia were fortunate as these countries relied less on imports because of their own domestic production and the impact of COVID was felt mainly on the tourist industry and employment. This could be applied to most countries that have a decent level of domestic production base which was able to support domestic consumption. The only downside was higher inflation due to the reduction of cheap imports from the likes of China and increased Govt spending due to the payment of income subsidies etc to those who lost employment.
Sri Lanka was hit hard. Its population is 22 million. It does not have a domestic production base to support local consumption except for rice and vegetables and both commodities were hoarded by errant merchants. This created a shortage and a price hike. To assist people, the Govt was forced to import rice. Drain of foreign exchange. Attempts to locate these errant merchants using the Army was hugely criticised by the opposition led to the President being accused of militarisation of the Government, just as was when the COVID vaccination programme was launched.
Sri Lanka also led one of the best programmes to keep its 22 million people safe from COVID. Part of the foreign exchange spent on vaccines was reimbursed by the ADB but the bulk of the expense was funded by the Govt. It set up over 14 centres of isolation for the people and the cost per person per day was Rs6,000. Multiply that by 14 and 3000 which was the average number of people in isolation per day. They built several makeshift hospitals to treat COVID patients. The Medicines, the medical equipment had to be imported. Drain of foreign exchange.
The GOVT also had to repay the interest of the Sovereign Bonds Drain of foreign exchange.
Sri Lanka also does not have an industry base to provide for domestic consumption, every commodity including oil, medicines, equipment etc, other than rice, vegetables and fish are imported. Drain of foreign exchange.
What are our main sources of foreign exchange? The biggest loss of Foreign Exchange due to COVID is from Tourism, US$ 6 Billion, and another US$ 5.1 Billion from the Sri Lankan workers in the Middle East. That is nearly 12 Billion US $ PER YEAR!!.
The current uprising has been organised by the opposition because they want power. They are most likely funded by drug barons who lost their business because of the President's drive to cease the drug menace that had even infiltrated village life in Sri Lanka. Parents could not get their children to go to school, study and even to assist with their food cultivation as was done time immemorial in Sri Lanka.
Basil Rajapaksa became the Finance Minister in July 2021 and the drive to topple this Govt started long before that. The protests by the teachers, the health sector all were agitations brought about by the JVP and Samagi Jana Balawegaya. One begs the question, was the oil and gas crisis a well organised crisis created with the intention of destabilising the Government?
The motive of the current protests will communicate to the world that Sri Lanka is an unsafe place to visit and thereby kill the tourist industry that has just started to pick up bringing the much needed foreign exchange.
The writer sees this as another attempt to cripple the country and a sole effort to gain power since an alternative Government does not have a magic wand to bring oil and gas to Sri Lanka.
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