Economic crisis in Sri Lanka sparks feud within ruling party

ECONOMYNEXT – Sri Lankan Water Supply Minister Vasudeva Nanayakkara has said he will not attend the cabinet meeting or work at his desk in protest against the dismissal of two colleagues by President Gotabaya Rajapaksa during the last internal squabble of the ruling coalition.

President Gotabaya Rajapaksa on Thursday sacked Udaya Gammanpila from the portfolio of energy minister and Wimal Weerawansa from industry minister. Both were ministers.

“I have retired from ministerial duties,” Nanayakkara told reporters surrounded by his dismissed colleagues on Friday (04).

“I will not involve myself in any ministerial function. I will not attend cabinet meetings. I urge justice for this bad decision.

“The government should accept that it made a mistake and correct it. Otherwise, I will not go to the firm for the next three years and I will not assume any responsibility within the firm for the next three years.

Friday’s drama is the latest twist in a series of infighting within the ruling coalition, which had intensified as inflation rose and currency shortages led to fuel and power shortages.

“Now that the two of us are laid off, dollars will multiply, oil will rise from the ground, power cuts will end and great miracles will happen,” Weerawansa said.

The socialist-leaning Democratic Left Front (DLF) of Nanayakkara, along with 10 smaller parties, including the two led by Gammanpila and Weerawansa, made it into the coalition government led by Sri Lanka’s Podujana Peramuna (SLPP) after parliamentary polls of August 2020.

Gammanpila and Weerawansa, who have a rocky relationship with Finance Minister Basil Rajapsaksa, said they had been in the government’s bad book after they opposed a deal to give a take-out liquefied natural gas deal, a LNG terminal and sell a power plant in the United States. based at New Fortress Energy as well as a port terminal involving India.

The duo blamed Finance Minister Basil Rajapaksa, brother of President Rajapaksa, for the worsening currency crisis, triggered by money being printed to keep interest rates low amid a growing budget deficit.

Weerawansa said Prime Minister Mahinda Rajapaksa, another brother, was not involved in the decision to sack them, saying he had superior political acumen.

Nationalist-leaning Gammanpila and Weerawansa helped President Rajapaksa secure a landslide in the 2019 presidential and recent parliamentary polls.

The SLPP, which the duo describe as the “personal property” of Basil Rajapaksa, has 145 members out of the 225 members of parliament and has a two-thirds majority with the support of several other legislators.

The 15-member Sri Lanka Freedom Party, led by former president Maithripala Sirisena, has also criticized the administration as the economic woes deepen.

Vasudeva, Gammanpila, Weerawansa and 14 Sri Lanka Freedom Party members challenged the SLPP ticket.

Nanayakkara said he and his like-minded colleagues wanted to create a haven for the two who were now orphans but declined to give details.

Weerawansa avoided the question of whether they would join forces with Sirisena and other disgruntled SLPP members, as the forex crisis, shortages and queues made the electorate unhappy.

He denied that he intended to join the main opposition party Samagi Jana Balawegaya.

Many governments over the past 70 years in Sri Lanka have been toppled by high inflation, currency shortages, import controls and social unrest sparked by a money-printing central bank established in 1950 with the help of the United States.

The SLPP also came to power after two currency crises were triggered by the agency during the last administration following “loose” or discretionary monetary policies.

The agency purporting to operate flexible inflation targeting, has also engaged in real effective exchange rate targeting and output gap targeting.

He also claimed to apply a flexible exchange rate, which suddenly collapses after printing money for output gap targeting (also known as stop-go policies), but is not flexible in the other direction when economic output collapses due to the targeting of the REER allowing the exchange rate to strengthen.

Analysts and economists had called for a reform of central bank law to remove discretionary powers from its monetary council to prevent currency meltdowns, growth volatility, high inflation and social unrest.

After the latest episode of money printing, probably the worst in the agency’s history, the International Monetary Fund warned that the country’s debt was unsustainable and the economy risked an implosion. (Colombo/Mar04/2022)

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