Who Are Going To Complete The Capitalist Reforms & Socialist Reforms In Sri Lanka?

 By Harsha Gunasena –

Harsha Gunasena

Although the National Peoples Power (NPP) government solicited the highest number of votes in the last Local Government Elections, they have considerably lost their vote base mainly in comparison to the last General elections and in comparison to the last Presidential Election. The main opposition party Samagi Jana Balavegaya (SJB) also has the same fate.

At the time of independence, the populist parties were the United National Party (UNP) and Lanka Sama Samaja Party (LSSP). Decades back the populist parties were the UNP and Sri Lanka Freedom Party (SLFP) followed by the People’s Alliance (PA) which comprised mainly of SLFP, LSSP and Communist Party (CP). Initially old left had lost their popularity and then the UNP and SLFP followed. Sri Lanka Podujana Peramuna (SLPP) emerged in the place of SLFP and held the power once. SJB emerged in the place of the UNP and became the main opposition.

In the first time of the history of Sri Lanka, the elected President of the SLPP was ousted by peaceful public protests, which were turned violent due to the aggression of the ruling party, which was countered by the organized mobs. Sri Lanka had three armed rebellions but none of them were able to change the head of the state in this manner.

The appointed President ruled the country during the rest of the period of the ousted President and managed to take the country out of the bankruptcy situation with the support of the International Monetary Fund (IMF). The present Government came to power after the subsequent elections.

The trend of the public, which rejects the government as well as the main opposition, is not a healthy sign for the democracy of Sri Lanka although there could be very valid reasons for this trend. This trend was there, for some time and as a result, the traditional parties diminished one by one, as we discussed.

Public opinion in Sri Lanka, like any other country, expects quick results and quick benefits for them. As far as the present government is concerned, they have failed to deliver as promised. The government will have to face the consequences and my concern is the economy of Sri Lanka, which cannot afford the mass protests of the people demanding the removal of the government.

The main reason of the collapsing of the economy was giving the various benefits to the people by the state for which the state could not afford. It was reflected in cost unreflective prices of the fuel and electricity of which the service providers were state entities and expansion of the state sector with unproductive workers and unproductive entities. The beneficiaries of this process, the voters, thought that the main reason for the collapse of the government was the robbing of state resources by the members of the ruling parties. NPP promoted this concept in order to get the power. Yes, the corrupt practices should be eliminated for the development of the country and the transparent business practices should be promoted in order to attract investments but corruption was not the main cause of collapsing of the country.

The President, prior to coming to the power, said that he will continue with the IMF programme although it was mentioned in the election manifesto of the NPP that they will renegotiate the Debt Sustainability Analysis. NPP government continued with the IMF agreement without making any adjustment, which was the wisest thing to do for the sake of the survival of the country and the government.

The third installment of IMF programme was delayed until the government presented the budget 2025. It was released thereafter, and the fourth installment is delayed until CEB increase the tariff. One of the conditions agreed upon with the IMF was that cost reflective prices for electricity and fuel. The government managed to do this with fuel but failed to do it in respect of electricity. Hence electricity prices are going to increase shortly.

Recently I have seen that the President explaining this price formula very eloquently, which is the opposite of what his previous approach was. We should commend this rather than finding fault with him for what he said before, since if he is unable to do this we all will be in trouble. Let him eat the humble pie. If the shortsighted Public who brought NPP to power oppose this move, we should defend the government. What the government could do is to expedite the re-structure of the CEB and bring down the contributory factor of the cost due to inefficiencies and wastage and increase the contribution of renewable energy to the grid. Lack of vision of the government or fear of the shortsighted Public does not allow them to do it. The last annual report published by the CEB was the one for 2022. Those who are responsible for the delay deserve to be sacked.

Speaking at the weekly post-Cabinet meeting media briefing on 29 April 2025, Nalinda Jayatissa said that there will be a draft legislation titled ‘State Commercial Enterprises Management’ in order to make the State Owned Enterprises (SOEs) economically viable and professionally managed while opening the doors to local and foreign investments and eliminating the financial burden to the treasury.

This is a welcome move although it is contrary to the previous stance of the NPP. It is contrary to the decision of the government to allocate public funds through the budget to Sri Lankan Airlines and to continue under the government. Therefore, I believe that the government is correcting itself from the past and taking correct decisions slowly.

They are in the process of ending the false concepts of Sri Lankan socialism and silencing the idiotic public who support these false concepts. They are slowly spearheading the capitalist reforms of the country. Only they can do it. If not that will be the immediate end of the NPP government. Therefore let them do it with the support of all of us. Capitalist reforms being done by a socialist government is an irony but it is the Sri Lankan model.

The Irony is not over. Who is going to do the socialist reforms of the country? Before that, what are the socialist reforms needed? In Sri Lanka, there is an inequality of the distribution of income, which is a phenomenon of most of the countries. The JVP/NPP started talking about this very recently. One way of addressing this issue by the government is to increase contribution of direct taxes, borne by the people who can afford to pay, to the government coffers in relation to the indirect taxes, borne by all the consumers irrespective of the ability to pay. In Sri Lanka for a long time, the ratio of direct taxes to indirect taxes was around 20:80 and it was being changed with the increase of direct taxes in 2022.It would be great if this ratio would be 40:60. To achieve this the society should be richer with more people paying direct taxes. Therefore, a future capitalist government could do this. This is the other irony.

For instance, Ronnie De Mel, the Finance Minister of the capitalist government of JR Jayewardene once increased the maximum personal income tax rate in comparison to the rates imposed by NM Perera, the Finance Minister of the socialist Sirima Bandaranaike government.

However, the tragedy is that adopting IMF initiated capitalist reforms is not enough. These reforms are aimed at strengthening fiscal stability. Apart from that we need to have a higher economic growth rate. In order to achieve that, which should be weighted more on foreign trade with higher exports, depending on the circumstances Sri Lanka faced, the government should have a clear vision in that direction. The government is focused on protectionism, which is a common phenomenon of the successive Centre-left Sri Lankan governments. Protectionism is defensive and I believe we should be offensive with reducing the tariff on international trade and having Free Trade Agreements. Opening a bridge between India and Sri Lanka and having a highway from Mannar to Trincomalee, thereby connecting growth oriented southern Indian states to Trincomalee to which proposal the government opposed, is also an growth oriented offensive move. Instead, they initiated a defensive MOU of defense with India, which is unnecessary.

This lack of future economic growth oriented vision would be the downfall of the NPP government, which would affect the Sri Lankan state as well.

Published in Colombo Telegraph on May 12, 2025

https://www.colombotelegraph.com/index.php/who-are-going-to-complete-the-capitalist-reforms-socialist-reforms-in-sri-lanka/