The increase in the price of petrol and diesel has been accompanied by the removal of the QR Code quota system for the purchase of fuel. The elimination of long lines of vehicles, and people, outside of the fuel stations that existed a year ago is one of the signs of normalisation that is credited to President Ranil Wickremesinghe and his government. The tripling of fuel prices over the past year, which has now increased further, would be a key factor in reducing demand and eliminating the need for the quota system. The price hikes would also make it more attractive for foreign companies to sell fuel in Sri Lanka and make their profits. On the other hand, the impoverishment of the general population by the tripling, if not more, of most prices since the economic crisis commenced is a central feature of the present reality. The increase of petrol and diesel prices will impact on other costs which will impoverish the people still more.
The devastating impact that the price increases in the country have had on the living standards of the people is brought out by survey after survey. A national citizens’ survey led by the United Nations Development Programme (UNDP) found more than 55 percent of the population to be vulnerable across three dimensions - education, health and disaster, living standards - and 12 indicators, including school attendance, physical condition [of health], unemployment and indebtedness. In effect, the survey showed that more than 12 million people out of Sri Lanka’s 22 million population have been badly affected by the crisis and remain vulnerable amid claims of a recovering economy. People are being forced to sell their assets in order to maintain a minimal standard of living.
In another survey, the United Nations Food and Agriculture Organization (FAO) has reported that the projected cereal production for 2023 is expected to fall below the five-year average due to the ongoing obstacles in farmers’ access to necessary inputs. The surging prices of key food items are also playing a role in constraining the economic accessibility of food for a significant number of households. Although the majority of households in the country maintain food security, including through taking loans and sale of assets, certain areas continue to grapple with pockets of food insecurity. In yet another report, the World Food Programme (WFP) has provided statistics from the Crop and Food Security Assessment Mission 2023, revealing that approximately 3.9 million Sri Lankans are moderately afflicted by food insecurity.
FIRST PROBLEM
Accompanying the permanent increase in the price level are high levels of indirect and direct taxation that have been imposed on the people. This is a double blow. A statement by A Collective of Trade Unions and Civil Society Organisations in Sri Lanka said that “In addition to lowering the direct income tax threshold to rob lower middle-class households of more of their monthly pay packet, regressive indirect taxes (VAT)almost doubled to 15% between June and September 2022. As a result, the poorer sections of the population shoulder the burden of taxation today. Food inflation shot up to almost 95% in September 2022. With headline inflation at 57% at the end of last year, real wages have fallen by nearly 50%. The World Bank estimates that 500,000 jobs have been lost as of 2022.”
The latest announcement by the government is that it will be imposing wealth, inheritance and property taxes. This might seem justifiable as will only affect those who have such assets to be taxed. However, this will also affect a significant proportion of the middle class people as well who can barely make ends meet and who may well have put all their assets into constructing a home and are repaying loans as a result. As indicated earlier, the UNDP survey showed that about 55 percent of the population have been badly affected by the crisis and remain vulnerable. Those who have professional qualifications or are willing to take up the challenge of going abroad to work are doing so in large numbers for the reason that they cannot meet the increased level of expenditures with the income they are left with after taxation.
The first problem with the government’s efforts to find adequate resources to finance its budget deficit is that it is going after those who are already in the formal economic system. It is deepening the tax net to catch those even with relatively low incomes. It is those who are in the formal economic system, and law abiding, who are being taxed and made to pay up. However, there is a large number of people who remain outside of this formal economic system and make vast amounts of money and are able to evade the taxation of their income and wealth, which may even be parked abroad. An example would be the case of the space satellite brought up by Opposition Leader Sajith Premadasa in parliament. Even though the cost of this venture is more than that of the Indian rocket that went to the moon, when the query was raised it was said to be privately funded. There is a need to investigate if taxes were paid by those who funded the project and on the sources of their income
SECOND PROBLEM
The protest movement of a year ago whose suppression is now complete with the government having broken it through the security forces had three objectives in mind. The first objective was to send the then president home. The second objective was to send the 225 parliamentarians home. The third was to effect system change. There was a spirit of idealism captured by those of all ages and regions who came to public places to show their solidarity with the common cause. This idealism continues to live. A survey conducted by Verite Research has shown that approximately 60 percent of the public do not believe that the protest movement led to the wishes and aspirations of the people being fulfilled. In addition, 51 percent of the respondents said that corrupt and bad governance needs to be fixed in order to rebuild Sri Lanka, one year since Aragalaya protestors vacated Galle Face Green on 10 August 2022.
The second problem with the government’s efforts to find adequate resources to overcome the economic challenge has been the absence of any system change. The US Revolution of 1776 was on the slogan of “No taxation without representation.” In Sri Lanka it is taxation without accountability. The majority of people are paying the price for the economic collapse caused by a smaller group who are being spared the burden of being held accountable or asked to bear at least a part of the burden and instead continue to remain in their positions. Everything in the past remains intact including abuse of power, corruption and mismanagement. These all remain, and if hearsay is true especially with regard to corruption, the situation is even worse than before. The president and prime minister may be notable exceptions, but their financial cleanliness is no relief to the people who see ongoing depredations by others in power, whether it is in respect of emergency purchases of medicine, energy or fertilisers.
The buildup of frustration and anger in society is growing by the day and every price and tax increase that casts an additional burden upon the people, which is not met by an equivalent sacrifice or demonstration of accountability by those in government is bound to escalate those negative sentiments. The direction the country is traveling does not appear to be positive but negative. It needs to be kept in mind that command responsibility lies on them all for mismanagement and corruption. There is evidence that frustration and anger is being turned inwards and violence within families is increasing. So are robberies and killings. This frustration and anger can also take more collective forms against those of other communities. When elections can no longer be postponed, the frustration and anger will manifest itself in the manner of voting and if elections continue to be postponed it can even lead to a renewed protest movement less idealistic than the one that came a year ago.