charindra chandrasena 00:06 Hi Dana. Hi Jari. Good to have you back. Good to good to be back. Andrea. Speaker 1 00:12 Hi Dana. Sorry. Hi Jari. Good to be back. Good to be back. Good to be back. How are you? Good. Good. Good. Good. Just finished another podcast in KMB, and you know mind is all over the place. charindra chandrasena 00:23 Yeah, the podcast specialist now. Podcast specialist. Not Speaker 1 00:25 really, but you know, unfortunately, on this particular day, there's one in the world. Like, Dhananath Fernando 00:29 do you have a doctorate? I think I have a doctorate in moderating discussions of all sorts. Easily. charindra chandrasena 00:38 So today, I mean, there's a lot going on, but we wanted to make it a bit of a general conversation. So basically, guys, everything that we're going through now can be traced back to the rest of the world. Yeah, Speaker 1 00:54 of course. charindra chandrasena 00:55 Because if you take the the economic crisis was because of global factors, but still it was very much local in the sense that not every country around the world that went through COVID went through an economic crisis. Exactly, right? But then there was a lot of defaulting. Yes, but not every country. Right, very few countries. So Sri Lanka, I think that was-I mean-you could call in the disaster sense a man-made disaster, right? But everything else that has happened to us this decade has been-you know-has had implications. Not implications has had its origins outside our borders. Correct. Now, I want to focus a little bit on that geopolitical climate, climate today, because I think it's important for our audience, and and and maybe the three of us will have a different understanding of it also after discussion. Just but but let's start from Sri Lanka. Do you think Sri Lanka is a country that is resilient to these shocks that we are getting from around the world? Because these are not on and off anymore. Just to set the context for this, this decade has actually been the most tumultuous decade globally since since the end of the Second World War, which is 1945. Okay, the closest one is 1970s, where there was this oil embargo imposed, and then the Iranian Revolution happened towards the end. But and then there were minus incidents, but nothing like this. And hoping, and we are we are actually still in the first six years, so we are comparing against full decades. And already this decade, with starting with COVID, then the Ukraine war, then Gaza, and then Dhananath Fernando 03:00 now what's happening in Iran, and then the entire you know the shock to the entire system that has been brought about by President Donald Trump, the second term, all of that considered. So, in that against that backdrop, we now have to consider this not exactly exceptions, but the new normal almost. Tana, start with you. Is Sri Lanka ready economically to face these shocks? You know the simple answers are no for sure. For no data shows it's no. It's for geopolitical shocks. So for climate events, we are not prepared. I think last time the Ditva was one good example, actually, we were somewhat prepared. That is also because the fiscal balance we had. But for geopolitical ones, we are not. And I think the word resilience is also kind of misused or overused. Sri Lankans think we are resilient. Basically, like every time when something happens, like we survive. We think that's resilient. I don't think that is resilient. Resilience is like when something happens that you have a structure that the impact is minimal. What happens to us is like we completely crushed ourselves, and then we somehow survive, and then we say we are resilient. That's an charindra chandrasena 04:15 interesting point, though, because I think people think Sri Lankans are resilient in the sense that when we get a disease, we don't die. Dhananath Fernando 04:24 Correct. Right. Yeah. charindra chandrasena 04:25 But if you are in hospital for weeks and months, how resilient are you? Is the is the benchmark or the barometer just being alive? Absolutely. So it also Dhananath Fernando 04:36 depends on the expectation. But I think we are not resilient. And also generally, when you say this, like you get like okay, you are being very negative. Why can't you be positive? True. I mean, just surviving is also good. I mean, unless rather than you completely dying, being being being up and running is also good. But we had also, I think, slowly, you know, improve our threshold. So there. We are not resilient, and why we are not is mainly, I think, due to the institutional structures. In my view, it comes back to this fundamental because for anything to run to be resilient, you have to have the structure that any type of a shock can be absorbed. Actually, interestingly, I was invited to a session. There are these strategic planners actually who plan for risk, all sorts of risks. I was very surprised to actually hear that because there are in companies who think of like, oh, it's not like generally you can analyse the risk on one thing. No, if you are a cyber security expert, you can analyse the risk on cyber security. If you are a media specialist, you can, but there are actually professionals who think of all types of risk. Apparently, they have done these types of risks for, for example, Heathrow Airport. Like he said, like you know, when you are analysing risk, the main risk is closing down the airport. Like what? Then I'm sure there are techniques and tools how they evaluate that risk. So then they think, okay, what can happen? Like it's a pandemic or it's a terrorist attack, and then that's how they plan on these risks. So I think those structures are not there as a result. I don't think we are resilient, but as, however, on on our positive side, somehow we are managing. Of course, one section of our society or Sri Lankans go through a completely a difficult time, but somehow others are you know again collecting back their pieces and just you know do something and then move forward rather than moving forward like we are just struggling you know do do do the same thing and struggle so that's how I see it. Yeah no I mean, charindra chandrasena 06:40 I, I, because I, when we were growing up also, we used to hear this word a lot that Sri Lanka is resilient even during a war. You know, our business sector is going on, and they are not just you know throwing the towel in, you know, continuing their businesses. I think very interesting to see actually whether that is resilience or whether that is just surviving in a in a bad situation, yeah. Speaker 1 07:06 Yeah. So it's basically the way I see it is you basically go two feet in front, then you go back three feet, and then when you are back in three feet, you actually minus one, and with that minus one, you feel okay. We are back to where we were. No, we are not actually behind. So I think that's for me. That's the easiest way for me to explain the situation. And the other one is you need to, for example, like any country, what they do is they they have particular people who specialise in for adverse impacts. Can be financial, can be weather, can be a disease like a pandemic or something like that, and they create a plan for that. Look, if we get hit with a pandemic, this is how this is how we need to take action, right? So how we get the health services involved, how we manage the economy, how we manage other things. If we have a financial impact that comes, how do we manage the financial impact, right? During a financial impact, you get the people who are bottom of the pyramid who get hit the hardest. How do you protect them? So if you take a natural disaster, a natural disaster can hit anyone. Right? How do you manage that? How essential services come in? Right? How the military gets involved? How the social services get involved? How the health services get involved? So you have a plan, so that is what you call an integrated plan to to mitigate risk, right? That is something at present I don't see. I don't see that coordination and all that, and you need to have that central body who does it because everyone acts on their own. When everyone acts on their own, what happens is your wastage of time, wastage of resources, and wastage of funding gets diminished, right? So that's why, for example, if you take the military, military you have the joint command. So joint command is there for simple reason for coordination, right? So then you know what exactly what resource. Let's say, for example, let's say you're fighting a war or something. What resource needs to be used from where at what time, right? So because everyone has, you know, if you take the U.S. military, I'm just saying because they are very big into this. The if you want, I'm just saying special forces, the Marines, you the Marines they have delta, right? The army has so sir. The marines have these guys. What do you call them? SEALs. The army has the Delta, right? The Air Force has some called special rescue operation or things like that. So then they decide for that particular operation which special unit are they going to send in, or which unit they are going to send in. So it's it's decided by the joint command, right? And if you try to do now, there's a classic case. I read a book. I can't remember. I can't recall the name. But they said it was what one of the major issues with the Japanese military during World War Two was the Army, Navy, and Air Force never worked together. They were actually rivals to each other, and sometimes they even tried to sabotage each other. Also, there's a it's it's unbelievable to think that way. But but there's there's a book. I'll try to put the reference on that. On comments of this pod, because charindra chandrasena 10:02 even when they were attacking Pearl Harbour, exactly, it was divided. The opinion was divided. Are we making up a sleeping giant by attacking America? Yeah, you know because America was going to come into the war, but not cannot. Not exactly. Yeah. So these guys decided this is the best time to attack America because after they come in, you can't attack. Speaker 1 10:19 In particular, they wanted to attack the Lexington. That was the American aircraft carrier. So, so what they say is one of the is still I think Japan already lost over as a different story. But the thing is, their defeat was absolute because of that because the coordination wasn't there. Yeah. So I'm just bringing that as an example. I think that needs to be done before we think anything else, yeah. charindra chandrasena 10:41 Okay, no, but in in Sri Lanka, I don't think we have ever had a plan like that. To be very fair, yeah, right, and you can also, not to my knowledge, yeah, because I feel like we plan for that government. Speaker 1 10:57 Yeah, charindra chandrasena 10:57 right. I don't see this bipartisanship when it comes to economic policy, you know, planning decade a decade ahead. Now China has this five-year plan. Dhananath Fernando 11:11 Yeah. Of course, with China charindra chandrasena 11:12 system, you know, it's the same party that's going to be in power. It's just a personal change. Yeah. So it's a bit easier. Yeah. But when they have that five-year plan. Even that five-year plan is part of a larger multi-year plan. Yeah, you know, so somebody can't just come in and correct. It's a new, completely new. It's Dhananath Fernando 11:30 basically the execution that they get exactly, and you can make a little few adjustments. Yeah, charindra chandrasena 11:34 but you can't completely change trajectory. Sri Lanka and and for for for that matter, it is also not about saying by 2048 we are going to be a developed country. Yeah, because you have to put the meat under that. Correct. Do you see any movement towards that kind of planning now, Dana? Economically. Dhananath Fernando 11:53 No, the only closest I think we got was Chari on like a that sort of a plan was during the crisis. There was a programme called a common minimum programme. I mean, programme in the sense there was a conversation. I took part of it from Advocata. I think Deshamani Karu Jayasuri was the one who convened. So the business community, everybody got together, and there was at least like a common minimum agenda that we had. Whoever the government comes, these are the reforms that you need to do. But I think afterwards I haven't seen anything, and at the same time, but charindra chandrasena 12:23 how how how long, like how what was the horizon for that? Dhananath Fernando 12:28 That was about two years. charindra chandrasena 12:29 Two years. Two Dhananath Fernando 12:30 years. I mean, what they agreed was it was it no nobody agreed ultimately, but at least there was a programme. They have a multi. Oh charindra chandrasena 12:37 yeah, no no not Dhananath Fernando 12:38 yahpal. This is after the crisis, after 2022. Ah charindra chandrasena 12:41 yeah okay okay right yeah Dhananath Fernando 12:42 even the. the the the big business leaders, everybody was consulted, and then it was tabled also by Dr. Harsha at the party. That charindra chandrasena 12:51 is to get out of a crisis. Get out of a crisis. I'm talking like no, no, 10 year, 15 year. Never, never, never. Dhananath Fernando 12:56 But apparently, other countries have been doing it. For an example, when we had the chat with Montek Singh Aluwalia, he said he used to speak to opposition members as well as the the young aspirational politicians about the structure. Guys, look, this is what you need to do. You know, you really cannot. These are the main structures. So that's what I'm even am today. I'm suggesting now the next step is at least we have to have a common growth agenda because any government who comes, they really cannot do anything, which are without solving this land issue, the labour issue, the factor markets issues, the regular. You really cannot, right? You can just bring a programme instead of samurdia. You can bring an aswasum. Instead of aswasuma, you can bring a janasavya instead of janasavya. I can give a you coming from a creative background. You can give a coin a better word, but of course the programme vulnerabilities remains the same, right? Everything it's the same, so that's where I think we need to have a common growth agenda at least. But we really haven't had even I think for the climate risk we really haven't had. Like look at the status of our metro med department, even for like critical ones. I mean, of course we all know we are an island, so we are quite vulnerable for these climate shocks and all that. We really haven't had any preparations, so we really haven't had a strategy. But I think that's where we need to move on. But here, what we are today is, I think, on the geopolitic galleries. I was at a rail bank even yesterday, and our one of our past inters Batya, who actually spoke at the event, representing the. It was a nicely conducted event between a collaboration between University of Colombo and the World Bank, and it's about jobs and on this uncertainty environment. So Bhatia spoke, and apparently there has been like some pre-workshops, and one of the main concerns by Gen Zs have been the uncertainty, and they are reluctant to take risk. My view was, I mean, during I mean, President Trump is teaching a masterclass on how to be be prepared for answer in life. You really like you know he's Speaker 1 14:53 supposed to try for Dhananath Fernando 14:54 answer. So everything is answered. You really cannot predict anything. So there we. Really haven't had any preparations, and I'm worried that the youngster. I mean, even we are kind of not prepared while we speak about it. But I think because it really doesn't in our genes or it's not in our system. But if the youngsters, the Gen Zs are not prepared, it's going to be very. But I don't think charindra chandrasena 15:16 this is a baptism by fire for the Gen Z crowd because for us this uncertainty, yes, we we lived through the war, right? But that's a that was a constant at that time. Correct, correct. This kind of uncertainty we have only faced in the last five to years, really. And you spoke Dhananath Fernando 15:36 you spoke about like this is the most uncertain decade after nine. Yes, this charindra chandrasena 15:39 is factually this is the most volatile decade, and it's only six years, right? So by the end, it will probably exceed that, and especially because Trump is going to be president for the next few years as well. But the closest comparison was the 1970s. So I feel like Gen Z has a lot of advantages in terms of technology, that that you know we didn't have, they they are born into technology, and Gen Alpha even more so. But I think the one thing they will have to deal with is this uncertainty that you know we were not aware of you know maybe in our teens we weren't really you know tuned into that so much because it wasn't like that, right? So I think maybe they are being prepared for it more at a young age, whereas we have to learn later on. You Dhananath Fernando 16:31 have a point. Yeah. charindra chandrasena 16:32 Just on that also, I think if you say that we are still not prepared, would the central bank governor have a different view on that? Would he say that we are setting our plans up for, for example, 2028, right? For the debt repayments, we have planned everything out. Despite what everybody says, we will default or we will not be able to pay on time. We are prepared, right? And then he will say that is part of a longer plan. But do you? Of course, they can claim that. But do you guys see that from the outside? It's kind of kind of long term plan. Because I'll give you give you context for that. In 2015 or 2016, the Hapan government said that by 2020 we will be a debt-free country. Free country. Remember that, right? Yeah. Now, of course, that was not backed by evidence or any any facts, but they did say that, and that that didn't happen. In fact, the opposite happened. Speaker 1 17:35 So, do charindra chandrasena 17:36 you now see any evidence? Speaker 1 17:37 Okay. So, and charindra chandrasena 17:38 this is not political, by the general. Okay, the government, but from the central bank side. Speaker 1 17:41 Yeah. So just looking at the, I mean, just look at what we can see and what we know. Now at present, the central bank itself says that they have an inflation target of because end of the day, you know, debt repayment and stability of the economy and all that. Inflation has a big impact on that, and then inflation is controlled by interest rates. So, just looking at that, at present, central banks' mandate is legally they are completely independent. Legally, their mandate is three to 7% of inflation. That's the range. Five is what they are targeting. So you think, and currently we have already, I think, hit seven. No, we are hit seven, and we are going north to double digit. That that explains the that explains your the answer to your question. No, I mean just running, getting close to double digit inflation. How are we going to get into that plan? I'm just asking, because if you are without any problems, if you are running close to 7% or north of 7% charindra chandrasena 18:46 not without any Speaker 1 18:47 problem. I'm saying without any problem. Let's say at present, let's say at this present situation, I mean currently there is an adverse okay war going on. Beyond that, there's nothing big happening here. Yeah, but once charindra chandrasena 18:56 once that settles, don't you think there's going to be downward pressure on inflation. Yeah, but then Speaker 1 19:02 yeah, but then again, that whole argument now they are talking about oil, no. Yeah. So that old argument, the whole argument, we I think had this chat about three weeks ago. Yeah. Right. If you look at the if you look at the how much of how much of money that has been released to the market, right? Because central bank from January they borrow a lot of they borrow a lot of currency foreign currency from the from the market, and what they do is you pay you pay the foreign currency. So they didn't mock up the liquidity, and that started to move the that started to move the currency. I mean the SLR started to depreciate and very heavily. So that is something which the central bank could have controlled. It was beyond their control. They had the tools to use it. They could have mopped it up. They could have put the interest rates up. That's normally that's what happens when you are facing a crisis. Generally, the interest rates go up because the risk factor is more. What is a crisis? I'm just saying this like just to make it very basic. When you have a when you are going through a crisis means. Your risk is going up, correct? I mean, can we both agree on that? So, if your risk goes up, how do you? If your risk goes up, that means your business risk also goes up. No, so it's basically if you do anything, any business, you do is at charindra chandrasena 20:13 a premium. Yeah, yeah, Speaker 1 20:13 right. So then, if your risk goes up, obviously your return also has to go up. No, so then on that theory, interest rates have to go up. People will argue against this. That's a different story. I'm just looking at a very layman's point of view. But also, also, there I want to so focus on charindra chandrasena 20:30 yes, the immediate. Speaker 1 20:30 Yeah. charindra chandrasena 20:31 But now going forward. Speaker 1 20:33 Yes. This is the charindra chandrasena 20:33 argument that the central bank might make. No, my Dhananath Fernando 20:36 view is Jari. Of course, when you have to also understand the optics and the context. So, as the governor, you really cannot say charindra chandrasena 20:42 we are not ready. We are not ready. Then all the marks are clear. Yeah, next day Dhananath Fernando 20:47 crash. But while while we have 7 billion reserves, the challenge is I think the in a way he is right because you need only like an incremental cash inflow, cash in sales dollar yield of about seven, 800,800,000,000, to 1 billion US dollars for the next few years, which can be done. But we need to understand how the system works, that even not even that additional 800 million or like the current trend can only be sustained as long as the dollars flows into the market because the game is you borrow from Peter to pay Paul, right? So it only this this this wheels churn only until the confidence factors are there. Even the remittances they remit money. Exporters bring their money to Sri Lanka. Tourists comes. Everything happens as long as this confidence factor is there. The moment when there's a slight slightest doubt about it, everybody just like freezes. That's exactly what happened on the 22nd of May. Not exactly, but you know the exporters were not reluctant to convert their dollars. So with that, the currency goes completely major depreciation. Then people are not bringing dollars to the market. Even the people who remit remittances, they were considering. Okay, maybe it will depreciate. I'll hold for like another two days. Maybe next week. Which is human nature. Which is human nature. So that's where we have to be cautious when it comes to while we are ready or while we have dollars in reserves. Again, we need to understand we are not paying debt by reserves. Reserves are not for that. What we are doing is paying it from the market. Like we, when the money comes in, we basically the treasury buy either they can buy it from the market, but what they are doing is you are buying it from the central bank, and the central bank buys back it from the market. So for imports, for debt payment, everything we have to have dollars, and the dollar flow has to be continued. And we are not paying it from because what what is happening? Because the moment that you then the reserves dropped after a certain threshold, then the credit rating is going to go down, and then again the same cycle. So that's where we have to be cautious, and in terms of preparing for uncertainty, that's those are the factors that we have to consider, mainly the geopolitics and climate. But I think geopolitics is a really an interesting one. I think we have to really invest money on this geopolitical game. I'm not sure how to even. I'm not an expert, but for for for a fact that the Ministry of Foreign Affairs has to take this very seriously and invest on this game where the where the you know power like the dynamics. Speaker 1 23:26 Power dynamics and the political balance. Because as you know, the Russia is Dhananath Fernando 23:29 also apparently not doing well. Yeah. So charindra chandrasena 23:31 that's so let me just lay the context for the for the last segment of this podcast. This context for what might happen in the future? I'll start with the big one, not Russia. Actually, the U.S. their national debt is at about 40 trillion. Speaker 1 23:52 Yeah, yeah, approximately trillion. Trillion. Yeah. charindra chandrasena 23:56 So just to lay that out for our audience also, a trillion is 1000 billion. and and a billion is 1000 millions. Correct, Speaker 1 24:05 and and recently, just to make it worse, Pentagon has asked for congressional approval for another 80 billion. charindra chandrasena 24:10 Yeah, so that Speaker 1 24:12 is you know Pentagon asked for the military. Exactly. So I mean, charindra chandrasena 24:14 so so that is there. So it's about 125% in terms of their GDP, right as a percentage of GDP, that debt is about 125% Their yields have been going up. Their bond Speaker 1 24:30 yields. Yeah. charindra chandrasena 24:31 If by any chance there is something that happens to the U.S. economy, may not be a crash, but if because the markets will get affected, and then it will trickle down to the entire rest of the world because this is the superpower, including China. Okay, China is not going to be immune, so China doesn't want the U.S. to crash. No, Sri Lanka will also not be immune to that, and the U.S. is our biggest buyer. Yeah, export. That is there. That may be a long-term thing, but in the next couple of years, we don't know what Trump will do. That is there. Then you have the Middle East. You have obviously Iran and the current situation where that will develop. You also have Israel, which is actually at the centre of all of these issues, and there's an election coming up, and Netanyahu, Bibi Netanyahu, probably Speaker 1 25:26 get charindra chandrasena 25:27 he he might win, might not win, depending on what will happen in the next few months. But here's the worrying part: people are blaming Netanyahu for all of this. The opposition is more hawkish, right? They are blaming Netanyahu for agreeing to this deal, right? For agreeing to stop. Speaker 1 25:45 Yeah. charindra chandrasena 25:46 Right. So there's a guy called Naftali Bennett. Yeah. There's another guy. I don't remember the name, but these guys are even more pro-war because their Israel's government, their political parties can't sustain themselves without war because they have to paint that they are always under threat and existential crisis. Everybody wants to kill us, and therefore we have to you know take the first step and defend ourselves. So what will happen in the because and also there's a conflict brewing between Israel and Turkey. Speaker 1 26:19 Yeah. charindra chandrasena 26:19 Right. So Turkey, whether that will develop, we don't know, right? So that that middle is then coming to Russia. Russia doesn't look like it's winning. Russia looks less like it's winning now than a few months ago because Europe has banded together and started supporting Ukraine aggressively with weapons also. So the weapons that attacked the Moscow recently were developed jointly by the UK and France. Speaker 1 26:45 Yeah. charindra chandrasena 26:46 So, and they're sophisticated, and Russia just doesn't have an answer. So, if Russia suffers, that could have trickle down effects as well. And how that will affect oil also, we don't know. The China factor is there. China's real estate crisis is coming back up again. They haven't found a crisis, a solution to what started with this Evergrande. It's called Evergrande crisis, right? So that's still going on. So there are so many, and of course, UK we don't really know what's happening because there's so much with Andy Burnham. How that will affect us, we don't know. Cat is Speaker 1 27:21 more popular than the primaries. There you go, right? charindra chandrasena 27:23 So with all of that, right? I feel like we need to think of this in a major way, and and and maybe that can be part of our foreign minister's mandate as well, right? Because I don't really see any sort of scientific analysis of this. Yeah, absolutely. Dhananath Fernando 27:41 This is going to be quite crucial. Even whatever happens, there is something is going to happen. So we have to be prepared because we really haven't analysed the risk factors and all that. I think some of the major companies probably are doing it. I know that they are looking at for like three months out of crisises and then like you know, what if if it extends for another three months, so on and so forth. So that's where it is at the at the at the moment. But I think we, as a country, we really haven't. I don't see we being basically discussing these major issues and how to be basically you know proactive or reactive Speaker 1 28:21 to it, Dhananath Fernando 28:22 and all our plans can, I mean, go completely south in grand scale if we are really if we are not ready to embrace or like do that risk mapping. In my view, that's where we have to be cautious. And this was completely unexpected. And there can be, I mean, when the global pandemic came, we really did not know like what a pandemic looks like, and now then like it's back and forth and back and forth. But charindra chandrasena 28:44 but there are pandemic I understand, but everything else, if you have a close eye on global developments, you can see the ripples of it. No, even even Russia attacking Ukraine, there was a build up, military build up. Same with the U.S. and Iran, there was a military build-up, so you can see certain things happening, and it's okay to be over prepared, right? Than being underprepared, correct. But Dhananath Fernando 29:08 also, it also made you understand the political risk. Now, the list example is Sri Lankan context, right? Now people are asking to bring the fuel prices down. At the same time, to remove the QR code. I mean, on politics also, while it is true, also you don't know what is the future of this, you know, deal. And the moment that you okay, let's say, bring the fuel prices down, whether you have the political capital to again raise it if something goes wrong. At the same time, if it's if it doesn't go wrong again, but you are liable saying that look, you have been just keeping the full prices up while the global prices are completely going up. We really don't know how to you know any decision is a wrong decision, and any decision is a right decision in that context. So it all it Speaker 1 29:45 all depends on the timing. So the the the global like what do you call instances or the issues that are currently are facing with one thing you have to see that the US also another reason I think the US wants to kind. Quickly wrap this up. They are in a bit of a catch-22. One reason is U.S. debt getting subscribed from outside is less now, which means the premiums are going to the yields are going to go up, which is a massive problem for the U.S. Treasury, right? So Trump has to quickly finish it off because U.S. companies itself subscribing only, or U.S. companies being made to subscribe, it's going to really put the rates up. So that's a huge problem for U.S. refinancing. charindra chandrasena 30:27 And if there's a federal reserve rate hike this year, as signalled, yeah, that's going to send the yeah so high. So the thing is Speaker 1 30:34 the the present the the the pre the the previous chair who was there, Trump had a huge problem with him because he said it's too because interest rates are too high. Jerome Powell. Jerome Powell was the new treasury secretary. I can't remember. Sorry, I can't remember his the Fed chair. Sorry, the Fed chair's name. I can't remember what's his name. But the thing is, he charindra chandrasena 30:53 is more in line. He is more Speaker 1 30:54 in line. But the thing is, if they keep the rates down, what's going to happen is U.S. debt getting subscribed, it's going to be difficult, right? If you put the rates up, then it'll it'll kind of fix the problem for the moment. That is one. Second is you spoke about China that China also doesn't want the U.S. to fail. Maybe not anymore. That's a bit of a dicey question. You know why? When China China has been preparing for this, right? China has diversified its exports so much. There is no single market. Of course, US is the biggest market, right? No question about it. If US market completely closes, okay, China will have a massive problem where some factories will go under and all that. But the thing is, it's not going to be a death blow. Where it was, charindra chandrasena 31:39 I'll tell you why I said that, yeah, and and why I will still stand by it. It is only because China currently in its current state is not going to replace the U.S. No, it's not because people think it's because of the size of the economy and all of that. Yes, those factors are there. Size of military. Yes, those factors are there, but it's mainly because China's success has been built on supply, Speaker 1 32:04 yeah, charindra chandrasena 32:05 on on being the factory of the world, Speaker 1 32:09 yeah. charindra chandrasena 32:10 America is the buyer, Speaker 1 32:12 is the charindra chandrasena 32:12 consumer, Speaker 1 32:13 yeah. charindra chandrasena 32:13 So if you have to choose between two, yeah, you usually would say the customer is always right, kind of vibe, right? So you would any countries that are stuck in the middle are likely to go to the U.S. simply because their products are being bought by the norms. So Speaker 1 32:32 I'm I'm talking about two extreme conditions. Like if the U.S. company stops buying Chinese goods, you're going to have massive inflation in the U.S. because China produces by, for example, the only reason Americans are buying stuff from the Chinese are not because they like the Chinese, right? They have openly stated they don't like the Chinese, but Chinese stuff is cheap, right? That's that's the reason. And we saw an charindra chandrasena 32:51 example of that with the tariffs that were exactly right. Interesting starts going up. Yeah, exactly. Speaker 1 32:55 So the thing is that that's certain. On the other side is in China is the factories won't run, but China has been preparing for this. Yeah, America. See, of course. Yeah, China has been preparing. You know, for example, you know, currently here the best-selling cars in Sri Lanka now is collectively is Chinese. I mean, okay, Toyota and maybe Nissan, few Japanese ones are fighting for it, but it's mostly Chinese now because everybody is buying a lot of electric cars and all that. So the popular brands are there, and everyone, everyone is buying it. So all of them come from China. So they have kind of diversified where they supply to, right? So that's what I'm saying. So China, I think, doesn't want to be dependent by dependent with America for the next maybe. They have China doesn't definitely has a pen. Maybe next five to 10 years, they don't want America to be their main export market. They want the world to be their main export market because you diversify your own risks. Then, second option is China is one of the countries that used to buy a lot of American debt. So how the whole trade happened was China sells goods through US, US pays China, and China puts some money back in the US by buying subscribe to American debt, right? China, Japan, a lot of countries are there, right? Germany, all that, right? So the thing is, currently, if the big countries that are the big economies don't subscribe to American debt, American American rates are going to go up. American is a country that runs on debt, right? America has a massive auto debt, massive. It has a trillion dollar credit card debt. It has a multi-trillion-dollar housing debt. So all those debt runs on interest rate, and keeping interest rate is where you make it more possible for people. I mean, it's common sense. No, the lower the rate is, it's easier for you to pay. So suddenly, if there's a big spike comes, don't don't the same thing what China had with that. What do you call that company? Green, the property company, Evergrande. Right, same thing can happen in the U.S. Just imagine American banks, people are people are defaulting. If people start defaulting, charindra chandrasena 34:47 2007 eight financial crisis was profitability. No, no, Speaker 1 34:50 because that's the thing. Because you are talking about government debt of 30 trillion. What about the private debt in the U.S. Because private, you have corporate debt and you have personal debt. That is credit cards, auto loans, housing loans, which run to trillions and trillions and all. I mean, I still haven't gone through the data. I mean, that is something we really need to look into, right? So, so this is not something where you know America has the whole memory. America, like if you go 30 years ago, America had all the cards. Now America is one by one. You know, America is playing poker, losing cards one by one every year, right? And that is carrying the Americans more than anything because the biggest thing they are going to lose is the petrodollar. You lose the petrodollar, then you end up becoming the world global currency, right? That's a reserve currency, and every reserve currency in the world have failed because of a war, and America keeps on fighting. That's why America is really scared to get into into a war, or even in Iran, even not getting into active combat. Where without boots on the ground, they were saying. By the way, I'm trying to be corrected. They're saying that the War Department or something has cut. They were saying basically that they have to spend $2 billion a day just to bail something like that. charindra chandrasena 36:00 Yeah, yeah, yeah. Speaker 1 36:01 Right. So just say this goes for 24 months. It's another trillion dollars that's going to come in. I mean, because it's not only the $2 billion a day, right? Because if you are going to put boots on the ground and really fight it out, it's going to be, it's going to get charindra chandrasena 36:13 yeah yeah Speaker 1 36:14 345, x it will go up. charindra chandrasena 36:15 Absolutely, yeah. So that's the interesting thing. But to to wind up now, Dana, Sri Lanka to be resilient. If you had to prescribe three things, this is not to fix the economy or anything like that. I'm simply talking about economic and overall resilience because it is the economy at the end of the day. For resilience specifically, what are the top three things that you would describe? Dhananath Fernando 36:44 Increase investment on these data and information systems on climate-related issues and geopolitical issues. We really need to have the investment. Second is strengthen the Assasuma programme because in in the part of the resilience, anyway, with the shock, there will be part of the community that will go. Who are the most vulnerable will go pretty much having a hard time. So invest on the Astra Suma. That's the second thing in terms of the buffer and the safety net. The third one is quite strategic. That is to pick your pick your sides or pick your sides in the sense on the geopolitical context. See where we fit in to get the support with the dynamism that comes in. charindra chandrasena 37:35 But we have we have long held a neutral start. Yeah, Dhananath Fernando 37:37 correct, correct. charindra chandrasena 37:38 So Dhananath Fernando 37:38 exactly, I'm not saying to take a side, but see where we stand now because things have moved from our neutral stance quite drastically at the moment. So see what is the trade relationships and things that we need to align for for to be resilient for a challenge. For an example, when things went wrong, India supported. For example, right? Japan has been there for our support, but like, what can be done in a time of crisis? In you know, in these type of times, where we should have our network where we can absorb resources. I think I charindra chandrasena 38:13 think our foreign policy cannot cannot begin without India. No, we have to. It has to hit Dhananath Fernando 38:18 India. charindra chandrasena 38:20 One more thing, in terms of our reserves, what is the ideal import cover that we should have? How many months? January says Speaker 1 38:33 three months. Dhananath Fernando 38:33 Yeah, three months. But I think it's six months of prices. It's about six to nine months. charindra chandrasena 38:37 Yeah, six to nine months is better, no? Yeah. Because I mean, we have had three months. No, so normally you Speaker 1 38:43 you have two types of covers. I mean, economic. That's how they define it. Normally, you have the general cover. General cover means you can import as life it is. That means we are not going to sacrifice, stop anything. Then the other cover is basically you only bring the essentials, right? That is for bare survival. Like let's say things like food, medicine, oil. That's about it. So it depends on how you maintain that cover. And the other one that I want to say is, unlike other countries, for example, let's say Singapore and all that, where everything is imported, Sri Lanka has relatively decent agriculture production, right? But one thing, our wastage is very high, right? We have we are surrounded by ocean and we import fish, right? And one major reason for that is, and we have so much of vegetables produced, and what happens is about 50, about 45% gets wasted on transportation, and so on and so forth. So one thing I think we really need the government needs to take the lead, and then the private sector will follow because certain industries the government has to take the lead, then the private sector follows. Is you need to really invest into what you call food storage, right? For example, if you go to foreign countries, let's say the USO, Europe, or you know UK and all that, off-season goods are available because everything is frozen. So in those countries, you know things like frozen vegetables, frozen. Fruits, it's a thing. Like you know, then there's a huge canning industry, right? So anything that is produced goes into the goes into a shelf, where it can be used even after couple of years, even because that's how. But charindra chandrasena 40:13 but food is perishable, you know. Speaker 1 40:15 No, so that's I'm saying how you how you increase the longevity of food is you need to increase storage. Yeah. So storage is either you do cold rooms or either you do canning, charindra chandrasena 40:23 right? The Shillar have, Speaker 1 40:25 we don't have storage. For example, for for example, you go to most of the other countries. Vegetables are very cheap throughout the year, even during peak season, during season and off season, is because you have cold storage. That is, you know, it's called frozen vegetables, frozen frozen fruit, right? So they they pack it and all that. It's available for you. I think we also need to look at options like that, where the certain vegetable where you know it's it's you have abundance during the season. The excess should go into some kind of a storage, right? Where later on it can be used. Yes, charindra chandrasena 40:56 actually now with talk about talk of El Nino coming in, yeah, most likely impact on Sri Lanka will be a drought. No, Speaker 1 41:03 yeah, charindra chandrasena 41:04 or it will be floods, but most likely a drought. If it is a drought, yeah, charindra chandrasena 41:08 then our one of our harvesting seasons is going for a six. Yeah, right. Speaker 1 41:12 Exactly. So charindra chandrasena 41:13 then it could be a food supply shortage as well. Speaker 1 41:17 No, I mean that's the thing. I mean, if you go to any other country, I mean, frozen vegetables is one. Then the other thing is things like tomatoes and all they all canned. I mean that's what they say. No, I mean you look at go to you watch a pizza making video, right? Of some chef, what does he take? He didn't take he doesn't take tomatoes and crush it and you know do all that. He takes from the can, right? And that's how it's done because those countries the preservation because you know, I'll tell you a reason for that. Sri Lanka traditionally doesn't have that problem because we don't have per se seasons. We have a wet season, a dry season, right? But technically, in those both season, you can still grow. charindra chandrasena 41:50 It's not in the culture. It's not in the Speaker 1 41:51 culture. So in those countries, they have four seasons. In winter, you can't grow anything. So you have to survive for winter, right? So for survival of winter, if you go back a couple of 100 years, what they do is they used to, for example, if there is meat and all that, let's say pork and all that, what they do is they smoke it. They smoke it during before winter, and that's what they eat, right? Then you know they do pickling. Now, for example, you know pickling and things like that, pickled vegetables and all Speaker 2 42:17 that. Speaker 1 42:17 In Russia and all that, they do. It's a big thing in Russia because the reason is then the pickled vegetables are actually used for the winter eating. Now, of course, a lot of people are saying those are superfoods. When you pickle it, you know it's good for your bio, it's good for your stomach and all that. That's a different thing. But the real reason is those are survival foods. Yeah. Right. Same thing. Same thing with Korean, for example, the kimchi. charindra chandrasena 42:36 Yeah. Yeah. No. Very good point. I think that and if I may add fuel to that, Speaker 1 42:43 yeah, charindra chandrasena 42:44 fuel also storage issue we have. Yeah, if we can fix those two storage issues, we Speaker 1 42:49 have the tanks. We are just not using exactly. Yeah, yeah. So charindra chandrasena 42:52 I think recently the government has instructed our laid out a plan to start utilising those Speaker 1 42:57 exactly. charindra chandrasena 42:58 But I mean, I wonder if it's too late now because now we are. But never too late. No, yeah, never too late. Dana, do you have any closing thoughts? Dhananath Fernando 43:08 The only closing thought is just subscribers. I was going through the comments very honestly on our social media platforms, and some I have realised based on the algorithm, some for some content that we produce, like one side is completely blaming us, and for some, like the other side is blaming. At the same time, for some content, there's another side who is praising us, and for some content, completely opposite side is praising us. So that shows that how independent we are and how we present of our story with facts and figures, sometimes by getting the blame from both sides, and sometimes by getting the praise from both sides, and that is a good indication the the good and the solid work that we do, and that's why you need to go and become an Advocata insider. Even it's a small amount like 12,000 rupees, it's very important for us to run a space like this without any interruptions, and where we are given the space to speak our minds and to see things how as it is, and to importantly drive the policy narrative of Sri Lanka, because we all know it's a policy problem, and we are trying to fix it. It's I know it's a mammoth challenge, but you can contribute in a small way. It's not a small way actually; it's a big way by 12,000 rupees a year, 1000 rupees a month, and become an advocacy. It's a it's a commitment for reforms, but it's more than a commitment. You also get some incentives because we all speaks about incentives. You get analysis of of currency, of stock market, of property market, so on and so forth. But more than anything, it's a commitment and a contribution for policy reforms, and that's where we need to stand for. So go and become an Advocata insider, and help the good work that we do. Speaker 1 44:54 Yeah. Just one more thing I want to add because we just transfer on that whole Russia list. Yeah. Right. So. One for the last 2000 odd years, from I'm going through specifically with the Christian calendar, right? Until 2026 or 2025, war was defined by offensive weaponry because it's something we needed to speak about. It was about offensive weaponry. All these country companies that are there, Atheyan, all these Raytheon, United Defence, you know, Boeing, all the they are offensive weaponry. Since the birth of drone warfare, and especially in the last maybe 18 months, now the real challenge is actually defensive weaponry. So if you look at how warfare has changed from offensive, now it has become defensive, right? It's a major shift, right? And whoever who actually develops the defensive weaponry is basically is going to be the dominant hand, charindra chandrasena 45:49 right? Interesting. So interesting times ahead, and we'll we'll we'll obviously be on hand to discuss this in the coming weeks and months. So thanks, Aryad. Thanks, Dana. Thank you. Good to have the old team back, and thank you everybody for tuning in. And we will see you next week. But in the meantime, further to what Danaat said, let us know your thoughts, and if you have any issues that we you would like us to hear a hear covering, let us know and we'll we'll we'll consider them in the next few episodes. So thank you and take care. Transcribed by https://otter.ai