charindra chandrasena  00:04
Hi there. Hi Jari. Hi Riyadh.

Speaker 1  00:07
Hi Shari. I'm back again.

charindra chandrasena  00:09
Back again. Yes, you are back again. Which which brings us back to the topic we discussed last time. Last time was just. There is nothing nothing else that we can discuss, but have you been following what the government has been doing and kind of the relief efforts, the the sort of decisions that they've been taking? Yeah,

Dhananath Fernando  00:36
yeah,

Speaker 1  00:37
yeah. So yeah,

Dhananath Fernando  00:39
so I think the relief measures there's quite a lot that has been announced, like 5 million for a completely damaged house, and up to 2.5 million for a partial damaged house, and another 200,000, I think, for I really cannot recall like per hectare. So there's a quite a extensive list of relief, and there are

Speaker 1  01:02
moratoriums also. Yeah, there's moratoriums, and plus there is rental loss. You know, for example, people who are in camps, if they want to move into a rental house, I think, I think the government said they'll be pay. I'm not exactly sure about the number. It's either 25,000 or 50,000. Yeah. So they said they'll pay yeah for three months, and plus for three months they'll pay a loss of income of 50,000 a month.

Dhananath Fernando  01:23
Correct.

Speaker 1  01:23
So, and this is all possible because the reason is the the savings what they had, like almost a trillion and almost a trillion rupees. Yeah,

Dhananath Fernando  01:30
25,000 to like you know to basically get whatever the household equipment or whatever that you require because everything has been washed away. So I think all that is, I mean, good, good in the sense because you need some level of assistance, and the we had an advantage because as we had said, we had a good revenue collection for the first 11 months, and also I think it is coming as a cash transfer, which is the right way because if the government is going to buy everything and give it hand it over to people, I think that's not yeah. It's very

Speaker 1  02:06
yeah exactly buying and giving is very inefficient. So besties like you

Dhananath Fernando  02:09
disburse money as soon as possible through the district secretariats. They can identify. We have to be also cautious. Sorry, generally when you have such, I'm not saying it's a generous one, but when you have fairly earlier, you had like 2500, 5000 some relief, which doesn't. I mean, which is not neither here nor there. No one can do anything. But when you have also such massive bus, there can also be people, you know, those who are not really deserving will also try to enter the system. Yeah, we have to be little. Yeah, one

charindra chandrasena  02:40
example is the to clean the houses because that cleaning is a is sort of a deep cleaning. Yeah, absolutely. So 25,000 has been you know promised to each household, and that's a big amount by Sri Lankan standards and by previous disaster standards. Yeah. So, to your point, is there room for abuse as well?

Dhananath Fernando  03:06
There is room, but is anybody

charindra chandrasena  03:08
going to go and actually inspect the house and see whether? Yeah.

Dhananath Fernando  03:11
Very unlikely. We have the state has the capacity to do that because we are talking about like hundreds. Probably like how many houses? 1000s of houses. Houses. And this. same machinery has to pretty much do the rest of the disbursements as well. And also, it depends on like what is the flood level. It's like I we saw like in Gump and all areas like there's like you know feets and feets of like you know sediments or mud that has been yeah and even cleaning is cannot even think like how to clean because your road and everything has also been like covered entirely with mud. So even to clean, where are you going to?

Speaker 1  03:49
And and the other thing is that that particular mud when it when it comes into the house, what happens afterward? It starts to basically harden and it turns into like concrete. Yeah. So I mean, after that's why they were saying, you know, we quickly need to get this mud out, right? So the thing is, after it turns into concrete, I mean, really hardens and becomes really, I mean, so after that, you need to bring like industrial machinery to break stuff, you know, you know. So the thing is like, you know, pile drivers and stuff like that, which will destroy the house also.

charindra chandrasena  04:18
Yeah.

Speaker 1  04:19
So that's another deep-seated issue. But the thing is, the houses that got flooded and all that. I think the cleaning is very straightforward. Only thing is, you know, you need to clean it. You need to clean it multiple times, and then of course you have issues.

charindra chandrasena  04:32
No, but flooding also is muddy flood. No,

Speaker 1  04:35
no. The thing is, some is some are muddy. Now, for example, like over the weekend, I was with a couple of friends. We went to kind of give some aid stuff because they needed transport. So some of the pickups went, and one thing what we saw was there the mud wasn't there, very visible in Angwell, and in that line it was just basically the canyon had overflowed, and the water had come through. But of course, the the the the height of the water was very high because the people in that area they you they are used to floods. I mean, it happens a seasonal thing with the with the with small cyclones and the monsoon and all that. Normally, the water kind of you know spills out, but this time they said it was completely unprecedented. And they said in some places the water was up to about almost 25 feet, which was absolutely scary. So places like that, cleaning is relatively easy. You just have to kind of open it up and write off, and then you get fungus that comes. So that is where you need to put the chemicals and get rid of that. And yeah, and later on in life you'll be getting lot of electrical issues because when the wire starts, you know, it starts to oxide. So those are the issues people will face on that area. But in candy and you know in Mavanalla and Gampalo and all that. It's a completely different game because it was just thick mud. Because it was part of a landslide that came down. It was thick mud, and when the mud starts to harden, it's a massive operation to to basically remove and clean. So different areas, different problems. Different

charindra chandrasena  05:56
problems, yeah. But generally, about this week of you know relief measures that we have seen, because the last show when we did last Tuesday, we were still basically trying to get our bearings, find our bearings, like what on earth is happening. In that week since then, I feel like there has been a better coordinated response, more far sort of more long-term thinking. Yeah,

charindra chandrasena  06:29
just and and and maybe a more empathetic view towards the people's problems. But on that empathy thing, is it now? I saw the president was going around, you know, meeting, having a lot of meetings in different districts, and at certain points he was saying, "Dilaland, Dilaland, don't make it such an issue. Just give it. These people have already suffered enough. Do you think that kind of thing is

Speaker 1  07:05
the micromanagement that's currently going on? That's

charindra chandrasena  07:07
micromanagement, but more than micromanagement. I'm saying, is it almost too empathetic from a president to just say, just give it, just give it? You know, because because at the end of the day, isn't it people lower than him that should be deciding what is feasible, what can be given, what can't be given?

Dhananath Fernando  07:30
So I think it boils down to Shari the capacity show because I think you know president must also be under tremendous pressure because he is also the minister of finance from the back of the envelope calculation, it seems like more than 200 billion, or probably 300 billion, that we are spending extra, as per the government numbers that they have released. So he he being the finance minister, and also seeing it first stand, also with a political sort of sense, he must be saying that the ladana di ladan but definitely I think it must be with some proper evaluation and like you know but the challenge is when you bring that layer you are slowing down the process but this is not a time that you can

Speaker 1  08:14
yeah

Dhananath Fernando  08:15
I mean excessively slow down the process or like you cannot you know take too long to respond because people are really suffering. Time is also has a massive thing because by delaying it, just you maybe save something, but the the real economic cost would be much higher because then that person will be in a separate camp and the economic activity is lost and then they cannot. But at the same time, it opens up, so it's had to strike a balance. So my sense is that's why he may have said not worth the time of a president even to discuss this. You just give it away. Overall, basically he's

charindra chandrasena  08:49
saying don't get caught in the

Speaker 1  08:51
weeds

charindra chandrasena  08:52
because these people are suffering. You can't ask them to fill. So there was one example where there were two forms to be filled, and then he said, "No, no, just just do it in one form. So like that, I'm just wondering whether and and Shari,

Speaker 1  09:07
because another thing is, I think up to now, probably the full extent of the damage. I'm talking about the human casualties and you know public infrastructure. I think they would have figured out private infrastructure, like for example, things like housing and all that, because I know for a fact that in some places now only communication is getting established, because the mobile networks are down to various reasons. Some were completely washed away, some had collapsed, some ran out of diesel. All kind of these things happened. So little by little, it's getting established, right? Even still, even now, what they say is communication is a little bit patchy, right? Yeah. Because you have burst of signals that come, they drop. So one of the issues

charindra chandrasena  09:47
that was discussed was not signals; it was electricity. Yeah. And why it's taking so long? Yeah. Then the CB and related officials were saying that some of these areas we can't reach.

Speaker 1  09:58
Yeah. Exactly. Provide

charindra chandrasena  10:00
to restore electricity supply. Yeah. So I think there are there are some issues on the ground, but generally about the president of the country, the first citizen, going and having these meetings, guys, with a large group of people, but at a very low level. What are your thoughts on that? And that comes back to what you said, micromanaging.

Speaker 1  10:24
Yeah,

charindra chandrasena  10:26
should the president of the country be doing that, or should it be at a lower level, a ministerial level,

Dhananath Fernando  10:31
at least? My view is, Charlie, it's on the PR point of view, and to give that signalling, I don't have a lot of. I mean, I think what he's doing is right because that shows, you know, you are, and also you get probably get like a first-hand experience on what they are going through. So I think you have to be empathetic, and this has been done by every president, even if you're probably in different scales. Even when the 2016 floods happen, I think it was a helicopter thing that you people go and check, and even if you recall, even after the economic crisis, the then President Ranil Bikramma Singh he like came down, like getting down from his vehicle, and then he sort of saluted the tri forces and all that, which has never been done on like you know protecting the parliament and all that, so I think it's more politics, also to give that signalling that I care about it, which is also needed, like at a you know sentiment wise. Like look at the mood of the nation now.

Speaker 2  11:30
Yeah,

Dhananath Fernando  11:31
they they have a feeling. President and the finance minister has sort of a first hand experience on this thing. Is like at least that's my mood. Like I have seen because I also got the information from that conversation, which was showed on public television, on like how President engages in the conversation with CPTCO and electricity board, vegetable farmers, and whoever who not. So I think no,

charindra chandrasena  11:57
but but that's also my point, Dana. That why is it always him? Correct. You know, why is it not the person you know below him or the people below him, that ministerial level, or even the heads of authority level? Why is it always AKD for everything?

Speaker 1  12:16
So okay. So this may be another reason, right? I'm just playing the devil's advocate here, but the thing is, you need to get people who can do it also. No, so there might be a problem with capacity issues also. Now, if you take what they say, the best cabinet of the country was that what they say, right? Is that the 78 cabinet of Jar Jar, where you had the people of Ghamini, Lalit, you know, who was a finance minister who passed away recently? Ronnie Dimel, right? The people of that capacity were there, right? So currently, I don't know if there's an issue like that also. So then you have to bet on your own, right? So normally, if you take a winning team, if you take a if you take a winning team, for example, if you take the 96 World Cup team, we had Sanat, we had you know Murali and all. I'm just bringing a technology into this. So that was a winning team. All of them could contribute something. But then again, if you just have a Sanath team, that doesn't mean you want to win a match. No. So I think there might be shown capacity also because one thing you don't understand is this cabinet is very inexperienced, right? And there are only three people in the cabinet who have actually were in the was in the last parliament also, including the president. So I think there might be an issue like that also where everyone is trying to get grasp of how things work because one thing is the government mechanism also works. The government mechanism and the government how to say the nature of the beast is different. So probably sometimes due to the lack of experience, I think president must be thinking that he has to be at the helm. I think that also might be a reason.

Dhananath Fernando  13:49
Definitely, I also think it's too micromanaging because you know whether these bowser went to this particular feeding station and you know whether the that road is accessible. I mean, at one

charindra chandrasena  14:00
point, he had to get his assistant to call five or six final year students of a university and ask if you know they were willing to undertake something because that had not been done properly or whatever. And I'm thinking, my God!

Dhananath Fernando  14:19
Yeah, definitely. That's too much of micromanagement for for sure. But I mean, on a PR point of view, that also gives like you know, it gives it gives a it gives a positive. This is

charindra chandrasena  14:29
not a problem, guys. I'm I'm just thinking out loud. How long can you do this? No, because there's a burnout risk, and and there are honestly, I mean, obviously now he'll have to focus on this entirely. But in the long run, there are bigger fish to fry for a president. Yeah, absolutely. So if he has to continue doing this, because he was doing this before the disaster as well, it was at night. No, no,

Speaker 1  14:53
that's the thing. In a way, it's a good thing. I mean, I'm not saying that crisis is a good thing, but in in a in a. Way you know the president all the realises know how inefficient the government is and the whole government mechanism, you know. So they every government that comes here, but they say I'm going to put the energy in single. Abhiraj say shaktimatkarno. Now the thing is, but they have been running just stuffing people, stuffing people, stuffing people who are who who are incapable. So this is like a good eye opener also for the president because they are. I mean, this government is very gung ho on on state services, no. So then they or he also gets a idea how the state works, and because when you go and have a crisis, only you really know how what are the people who can you know. For example, the private sector collection and also the private sector is also part of the and ordinary Sri Lankan citizens are also part of the recovery. You know, sometimes probably they would have collected and given more than what the state would have done. Not to know, because you know, because you get a lot of people you know who are collecting in various capacities. I mean

charindra chandrasena  15:54
that's one thing you can't fault the people of Sri Lanka exactly their generosity exactly and the the way they spring to action exactly has not changed since the tsunami. So that's

Speaker 1  16:04
the thing. So the thing is again, if the government is my, if someone asks me, what I would say is for the government also, if you are doing a disaster management plan in the future, right? The state simply won't cut it. You need to figure out a way how you get the private sector, the citizens also who normally come and help. You can have a registry and all that where you can call them and come now. For example, I have had friends which I was a part of it where these four wheel drive clubs and all that. They have been loading up their pickups, their jeeps and all that. They are going to places, all the places where it's very difficult to access. Now where lorry can't go, where you need a proper four wheel drive with the equipment, with the upgrades and other things like snorkels, winches, and all that to go. Now, they are also part of a they are also part of a recovery system, which is not. I wouldn't use the word regulated, which is not. It's not a how do you word this? Okay, they are also part of a part of a recovery system or helping system, which is not coordinated. It all it's all done ad hocly. So the scenario is in future for them also to be. So you mean

charindra chandrasena  17:12
a centralised citizen?

Speaker 1  17:15
No, get collective. No, so that's what you. So for example, that's what you do with the national guard also. No, no, national guard is generally citizens who have been trained for who have been trained in military activities, who are who are ordinary citizens being working in the private sector or whatever they are just doing ordinary.

charindra chandrasena  17:30
They are convened. They are convened

Speaker 1  17:32
exactly. They are convened for. They are convened for the. For example, they are convened when there is a crisis. Yeah. Right. They are convened

charindra chandrasena  17:39
by the government.

Speaker 1  17:40
Convened by the government. So that is one option about the national government. So we have something called the reserve, but in the U.S. it goes the national government because every province it's under the governor, right? So it's it's a different setup because because US is a federal state. Yeah, but

charindra chandrasena  17:52
but but my point is about the private sector initiatives. Yeah, it is not centralised like that. No, it's

Speaker 1  18:00
not centralised. So that's the thing. So is

charindra chandrasena  18:01
your proposal to centralise it?

Speaker 1  18:03
That's right. No, but I think doesn't have to be centralised. Like for example, you get every GS division, or you get you get the municipality, no, of the main city. Get them involved because you get these little clusters who are there. I'm not saying exactly how to do it, but I'm saying but you need to figure out a way how to do it. Yeah. Right.

Dhananath Fernando  18:18
My point is on on the micromanaging, Chari, we had to look at the cost of what we have, what the president has to give away on micromanaging. I think ideally, my view is he could have, in a way, micromanage if he really wants to on the policy changes. Now, it was very effective that the decisions we made, like how much that we have to allocate for a damaged house and all that because that's in a way moving the economy and you are speeding up the recovery. Ideally, this should also you know not allowing this crisis to go waste. The other reforms, there's massive reforms that is required to also overcome this crisis. I think that focus

Speaker 1  18:57
is

Dhananath Fernando  18:58
what I feel missing by going to that level of micromanagement, ideally you have to look at the land thing, move the digitization part of it because what we all see is in a way lack of so that also make it because now the the good thing is there's another 90 day window. We spoke about no like there's only 100 days for any government to basically do the hard reforms, and now with this crisis, there's another probably 100 150 years. Yeah, I

charindra chandrasena  19:23
was wondering why you said 90. Yeah, no, I mean basically it's the three months because people will be evocating things. So

Dhananath Fernando  19:29
now it's like because now I mean no railway will go for strike anyway. The railway network is pretty much unoperative. So so this is the time that you really go hard on the difficult reforms, because anyway you have provided a lot of relief for people to, you know, come back, and this is the time that already what was you know in the pipeline. You just get it going to speed up the recovery. No, I

charindra chandrasena  19:53
think that on the reform side, I'm going to talk about different kind of reforms. In that now he has promised that he will. Will not allow any further buildings or construction in areas which are not meant for construction, and I think that could be a real turning point.

Speaker 2  20:13
Yeah,

charindra chandrasena  20:13
economically also, people don't focus on the economic value of. You're referring to the

Speaker 1  20:18
5000 ceiling,

Dhananath Fernando  20:19
5000 feet ceiling. The feet ceiling. Now, for

Speaker 1  20:22
example, now that's what I'm saying. That is also not very clear because the reason is now if you take Nurulia, Nurul is over 6000. So how does that work? You get what I mean. So the thing is, so but so it's no. So most of the flooding has happened between I think 2003 1000. It's not even the 5000. The problem is lot of the places where the water has come, you need to figure out now there are waterways and all that. People go and block it and they build a house or they build they build a building. Who gave the approval for it? No, but that's

charindra chandrasena  20:51
that's the point, right?

Speaker 1  20:52
So you can't blanketly go and this thing no chari. Okay. You can't do it like that. You can't just go and tell above 5000. I'm not going to allow. Okay. Economists don't run like that. No. But but you need to do a geo survey and figure out these are the places that are at high risk. Those areas have to be excluded, irrespective of their height.

charindra chandrasena  21:09
Fair enough, but I'm saying at the moment also, aren't there zones that are demarcated as high risk, right? And the construction has already happened. Yeah, so that's something. How has

Speaker 1  21:20
that happened? Because now those houses have electricity and water, correct? Yeah. To get electricity and water, right? You need to get an address. Who refuses to address the municipality, right? How has that happened? Now these are the things that.

Dhananath Fernando  21:34
Yeah. So that's why on a mark, no, 100% I agree because regardless, it has to be calculated based on the risk. And even if you go to let's not go to 5000. Even if you go near next, I mean, there was an incident no in Anguilla that a train passenger died by knocking into a roof which was adjacent to the railway track. So ideally, how can they get electricity and water? Of course, there has to be some informal way of getting the address and all that. So agree with like we should, President. I mean, what he said was we should not allow anything. I mean, what do you call hazardous construction has to be pretty much avoided. But you have to look at how are we going to do it. That to do it, that's my point. That's where you have to bring that big reform. That is, you have to map the land. There's no other way that you can actually avoid that. You have to map it on a satellite with the limited knowledge that I have, and there has to be a land titling to begin with. And on a satellite manner, you should be able to evaluate the risk factor. Of course, someone can go and inspect like a physical inspection, but on a more macro level, you should be able. So that reform needs to move now. And

charindra chandrasena  22:47
if that is serious, are you saying isn't the preliminary step to stop construction happening in these areas just? I mean, by basically circumventing the regulation. So the thing is, so that has

Speaker 1  23:02
what that is what has happened. No, correct. It's like this, Char. You know, President just went on a banker number or just random number. I don't know how many. Yeah, no, let's not go there. Let's not. Let's not get on the 5000 feet, right? Normally, when you do a geo survey, right? There are very specific satellites that do geo surveys, right? So those particular satellites, they can send high-res images in various formats, like infrared, I don't know, whatever ultrasonic, whatever. So on that, you can figure out now. For I mean, I have a, I kind of know someone who is into this thing, and what he said does already the surveying this thing is done because they already have the. So if the government utilises very specific ones, they can exactly tell these are the places of low risk, these are the places of medium risk, these are the places of high risk. High risk, absolutely no future construction. Medium risk can be done with modification. For example, you can make houses with if it's only no landslides, only floods, you can make houses with that sit on stilts. That's one option. Low risk houses, you can go on with your normal life. So I think you need to get that categorization thing needs to be done, and it has to be done with actually with technology and science in Sri Lanka. Nothing gets done in technology and science. Some guy just goes there randomly, says, "All right, come on. And lot of the flooding also has happened because we have been filling marshy lands. They are they are the natural what you call waterways or rain pools where the water in the area gets collected. So when you start filling them up, so these are these illegal construction and all that. A classical case is what you call water sage, right? After water sage was built, the surrounding houses got flooded. You get what I mean. So on a move,

Dhananath Fernando  24:43
yeah, on a move. Now, what I think what he said was already the houses that got damaged. You really cannot go there and again rebuild there because you're already at the risk.

Speaker 1  24:54
You're

Dhananath Fernando  24:55
relocate them. I think that's a welcome move because it's obvious that you cannot let them go there and even. Partly damaged one, and if you really know now, these areas are prone for open for floods and landslides. Definitely, you have to move. But the challenge is, we also can't say no. Till we do the entire satellite mapping, you stay in a camp or somewhere. I mean, things have to move. So definitely, they have to be relocated to some identified like you know area, but I think that's where the and

charindra chandrasena  25:23
also they are trying to make it as close to the other house as possible. Correct. At least they have that environment or yeah, because some of you know you

Speaker 1  25:32
need to do that because some of their livelihoods are in general area. So you can't tell them to move 50 kilometres and tell them to come. Exactly. Yeah. So exactly. So

Dhananath Fernando  25:39
so, but I think what you what we should not forget is there are some macro reforms needed. I think because most of the time we will forget that we will try to rebuild as to the same level. You rebuild the houses, you repair the roads, and you repair the bridges and all that, and you try to bring it to stability. And probably this government's term will fully has to be their their job would be to rebuild to where it was before, and there will be some level of other shocks coming in the next few years. We really do not know. We hope there will be not, but in that we should not forget the macro picture because that is what is moving millions of people. That rebuilding a road, a bridge will move 1000s of people, maybe hundreds of people. But that macro change will move millions of people, even for a future shock that can come on our way. What

charindra chandrasena  26:35
is what is the macro change you're talking about?

Dhananath Fernando  26:37
So definitely, the land mapping has to be done, and a risk analysis has to be done. So what we discussed already last time, ideal way could have been also bringing that risk premium into the formula. Because for an example, you think that that now the challenge has been how these licences or like permits being given to build these houses. Probably it is some illegal way, right? But imagine if you everyone has to take an. I'm not saying to mandate insurance for every construction, but imagine if you have to take an insurance. So then that I mean, if it's mandated to have an insurance for your housing plan and where you are going to build it, definitely that risk premium is going to get captured because no insurance company will come and give you even at a bribe because you know if something happens, you have to pay a massive claim, right? So even if someone wants to build it, like let's say 5000 above, they know the risk. So automatically you are basically discouraged. Discouraged

charindra chandrasena  27:38
from your discouragement.

Dhananath Fernando  27:39
Even if someone really wants to build it, they will get the full measures to make sure that even if something happens, same with tsunami. Now, ideally, all the hotels at a beachfront should have evacuation for a you know tsunami threat. So, if that happens, then you are discouraged. But it is a I mean, it's a faster. I mean, it's too soon to do it right now, but that's the overall way that we need to think about it. For an example, if you are renting it out a vehicle now, every vehicle is mandated to have an insurance, right? If you are moving passengers, exactly, you have to insure for passengers, and that has been mandated. Everyone is adhering to that, right? So that way you can move millions of people. Imagine, like without insurance, like what could have been a disaster that on the roadside accidents that we could have. You know, now at least. So I think that's the way that we need to think. One is on land. Second one, definitely on the social safety net and digitization, because this is a problematic thing on the digitization, and the third one definitely on the food and construction because that is required to rebuild the country. And don't forget, it's I mean now the government cannot increase the income of the people because everyone is like constrained with lot of other issues. What they can do is it is equivalent to bring the cost of living down. It's same as increasing your income, but they can now bring the cost of cost of living down by making the food affordable, making the construction affordable. That's a big relief for people because otherwise, out of the 5 million that they allocate to rebuild the houses, most of it will go for unproductive. I mean, when the global, I mean, when the re in region your cost of construction is 40% cheaper. Why are you? I mean, out of your 5 million, probably 40% will go for unproductive construction. So you can cut it down and give the relief by bringing the bringing the cost of construction and food items prices down. That's equivalent to income raise for people. And that's how

charindra chandrasena  29:47
how how how can it be done? How can the cost of construction

Dhananath Fernando  29:50
be brought down? Yeah, taxes just taxes. Yeah, there's massive tariff. You have to basically bring it down. So on food items, but not

charindra chandrasena  29:59
price controls or. Definitely not all price. That's

Speaker 1  30:01
a worse because then what happens is whatever you have that whatever that's available even at a higher price will completely vanish from the shelves. Exactly. So that makes absolutely no sense. It's counting. So

Dhananath Fernando  30:10
yeah. So those are the. But then

charindra chandrasena  30:12
but then revenue will suffer.

Dhananath Fernando  30:14
Revenue will suffer, but actually revenue will not suffer in my view because already with this high tariffs, most of the items are not coming. I mean, when you it's like my famous example is you you know we are playing with the little puppies. No, there's a you have a chain which is swinging and you ask the puppy to basically jump over it and you slightly elevate the chain or the rope and then the puppy jumps over it you know two three times, and when you after one point, the puppy may not like jump over it. He will go under it. So when you make the tariff after a certain level, no goods are going to come, which is that means you are not generating any revenue. You are just keeping it at a very high level. So then

Speaker 1  30:59
you you get all kind of problems like under invoicing, and then you know money paid under the table to clear goods. All kind of these things happen, right? And then actually you're leaking the revenue. Then you're leaking because then that money doesn't come to the government. And if it comes to the government, at least we have a hope. No, it'll go to the people. It's going to go to particular corrupt officials who are there, right? It's going to you know it's going to enhance their wealth. So that's why I'm saying you know. So taxes and all that. It has to be fair. If you go on a complete, you know, if you go on a complete grab, what happens is you won't get the money. One thing the stuff won't come, and what other stuff that comes also won't get taxed.

Dhananath Fernando  31:35
And I think President, it's in their cards. They they have spoken about a national tariff policy. So I think this is the time, with all that you basically do it once and for all, and that helps. So I think that's why we were. I mean, my point is, don't forget. Like we are still at I think the immediate aftermath. We are just in the kind of relief mode, which is slowly now facing moving out to the rebuild and getting back contract sort of a mode. But we should not forget it's 30 to I mean 90 days. Move that difficult reforms, and which is in the system, economic transformation at in whatever that name, and basically breaking down food, tariff policy, land issue. Those are critical, and I think I don't think anyone would oppose at this point, you saw the disaster, and it's very clear. Yeah,

charindra chandrasena  32:24
when the when the attention is elsewhere, yeah, when there are you know bigger issues going on, get this difficult. And

Dhananath Fernando  32:31
even the railway, even now, what they said was about only 30% operative. No, so even if they go on strike, it doesn't matter, no?

Speaker 1  32:38
Yeah, because anyway, you saw it's equivalent to a strike, no? Exactly, only the only. the southern lines are running, right? So I mean, KBA is out beyond a certain point. The southern line is running, and there's no accessibility from the other side also. So that's what I'm saying. So this is the best time to get all the reforms that Dana spoke about. And other thing about this one, and about the insurance thing, the hotel sector made a good comeback after the tsunami because of insurance, right? Because normally you're running a standing business, no? So normally you run an insurance because you don't have a choice. So when the tsunami hit and you know wiped the whole infrastructure out, the money was available from the claims, where quickly rebuilding could have been done. So again, that is like a prime example how important insurance is. Because

Dhananath Fernando  33:28
you should not forget these insurance companies must be also reinsured in some other parts of the world. So they are also getting a claim if someone is the thing.

charindra chandrasena  33:36
The thing with households, guys, is that people don't think that you know. Correct. People don't actually think anything will happen to them. Exactly.

charindra chandrasena  33:45
You know, they hear about these stories, but

charindra chandrasena  33:47
that kind of mentality. So that mentality is very hard to change. Correct. And I agree with you guys, that it has to be mandated. Therefore, you know it's it's not ideal to mandate things, but in this case, especially Sri Lanka, it will have to be mandated.

Speaker 1  34:10
Yeah, it has to be brought into law. Yeah, yeah.

charindra chandrasena  34:12
Because believing that because you have done a lot of ping, that nothing bad will happen to you is is a mentality that that will go on for a while, I also want to touch on the precedence or the government's response in terms of the IMF also.

Dhananath Fernando  34:31
But before that, I think are we going to discuss about data issue?

charindra chandrasena  34:34
We we we can. I'm wondering whether we have time because it's a it's a bit of a big issue, which I don't want to sort of.

Speaker 1  34:43
It's a huge subject

charindra chandrasena  34:44
on its own, which I don't want to skim through, and we have about 15 minutes. Then

Dhananath Fernando  34:51
it's okay. So then, yeah. So

charindra chandrasena  34:52
in terms of this IMF response, now what they have requested is the RFI, you know. Yeah, the rapid financing instrument. I remember. I think President Gota Viraja Pracha also tried to bring it in right during COVID. No, during COVID. Right. I think the second year of COVID was it or the first year? I don't remember exactly. Just just explain what an RFI is in relation to, or how does it differ from the EFF, which is the external fund facility that we have right now? Just just for people's understanding.

Dhananath Fernando  35:32
So, according to my understanding, extended fund facilities are more connected with a lot of structural reforms, and that basically you go when you have a balance of payment crisis, and these are fairly longer term agreements. Even the programme that we are in is a four-year one. Generally, it's about three years, and now we have a four-year one.

Speaker 1  35:50
And then that comes with targets also. That comes with lot of structural benchmarks, targets. Targets, yeah.

Dhananath Fernando  35:55
Rapid financing one is mainly when there's like a emergency situation for your temporary stability, you reach out to IMF, and that's what even the COVID. That's why a lot of countries went, and we were quite. I think we tried, but they were also dragging their feet. And of course, there were many countries who were in the lineup. Who had applied, and we applied quite late because we were under the impression, no, we can. We have a liquidity issue rather than a solvency issue. Yeah. So in this, with with this rapid financing, there itself

charindra chandrasena  36:24
doesn't this government show that it's far more advanced than that government?

Dhananath Fernando  36:31
Absolutely. By

charindra chandrasena  36:31
going there within two weeks of exactly this happening. No, absolutely.

Dhananath Fernando  36:35
I think they were quite proactive in that sense because you know you cannot also ask it after three months, no. You have to you have to ask it when the when the crisis when the crisis ends. So they have immediately moved to that. Even yeah, even no one basically even you know commented or asked. I mean, advised the government to again rethink of their RFA rapid finance, and they have basically already thought about it and already well. Well, the

charindra chandrasena  36:59
opposition leader was saying that that the IMF programme itself should be amended. Amended.

Dhananath Fernando  37:05
So I think there's already now the the process is chary because if you recall that the the next tranche was connected to the budget that we proposed for 2026. So now with this expenditure, our budget probably what we discuss with IMF and the staff. I mean, sorry. Let let me put it in this way. We already reached a staff level agreement before the budget, and and the conditionality was our budget next year 2026 budget has to be aligned with that. So then the staff agreement will come to. I mean, will be given the approval at the executive board level. So now things have changed. Our expenditure is going to go up. Probably revenue will take a hit. So actually, in a way, we are kind of temporary renegotiating the 17th IMF programme. In the meantime, we have requested to enter to the 18th IMF programme. So the RFI. So actually, till the IMS or what I think the IMF has done is they have given time to do the next review till next year. Pretty much now the staff level agreement that we entered is pretty much no longer valid, and then we have to revise the targets and again sign a new staff level agreement, which requires again the executive level approval. In the meantime, since I think we are getting delayed, we are also moving ahead with the rapid financing one, and then we can continue this previous EFF programme afterwards. Is my understanding. Yeah, and

Speaker 1  38:33
I think that I think another unsung hero is probably in this whole. This thing is the central bank governor and the central bank. I think I think they are. I think they are playing a very proactive role in this. So because so the central

charindra chandrasena  38:44
bank governor had said, Dr. Nandar Alvita Singh had said that the economic shock absorbers are on, and therefore we can weather this storm. Do you see that way as well?

Dhananath Fernando  38:57
Absolutely. If the central bank doesn't last time the problem was Chari. They they brought they believed on some weird theory of modern monetary theory. So they brought the interest rates artificially down. So of course it was the what hit was not the COVID. Yeah, it was the liquidity management. It was the liquidity management crisis that hit us badly. And even in this case, in I mean any I mean modern

charindra chandrasena  39:20
monetary theory is quantitative easing. It's quantitative easing. In in the US, it's called quantitative easing. Yeah. So just just an aside to the conversation: Why would it work in the US and not work in Sri Lanka? Yeah.

Dhananath Fernando  39:35
So the reason, the main even in US, it won't work. It won't

Speaker 1  39:40
work. But it worked. I mean, it bought a temporary kind

charindra chandrasena  39:43
of a boost, and after the after the after the 2007 eight financial crisis, correct. That's what President Obama, you know, employed. Yeah, yeah. I

Speaker 2  39:52
think it was caused. Yeah, so yeah, yeah. So what

Dhananath Fernando  39:58
is in U.S. Also, it doesn't work, but they they have a little bit of time which can manage because countries like U.S. Japan, Australia, their currencies have a global demand because import and exports happen in their currencies in other parts of the world. For an example, even there's no currency risk exactly. Even if you go to Peta, you can buy US dollars. Yeah. But even if you go to Nivea, very unlikely that you can buy Sri Lankan rupees, because their currency, what they print at Federal Reserve, is going all over the world. So as a result, even if you do a quantitative easing a little bit, you can weather that for us for some time, but rupee cannot because it is within this 65,000 square kilometres. When that happen, your first thing is your imports are going to go up because everyone who gets rupees are going to buy imported items. Not in the first round, they will not go and buy like you know directly a phone, but they will go and first buy something which is in local currency. But the second way, I mean, they will go and buy a mobile phone, paying rupees. But the shopkeeper has to buy a mobile phone by paying dollars. So with that rupees, he is going to go to the bank and asking for dollars. So that's how the demand for dollars is going to come up. So what the yes coming back to our central bank shock absorbers definitely if you don't bring the if you don't increase liquidity artificially or if you don't bring the interest rates down artificially we will not go for a economic sort of a crisis I mean our growth will be slowed down people will be under yeah

Speaker 1  41:38
we but basically we won't have a BUP crisis. We don't have. Yeah, that's how it starts, no? Yeah. So I mean, if they don't mess with it too much, and they let basically if they let market forces go, and not intervene and do all kind of these mad things, then what happens is we'll be okay, right? But Jana said was perfectly correct. We'll have an issue on, for example, good now, for example, construction industry, which was down and out, now they will make a recovery, which will contribute to the same. But then again, some of the other, some of the other industries and some of the other industries won't, because the reason is you know it's crisis hit and you know companies around, especially SMEs in that particular region, you know they are a little bit down and out. So the contribution what they are going to give to the economy is going to be is definitely impacted. So until they get until they get back on track and you know first fix their personal lives and then start fixing their businesses and corporates. Until then we are going to have a small hit on on growth. Am I correct? Okay. So yeah,

Dhananath Fernando  42:39
growth will be slowed down, but we will not go for economic economic crisis. Like you know, people will not be in queues for fuel. Yeah. So that's where we have to be cautious. I think in that front, central bank has done the right thing. They have, I mean, immediately asked for RFI. Yeah. They also, I mean, this is just the year end, and then.


Transcribed by https://otter.ai