Prof. N.A.de S. Amaratunga 

Prof. Chandre Dharmawardena has on several occasions written on the need to achieve self-sufficiency in food and energy which he has scientifically shown to be quite feasible using available resources. I too have written about the possibility of self-sufficiency in food as a solution to our economic woes. The mathematics of this proposal shows the logic of it in very simple terms. Simply put if we could achieve these goals we save 40% of foreign exchange we spend on imports. That would solve our debt problem and make our economy independent of foreign control to a great degree. A country which has a dependent economy cannot be considered independent.

Since independence Sri Lanka has adopted an export led economy which attempts to produce mainly for export and with the money earned buy its needs in food, medicine and other essentials. The country had always run a deficit foreign account with our export earnings failing to meet the import cost. Though the country’s exports have risen over the years imports have always outpaced exports. We are forced to take foreign loans to cover the shortfall. We also take more loans to develop our export industry the need for which keep rising. Thus the debt to GDP ratio keeps rising, now it has gone past 100%. It is 26% in emerging economies. This state of affairs is not unique to Sri Lanka, as a matter of fact it is the common underpining feature in the economy of all countries that has embraced the market oriented global economic model. There is no place for self-sufficiency in essentials in this system. Each country produces what other countries need and not their own needs. We produce tea, garments and a few other things in large quantities for export. In the service sector we cater to the needs of the tourists and middle-east households.

That this system has failed to alleviate poverty which is the most acute and pressing need of any developing country is proved by the fact that poverty has doubled in the recent years compared to 2015 and is at 26% at present. One in four is below poverty line and is facing food insecurity. Child malnutrition, wasting and stunting have increased and so have school dropout rates. Of course the Covid pandemic and the expenditure for its greatly successful control have had a big impact on the economy markedly draining its foreign reserves. If we had been self-sufficient in food the impact of Covid on the economy would have been minimal. Obviously the cause of the present economic collapse is not a sudden happening but a result of a cumulative process where the debt has been increasing and going beyond manageable levels. This has happened in several developing countries and not for the first time. Economic downturns are a recurring phenomenon in neo-liberal capitalist system and these repeatedly hurt the poor who becomes poorer in terms of purchasing power. This happens to the poor in the rich countries also. And the rich gets richer and this too is ensured in neo- liberalism, wealth produced by the poor flowing to the rich.

At present 40% of our essential food is imported and most of these could be locally produced. We could save about USD 2.5 billion of foreign exchange by attaining self-sufficiency in food. Focus on this aspect would create more than a million jobs. Perhaps the presently unproductive armed forces also could be deployed for this purpose.

Another USD 4 billion is spent for thermal power generation. As mentioned above Dharmawardena has extensively dealt with this subject and he has shown how hydro, solar, wind and other available resources could be used for achieving self-sufficiency in energy requirements. Main source of all energy forms is the sun, whether it is hydro, solar or wind, and Sri Lanka is blessed with these resources. We have the raw materials required to manufacture solar panels and the technology cannot be beyond our engineers. Surface for deploying solar panels need not be a problem, Dharmawardena has proposed that floating panels could be built on our large water reservoires. 

A total of about USD 6 billion could be saved by these means which would be sufficient to service the loans which has to start by 2028. How else could this be done? Could our export capacity be developed to earn sufficient foreign exchange to pay the loans by 2028?

The haircut” that the creditors have agreed is 28% of the total sovereign bonds but this may be trimmed to 15% if our GDP reaches 100 billion which is most likely. Moreover though the interest rate is 3.75% until 2028 it will increase to 8.2% under conditions mentioned before. This deal is very much disadvantagous to Sri Lanka when compared to terms entered into with creditors by Zambia (18%) and Ghana (37%).

The critical question is would we have sufficient dollars to pay these rates and also the capital recovery? Annual interest alone would amount to about USD 5 billion. Could our total foreign earnings be increased to meet these payments?. Our total foreign earnings in 2023 was about USD 18.9 billion. Our imports cost USD 16 billion. This means foreign earnings will have to be increased to about USD 25 billion by 2028 ie in four years. However to do this we may need further loans as well. Even if we barely could achieve all this we would be entagled in a never ending exploitative global debt system!

We are caught in a vicious cycle of export and debt. Therefore the system change that we need to breach this cycle is to switch over from an export led economy to a system which has as its goal self sufficiency in food and energy.

Prof. N.A.de S. Amaratunga