WALK into any street market in Colombo and most of the small talk and ‘gossip' by customers would be about the cost of living, the high cost of vegetables and the struggle to make ends meet. A year ago, the small talk, ‘gossip' and buzz in the cocktail circuit was all about the war, its success and how President Mahinda Rajapaksa did a great job of crushing Tamil Tiger rebels, who have been waging a near 30-year-long campaign for regional autonomy in the country's northern and eastern parts where most of Sri Lanka's 2.5 million minority Tamils live. Rajapaksa is once again dominating the conversations in the marketplace but this time it's about the economic situation. Putting it bluntly it is about the economic crisis. So is the president's popularity waning? “Not so,” says Dr. S.I. Keethaponcalan, head of the Department of Political Science at the University of Colombo. “There may be some economic issues but the president's popularity is still very high.” Be that as it may, economic issues are mounting, the cost of living is rising and, simply said, the government is living beyond its means. Revenue targets have fallen short of expectation and the promised 2,500 rupees (less than $25) per month to government servants as promised by the president in a pre-election campaign way back in November last year is yet to come. The president won the January 2010 presidential poll handsomely and subsequently promised to fulfill the wage increase offer in a mini budget that the government planned in mid-2010. However that didn't happen and in the national budget for 2011, which the president presented in parliament last month, only a 600 rupee wage hike was offered. “Where is a promised hike by the president?” asked an irate Colombo housewife, who declined to be named. Most people are reluctant to be quoted by the media for fear of incurring the wrath of the government, particularly the president and his close aides. Any discontent or anti-government comment is seen as an unpatriotic act in government quarters. Government spending has risen essentially due to the cost of huge infrastructure projects like the harbor, an international cricket stadium, an international airport and mega roadworks — all in the southern town of Hambantota, the president's home base which opponents say are ego-boosting and vote-catching projects. The harbor was opened last month with huge fanfare to coincide with a formal ceremony where Rajapaksa began his second term of office which runs till November 2016. According to Finance Ministry sources, the debt burden is due to spending on infrastructure work mostly funded through loans for which interest and principal debt repayments together amount to just lower that 2011 budget revenues. Economists say the bulk of Sri Lanka's total revenues in 2011 is going just for debt repayment while development work and recurrent spending on government salaries are all coming from loans, mostly from China and India, now Sri Lanka's newfound friends after the fallout with the West over claims of human rights abuses during the last stages of the battle with Tamil Tiger rebels in May 2009. “The government is forced to borrow from outside to meet its expenses,” a senior government official, who declined to be named, said adding that the government is resorting to further borrowing to meet its recurrent as well as capital expenditure. While the president and his men are at pains to explain that the cost of living is not as bad as it seems, opposition parties – particularly the former Marxist People's Liberation Front (which goes by the acronym JVP) – is preparing for a countrywide campaign to protest against the high cost of living and back demands for a bigger wage increase. The main opposition United National Party (UNP), which is plagued by internal conflicts and a leadership crisis with demands for its leader and former Prime Minister Ranil Wickremasinghe to step down and make way for others in the party, is also using discontent over the economic situation to draw away attention from its own crises. The party, which under Wickremasinghe's leadership has lost more than 13 national and local elections, is on a village-to-village campaign to gain lost ground – using the cost of living issue as a turnaround ploy. Much of the rising cost of essential goods like lentils, onions, fish, eggs, etc is due to taxes on products which the government badly needs as revenue to fund its ostentatious spending much of it on grandiose projects and tamashas. The tax and high cost of production, particularly of chicken and eggs, has forced the government to resort to imports, essentially from India to avert any shortage. Chicken producers say rising costs of production is making it uneconomical for small farmers. “Costs are very high and ultimately small producers find it difficult to make any profit, let alone break even,” a suburban producer said. Faced with a possible ‘explosive' economic crisis, the president has brought in changes to the tax structure, reducing the number of taxes that the business community has to pay which would then reduce the burden on the consumer. Some of the other sops offered in last month's budget – essentially to ward off anti-government sentiment – included a new pension scheme for workers and a reduction in personal taxes. That, however, is unlikely to take the shine off the opposition campaign to mount pressure on the government vis-à-vis the economic crisis. Yet with an election not anywhere around the corner, some analysts feel the president is safe enough though the ‘good vibes' and positiveness over the ‘end of the war feeling' is fast wearing off. But with local elections – municipalities, urban and village councils — due in April next year, the economic crisis could be a test of strength for the president's popularity and political future. Feizal Samath is a senior political analyst based in Colombo. __
