Political Appointments: A Test for the NPP’s Economic Vision.
The planned appointment of Duminda Hulangamuwa, as reported by the Daily Mirror on 16 March, as the next Secretary to the Ministry of Finance, Planning and Economic Development (MFPED) under the newly elected National People’s Power (NPP) government comes across as a surprising turn for a left-leaning government. Mr Hulangamuwa is currently a Senior Economic Advisor to the President. The NPP’s visionary election manifesto calls for a systemic shift in economic governance, that departs from current policies that have historically shaped Sri Lanka’s economic trajectory. To fulfil its pledges, the government must pivot towards economic framing that prioritises equitable and sustainable growth.
Scope of responsibilities
The Secretary to the MFPED has wide responsibilities in relation to macro-economic and fiscal policies. These range from annual budget and Appropriation Acts, public financial management, local and foreign savings and investments, public debts, banking, finance and insurance activities, and international financial cooperation to directing social security and economic development activities.
With wide influence across policy guidance to relevant State Ministries, and formulating policies concerning the subject of Finance, the role carries many responsibilities. It includes efforts to minimise income disparities, reduce unemployment, ensure price stability, manage uncertainties in public revenue policies, expand financial resources and economic needs, stabilise the interest rates, manage financial and balance of payment policies. The role also encompasses the need to introduce measures to promote domestic production, expand the business environment for the domestic business community, strengthen public enterprises and the institutional structure required for the efficient management of state revenue and expenditure.
While initiating many transformations, the secretary must also assist the government to ensure short-term economic stability to protect an already strained public from further hardship and to maintain political stability. Any misstep in economic management could risk undermining public confidence in the NPP’s ability to govern effectively.
Private Sector Engagement
The government’s evolving economic plans appear to lean heavily on private sector contributions. Key priorities include generating export-led dollar revenue for essential imports, fostering import substitution industries, transitioning toward value-added industrialisation, strengthening small businesses and cooperatives, and facilitating large-scale infrastructure projects. Given this reliance on private sector participation, the government needs to cultivate more balanced relationships within this sector, ensuring that corporate interests do not overshadow the needs of the wider population.
The NPP may also recognise the need to broaden its engagement with the private sector along with civil society members to gain a more comprehensive understanding of its role in Sri Lanka’s economic crisis and its impact on society. Mr. Hulangamuwa, as the Chairman of the Ceylon Chamber of Commerce (CCC) and Country Head of Ernest and Young, may possess extensive knowledge of the private sector. However, business interests need to be counter balanced with how in the past decades they have played a role in policy failure, economic mismanagement and widening inequality in the country.
Experience and Accountability
As a key figure in Sri Lanka’s corporate sector, Mr. Hulangamuwa should clarify why many members of the CCC endorsed the massive tax cuts implemented under Gotabaya Rajapaksa’s administration he advised. These policies led to a drastic decline in government revenue, reaching an all-time low of 8% of GDP.
Mr. Hulangamuwa’s views on the wide range of progressive taxation policies that are required to increase government revenue and reduce income inequality are critical. His knowledge and expertise on tax loopholes and the mechanisms exploited by corporations and individuals to evade taxation could provide invaluable insights into reforming the tax system.
Additionally, addressing illicit financial flows practised by private sector entities is crucial to reversing the loss of foreign exchange. Tackling these systemic issues could help Sri Lanka recover much-needed revenue and stabilise the economy.
Mr. Hulangamuwa’s involvement in both the public and private sectors creates a conflict of interest. To ensure transparency and maintain the integrity of public decision-making, this risk such appointments pose to tackling systemic corruption must be addressed.
Mitigating Risks
Globally, centrist political leaders such as Kier Starmer in the UK, Emmanuel Macron in France, and Joe Biden in the United States have struggled to reverse rising inequality and improve public welfare while maintaining traditional economic structures. The NPP must be cautious not to fall into a similar pattern, where maintaining the status quo ultimately undermines its transformative agenda.
In an interview with Echelon on 15 November 2022, when asked, “Who should take responsibility for the economic crisis?” Mr. Hulangamuwa stated that all Sri Lankans, both rich and poor, have lived beyond their means, consuming resources at subsidised rates and depleting the nation’s reserves. However, addressing the country’s profound inequality – akin to disparities observed in the West – requires a broader and more nuanced approach, one that considers the systemic factors contributing to this disparity.
Ultimately, if appointed, the NPP government will be judged on whether political appointees, like Mr Hulangamuwa is advancing the NPP’s progressive economic vision and calls for system change. His ability to navigate complex economic reforms while ensuring fiscal stability will determine not only the success of his tenure but also the credibility of the NPP government’s commitment to genuine economic change and to enhance the economic wellbeing of the poorest people.
The Way Forward
Sri Lanka is currently grappling with a severe economic crisis, marked by high debts and an unsustainable reliance on the US dollar. The debt restructuring plan backed by the IMF, which drives the country’s economic recovery, is built on overly optimistic projections and fails to shield the nation from potential external shocks. Moreover, the IMF’s recommendations have often been criticised for their adverse effects on vulnerable populations, particularly the impoverished segments of society, while not offering a lasting solution to the country’s mounting debt burden.
To navigate these challenges in a globally tumultuous period, Sri Lanka urgently requires leadership within its Central Bank and Ministry of Finance that can critically assess IMF policies and propose robust, homegrown alternatives that prioritise the welfare of local communities and safeguard the environment.
Mr. Hulangamuwa was an advocate for the external debt restructuring deal negotiated by the previous regime, which prioritised the interests of financial creditors over those of the Sri Lankan people. For Sri Lanka to achieve the long-term recovery it desperately needs, a leadership with a bold and contrasting vision—one that prioritises the well-being of its citizens over creditor demands.
The system changes promised in the NPP’s manifesto need constant attention to its principles when appointing public officers to strengthen institution in ways to convince both the public and take bold steps towards an alternative and just socio-political culture, where transformative institutions are enabled.
Engaging with the global economic system, the corporate sector, and the domestic economic elite may seem important for the government’s strategic approach. However, when selecting a candidate for the role of Secretary to the Ministry of Finance, Planning, and Economic Development (MFPED), the NPP government is likely to be better served by appointing someone with a deep understanding of economic and financial matters, a desire to change of governance and government systems and also a proven track record of understanding inequality, volatile geopolitics, climate change, the global economic order and with no conflicts of interest.