US embassy cable - 05COLOMBO1995

C O N F I D E N T I A L SECTION 01 OF 02 COLOMBO 001995 
 
SIPDIS 
 
DEPT FOR SA/INS: MGOWER; MCC FOR D.NASSIRY 
 
E.O. 12958: DECL: 11/23/2015 
TAGS: ECON, ETRD, EAID, CE, Elections 
SUBJECT: ECONOMIC ADVISOR SUGGESTS RAJAPAKSE WILL HOLD FINANCE 
MINISTRY PORTFOLIO AND TABLE RESPONSIBLE BUDGET NEXT WEEK 
 
REF: COLOMBO 1935 
 
Classified By: Econchief Dean R. Thompson, Reasons 1.4 B, D and E 
 
1. (C) Summary: During a November 22 meeting with Econchief, 
Senior Advisor to President Rajapakse, Nivaad Cabral (a 
long-time Embassy contact) said that the President will 
retain the Finance Ministry portfolio and that the new budget 
would be presented sometime next week.  The budget will 
largely keep with the previously-presented plan (reftel), but 
will add and highlight a few key points from the President's 
campaign platform.  Finance Secretary PB Jayasundera will 
remain at the Finance Ministry and Cabral will serve as 
Secretary to a newly formed Ministry of Policy Planning and 
 
SIPDIS 
Implementation (Note: Cabral indicated it would be a 
Ministry, though it was not announced at the Cabinet 
swearing-in today. End Note), which will also be headed by 
the President.  The President intends to keep the National 
Council on Economic Development, the Strategic Enterprise 
Management Agency, and National Procurement Agency intact, 
but to clarify their mandates.  Cabral was receptive to 
Econchief's briefing on US-Sri Lanka bilateral economic 
relations - including MCA, Megaports, CSI, US Treasury 
Advisor programs, TIFA/WTO and the American Chamber of 
Commerce and expressed confidence that the new administration 
would quickly reassure markets with regard to its underlying 
economic policies.  End Summary 
 
2. (C) On November 22, President Rajapakse's senior Economic 
Advisor, Nivaad Cabral, told Econchief that Rajapakse will 
retain the Finance Ministry portfolio (as well as the defense 
portfolio) and will table a new budget (as predicted reftel) 
sometime next week.  According to Cabral, the budget will 
keep much of the framework of the one announced on November 8 
by former Finance Minister Sarath Amunagama.  However, it 
will be reworked to include key Rajapakse initiatives, such 
as a fertilizer subsidy and "some changes to the program in 
the health and education sphere," in keeping with the 
President's campaign promises.  When queried about whether 
the GSL would maintain the previous budget's cap on fuel 
subsidies, Cabral demurred, saying a decision still had to be 
taken - but that keeping the lowered subsidy "would be hard." 
 Cabral said the GSL will endeavor to keep the budget deficit 
in line with the prior proposal (about 7.5% of GDP). In order 
to keep the deficit in check, the budget will earmark certain 
funds from the Provincial Council (PC) budgets for regional 
development projects (Note: Provincial Council funding is 
largely provided by the central government. Cabral claimed 
the administration is in discussions with the PCs and has 
their agreement on this. End Note).  On the whole, Cabral 
suggested, the budget will not be dramatically different, but 
it needs to be presented by this administration in order to 
counter what he called "successful United National Party (UNP 
- the primary opposition party) propaganda" suggesting that 
the budget tabled on November 8 was designed to show the 
former President's displeasure with the Rajapakse campaign 
platform. 
 
3. (C) As for the Rajapakse administration's economic 
structure, Cabral said that current Finance Secretary PB 
Jayasundera will remain, but that a new Ministry for Policy 
Planning and Implementation, with Rajapakse serving as 
Minister, will be formed within the Presidential secretariat 
(Note: this ministry was not announced when the new cabinet 
ministers were sworn in on November 23. End Note).  Cabral 
will serve as Secretary of this Ministry and will report 
directly to the President.  Cabral suggested that monitoring 
and implementation have been sorely lacking in GSL entities 
in the past, and thus strong leadership in this area is 
required (Note: Cabral has made a very successful career as a 
consultant engaged in advising corporations on corporate 
governance and restructuring troubled companies, so his 
perspective on the workings of Government entities will be 
unique. End Note). 
 
4. (C) Cabral said Rajapakse will retain former President 
Kumaratunga's economic policy bodies, such as the National 
Council on Economic Development (NCED), the Strategic 
Enterprise Management Agency (SEMA) and the National 
Procurement Agency.  According to Cabral, these entities have 
strong organizational structures, but can be better directed 
and made more "goal oriented" in their approach to their 
tasks.  Cabral suggested the President is considering a plan 
to issue all Ministers a set of policy goals, which would 
then be publicized, allowing public monitoring of 
performance.  Cabral quickly added, however, that this was a 
controversial idea and is still under discussion. 
5. (C) Econchief briefed Cabral on MCA, CSI, Megaports, 
current US WTO initiatives, TIFA and our efforts to 
strengthen the American Chamber.  He listened intently and 
several times expressed a strong desire to work closely with 
the US on all such initiatives.  Econchief noted that, 
contrary to perceptions in some circles, the US had not 
favored any candidate in the recent elections, and hopes to 
work with President Rajapakse's administration - though how 
well we can work together will depend on how the new 
President's policies affect the key USG goals in Sri Lanka: 
peace and prosperity.  Cabral felt that once the new budget 
was presented and the new cabinet named, many concerns about 
President Rajapakse's stance on peace and economic 
liberalization would be relieved. 
 
6. (C) Comment: Cabral is a long-time Embassy contact, and 
former Eisenhower fellow, who is friendly to the US and keen 
to seen increased US investment and stronger bilateral ties. 
He is widely viewed as being the architect of Rajapakse's 
campaign platform, along with Treasury Secretary PB 
Jayasundera.  We believe he will be a useful interlocutor, 
with access to the new President, who can help us navigate 
the new administration's economic plans.  Cabral's demeanor 
and business background will likely allow for a more 
productive relationship than with the mercurial Jayasundera 
at the Finance Ministry.  The relationship between Cabral and 
Jayasundera is unclear however, and how well they cooperate, 
or don't cooperate, could give an early indication of 
smoothly the new GSL can implement its economic policy 
initiatives. End Comment. 
LUNSTEAD