Covid 19 is one of the most discussed and widely reported topics in modern history, probably more than Hitler, the Second World War or any other subject matter. The pandemic has affected two hundred and ten countries and territories throughout the world and caused distress to over 95% of the human population. The virus is dangerous, both by way of the speed of human infectivity and its fatality.
Even the emergence of a single patient is a concern to any country in the world. The economic impact caused by Covid-19 is being examined and deliberated by every country in order to face the challenge of the predicted global recession. It is becoming unmistakably clear that the new virus would possibly cause much more harm than SARS, Ebola or H1N1 and its economic impact is likely to increase throughout the world.
In the backdrop of the pandemic, Sri Lanka has to activate ‘after burners’ instantly to get a running start to produce the required thrust to the economy. President Gotabaya Rajapaksa has once again acted swiftly by setting up the high powered presidential task force for economic revival and poverty alleviation. The forty member elite team comprising qualified and experienced professionals will fill in all required areas of interest in economic revival based on the pledge of the ‘People centric economy’ policy of President Rajapaksa. As per the prediction of the World Bank and other international financial experts, Sri Lanka would likely bear a severe negative economic impact during the post Covid 19 era.
Therefore, most Sri Lankans believe that now is the time to enter into economic nationalism. The current global trend is witnessing resurgence in economic nationalism. Even advanced economies are increasing their approach to nationalistic trade policies and greater industrial concentration.
Advancing along these lines, immediately after the emergence of the virus, the Government correctly imposed a ban on 157 items of non-essential imports and restrictions for 111 items. This timely move was hailed by local entrepreneurs as well as the knowledgeable public as a positive move that should have been done earlier.
In addition, the Central Bank lifted many restrictions on foreign remittances in an effort to bring foreign exchange into the country for six months. The CBSL invited expatriates and others to place foreign currency deposits in the Sri Lankan banking system on attractive terms. The effect of the invitation is yet to be seen.
It is a cinch that Sri Lanka will substantially lose a major portion of foreign exchange earnings from two of the main sectors, apparel and tourism, at least for over a year as per industry experts. The collective contribution of the two segments to the economy during the recent past is approximately US$ 9 Billion. In order to bridge the gap of this staggering loss, Sri Lanka has several options. Among them the two key factors are stringent restrictions on all imports and development of local productions as substitutes to all restricted imported goods. The third is to encourage exporters of diverse products to expand as much as possible.
As per the available data, the value of the total imports to Sri Lanka in the year 2018 was US$ 18.7 Billion, of which fuel accounts for US$ 2.3 Billion and fabric for US$ 798 Million. Fuel import has no alternative and fabric imports are a must for the apparel industry. The rest of the imports account for the balance which is primarily spent on vehicles, machinery, electrical and electronics, plastics, steel and paper related items. Most of these imported items could be substituted by locally manufactured products.
At this crucial juncture, protecting the national economy comes as the uppermost priority. Therefore it is of importance that the Government introduces a set of practices such as instituting policies on development subsidies, infrastructure development programs, and financial concessions to local industrialists as imminent measures.
In addition, opening up foreign markets under the guidance of the task force must be done to build up export destinations. This should be done by instituting policies such as tariffs, development subsidies, or infrastructure investment programs designed to create, attract, and retain as much economic activities as possible within the country. Restrictions on non-essential imports are a welcome sign and an encouragement to almost the entire manufacturing fraternity in the country. Many of the local industrialists are of the view that more items can be introduced to this list.
They feel that a vast majority of the consumer durables imported from both China and India can be manufactured in Sri Lanka. Similarly, many local companies engaged in agriculture based food related products assure that they can produce these items in Sri Lanka and save Billions of Dollars of foreign currency. Entrepreneurs of both sectors only need proper Government policy and suitable assistance by way of resources.
Agriculture is the fastest recovering sector in the post disaster situation for Sri Lanka. The Government’s decision of allowing farmers to proceed without hindrance during curfew must be applauded. Life continued devoid of imported food products during the past few weeks, setting forth a signal that the public can exist without them.
It will be a tremendous boost and stimulation to the agriculture fraternity if the Government continues the ban and restrictions on the import of food related products further.
Government policies declared through the manifesto on agriculture will be sufficient to open up a new era of the economy with the opportunities likely to be emerged in the aftermath of the pandemic. Pledges made on going beyond traditional practices in the policy statement with regard to agriculture will provide the required encouragement and persuasion to the young agri-business entrepreneurs. They will come forward when the Government regularizes the promised import tariff benefits, and low interest financial assistance and other specific perks.
The task force for economic revival will undoubtedly look at Sri Lanka’s widely popular export crops such as spices, vegetables, fruits, flowers, and so forth which will have a much superior worldwide demand. Along with the post Covid 19 global trade openings, Sri Lanka will have enhanced opportunities in this lucrative market as such products already carry a high reputation in international markets.
As stipulated in President Rajapaksa’s vision and his key policies, the country is aspiring for a people centric economy. The general opinion in Sri Lanka is that respective Governments, since independence, talked about numerous promises in their manifestos, largely aiming to win elections. In marked contrast, the new President amply displayed his intentions by promptly acting on his promises as soon as he took over office.
It is rather unfortunate that his tireless efforts had to be redirected to combat the current crisis although the majority of the citizenry confidently rely on his leadership.