Participatory approach, vital to derive economic benefits - Economist | Sunday Observer

Participatory approach, vital to derive economic benefits - Economist

15 November, 2020

Given the tough conditions in which the Sri Lankan economy is in, it is crucial that the Central Bank plays a greater role to ensure price and economic stability in keeping with the overall government policies and goals, said an economist.

Senior Lecturer, Department of Accounting, University of Sri Jayewardenepura, Dr. Anil Jayantha Fernando said it is paramount that the Central Bank plays a pivotal role to assure  price and economic stability in line with overall economic policies and objectives of the government.

 “The economy is currently in a perilous  state mainly due to increasing public debt, sluggish economic growth and insufficient foreign exchange earnings to deal with the external sector in addition to inefficiency, waste and corruption that have invaded the economy,” Dr. Fernando said. 

The financialisation approach of policy makers  would not go well with the economy when there is no comprehensive master plan to boost production and to increase the aggregate demand. This approach entails a high probability that excess money pumped into the economy, could trigger inflation and even create  a financial bubble  in the future.  He said at present, potential investors are reluctant to bear the risks of investment in production but rather they tend to be opportunistic to make a quick buck at the expense of the vast majority of people. Since, it is unrealistic to expect that additional income can be  generated through production in the country, the government is forced  to borrow more at a high cost to repay public debts.

This practice would further increase the debt burden of the  government. According to the central bank statistics, total public debts as at September 30, 2020, to be settled in foreign currencies within a year amounts to US$ 6,718 million whereas official reserve and foreign currency assets stood at US$ 6,666 million. International sovereign credit rating agencies have already downgraded the country’s repaying capacity of foreign debt.

Moody’s downgraded Sri Lanka from B2 to Caa1 grade which is highly risky. A recently released  Bloomberg report stated that Sri Lanka is on the verge of probable sovereign debt default risk along with  Zambia and Ecuador next year.  

What could we do as solutions at this critical juncture? Apart from other measures, the government’s immediate intervention in the supply chains of local  productions is vital for a viable solution to assure effective manufacturing and distribution of goods and services. Prior to inviting big international  investors, it is more important to facilitate small, medium and micro level local manufacturers who are in dire need of accessing to uninterrupted supply of materials required for production and to markets to channel their products efficiently.

Abrupt import controls might stifle local production and exports of the country in the longer run than the benefits expected to narrow the trade gap in the short run. 

On the other hand, it is essential to deviate from relying on the traditional individual profit maximising mode of  production which is inherently unstable.

Instead, we need to promote participatory and inclusive production approaches which optimise production effectiveness and helps share benefits justly among those who create value.

It is imperative to use technology  in facilitating  production  processes and stakeholders to share information  so that unnecessary conflicts and confusions among them  can be avoided.

In  today’s  global production context, consumers do  not know  exactly how and who produce most of the goods they consume and do not have access to full information about products. Hence, what matters is cooperation and consensus among everyone.Post Covid-19 situation urges us to be cooperative and collective rather than being individualistic and opportunistic in engaging in economic activities if we dream for a better society  to live in harmony.

The responsibility of creating such a society depends mainly on the genuine desires and commitment of the government.