The Government is once again between the devil and the deep blue sea as the unanticipated third-wave sucker-punched the country again, seemingly harder than the last two occasions.
On one hand, the Government has to deal with the ailing economic situation and the public health on the other. The economy of Sri Lanka was showing all positive signs of recovery in the first quarter of 2021 after curtailing the second wave successfully. The gruesome impact of the third wave will undoubtedly slow down the economic activities for the next several months at least.
Hit harder with third wave
Despite the proactive measures taken by the Government to lessen the impact of the pandemic within the limited fiscal breathing space of the economy, the third wave emerged with a renewed force. The slow recovering fiscal deficit is widened once again with revenue decline whilst the public health expenditure has increased dramatically since mid- April.
The Government, on the instructions of the health authorities, was compelled to impose island-wide lockdown until June 7, effective over fourteen days as a preliminary measure.
The irony is that, the factions that insisted on total lock down for the past few weeks have gone quiet. Regrettably, as always, the opportunistic political parties are using the new restrictions to criticise the Government again.
The unprecedented spike of Covid-19 cases and related deaths are likely to slow down the expected economic recovery further.
Experts say that the extent of the economic loss during the third wave primarily depends on the speed of the containment of the chain of infections.
Although the travel restrictions are not as stringent as the first wave, the economic activities, particularly the private sector commercial activities have declined to a great extent due to the public concern about the severity of the new variants that are more contagious and more lethal.
Central Bank assessment
The media has reported that contrary to the expert views of a critical influence on the economy due to the third wave of the pandemic, the Central Bank Governor has stated that the economic impact of the current infection is less than the preceding Covid-19 waves.
According to the Governor, the vaccination program and the travel restrictions will mitigate the impact.
However, the statement seems to be contradictory to the opinion of the health authorities which declares that the third wave is more disastrous than the last two occasions.
The Central Bank assessment on economic momentum seems to be based on the localised lock downs on selected Grama Sevaka Divisions, work-from-home protocols, online delivery models, and digital payments, and so forth.
In the context of the economy, the economists seem to be justifiably preferred localised lock downs rather than countrywide travel restrictions to balance the spread of infection with the economic loss.
Hence, the disparity between economic advisers and the health authorities is clear.
However, the CBSL has thus far contributed significantly to the crisis response by easing monetary policies and by taking additional measures to increase liquidity in the market.
Nevertheless, a senior CBSL officer has remarked at an online media conference that the moratorium given to affected enterprises will not be extended further, except transport and leisure sectors.
The same official stated that the CBSL will consider the complaints of those affected on a case-by-case basis.
However, considering the prevailing ground situation related to business activities, this decision may have to be reconsidered.
Many industries slowed down
The third wave that has started in mid-April has unquestionably slowed down the somewhat sluggish economic recovery the country has witnessed from January to April this year.
Out of the three major forex earning sectors, only the apparel industry has shown steady growth since October last year as per records.
Tourism, according to industry experts, was expected to improve by September-October and beyond. The predictions have completely shattered after the resurgence of the third wave, pushing back all hopes. The full recovery of the revenue of the foreign employment sector also was pushed back indefinitely.
As per the Export Development Board information, until April 2021, the export performance continued to move upwards after having a dreadful year with Covid-19 lock down in 2020 that contracted the export performance by a record 64 percent.
However, due to the relaxation of health restrictions in Sri Lanka and globally, the overall export revenue has shown all signs of rapid recovery until the surfacing of the third wave. Hence, the performance forecasts and predictions will have to be re-adjusted and new strategies must be adopted to face the new challenge.
According to an industry
expert in the apparel export trade, heading a 5000 employee apparel manufacturing company who wished to be anonymous, revealed that they are again coming up against a large shortage of manpower in the industry.
Although they have an adequate volume of orders, the employees tend to keep away from the factories due to the severity of the contagion and the rapidity of spread.
Even the basic mental states of the employees who are willing to work have become weakened due to peer pressure and justifiable fear of infection. Despite the best health facilities, incentives, and better working conditions provided to the workers, absenteeism has become a major issue for the industry.
Hence, their solemn expectation is that all stakeholders get together and contain the situation as early as possible for the sake of the country’s economy.
The revenue by way of foreign employment has declined drastically due to job losses in the middle- eastern countries and the tourism industry has become zero; the country is facing a dire shortage of foreign reserves.
On top of the loss of foreign revenue, the requirement of foreign currency for compulsory imports such as mineral fuel, medicines, and other pharmaceutical products, essential food-related goods, and so forth have become more severe.
Welfare expenditure increased
The full-blown health crisis has destabilised the countries medical infrastructure. The medical and related public welfare expenditure has been increased by several folds due to the unprecedented occurrence where the Government is forced to spend a tremendously high amount of funds from the public coffers.
The new surge has compelled the Government to increase the capacity of existing hospitals, build new makeshift hospitals, and provide them with machinery, equipment, and manpower.
Besides, with the prevailing rate of infections, the quarantine facilities had to be increased enormously due to the spike of daily positive caseload to around 3000 patients.
There is no doubt that economic activity feels the pinch. As a result, the cost of living also is rising due to the disturbances created by new travel restrictions. With public transport suspended, the day-to-day economic activities of the public are drastically affected. The retail trade has taken a huge hit depriving the livelihood of thousands. The service sector displays a significant backward linkage leading to a multiplier effect.
As for the employment front, the indicators show that those who have lost jobs during the first two waves were not recovered as yet.
Due to the continuous disruptions to business activities, the unemployment rate rose to a significant level. Whilst the impact is above-average in the urban communities, the rural areas also impacted badly.
The livelihood of thousands of people has been badly impacted and new measures must be taken to get them back on their feet again.
Stopping a fourth wave, a must
The containment of the virus and taking every measure to prevent a resurgence of a fourth wave is the national priority. The third wave of the pandemic in Sri Lanka will soon be over with the stringent measures taken by the relevant authorities. The Government is taking every possible action to ease the pressure on vulnerable sectors, often amidst politically motivated unfair criticisms.
The authorities and institutions responsible for the economy of the country will have to readjust strategies in terms of financial support for the business sector in the aftermath of the ongoing health crisis. The businesses, large, medium, and small that make the highest contribution to the economy must be safeguarded by all means, as a national priority.