A positive approach is required to solve current national issues | Sunday Observer

A positive approach is required to solve current national issues

28 March, 2022

It is no secret that the country is facing the worst economic crisis since independence, and the public annoyance is becoming more serious with every passing day. Even President Gotabaya Rajapaksa’s message has had little impact on the protests taking place across the country in response to a number of critical goods shortages. Regrettably, the general public is ignorant about the dire economic situation with regard to the foreign currency shortage, and the explanations from the government are not nearly adequate.

The general opinion is that the reason for the disconcerting crisis is the evident shortsightedness of the politicians, policy planning frameworks based on political agendas, and temporary solutions and short-term remedies implemented aiming at voter reactions to petty political interests.

The reason for most of the scarcities, such as LP gas, fuel, and some other commodities, is the enormous shortage of foreign currency. The general accusation of the public is that either the decision-makers made wrong calculations or they were not aware of simple economics.

The decision by the Central Bank to stick to a fixed rate regime may have been made with good intentions, although the move backfired. According to experts, the decision to switch to a floating exchange rate came too late when the flood gates were opened, skyrocketing the exchange rate.

In February, the Central Bank (CBSL) confirmed that the country was committed to honouring all forthcoming debt obligations and flouted claims by opposition politicians and some economists who opined that Sri Lanka was at the brink of default. 

However, currently, the confidence declarations of the Central Bank are doubted by many people as they are even unable to find an adequate amount of currency to pay for petrol, diesel, LP gas, and essential food products shipments lying in the port.

The appointment of the Economic Council, consisting of a majority of politicians and a few economic specialists, came under criticism by the opposition parties. Nevertheless, according to the Government Information Department sources, the appointments were made to reflect the real-life situation of the general public through parliamentary representation. The argument is that politicians who are always interacting with the public can provide real-time information to the government.

However, in another positive move, the President appointed a panel of experts to advise the economic council, which came to the praise of many Sri Lankans. The panel consists of the topmost business magnates in the country and qualified and experienced subject specialists in economics and financial management.

Business leaders

The business leaders appointed are the best available in the country, whose entities are not only immensely successful in business but also contribute substantially to the overall economy of the country. Similarly, the other experts are also professionals with proven track records and the highest level of credibility.

However, there are two issues this writer can opine on personally. The first is whether the senior politicians in the economic council will positively consider the opinions of businessmen whose actions are based on macro-economic factors rather than politically-influenced relief packages.

The politicians in the economic council will undoubtedly consider political outcomes more than long-term results. Hence, the pertinent question is whether the economic council will accept the recommendations of the expert panel that will most likely be based on stringent short-term and long-term daring actions.

The second dilemma is whether these extremely successful businessmen with different methods, opinions, mindsets, and management styles will agree with each other on recommendations. On the positive side, on the majority of the financial issues, they seem to be agreeing as of now.

However, whatever recommendations they make collectively will undeniably bring results. For the sake of the future of the country, the entire citizenry is looking forward to this expert panel, not particularly on the economic council. Finally, after a number of agreements and disagreements, and contradictory opinions by experts, the government has decided to seek IMF assistance. According to media reports, the deliberations with the IMF delegations commenced recently, and the government will soon submit policy proposals. According to most economists, seeking IMF assistance is the best short-term remedy available for the country at this crucial hour.

However, the IMF conditions will likely be unpopular, and the government has to make stern and bold amendments that will be detested by many factions, particularly opposition political parties. 

The major portion of government revenue collected through taxes is spent on public sector salaries and pensions. Also, a number of state-owned enterprises have become blood-sucking parasites that are maintained by taxpayers. The efforts of successive governments were not fruitful in stopping the colossal waste incurred by these entities.

Expert opinion

According to expert opinion, the IMF will expect the government to heavily reduce these unproductive expenditures. They also plan to request the government to restructure the current tax system.

However, the biggest headache the government will face will be resistance from the opposition. If the government agrees with the IMF to curb expenditure, the opposition will be given anti-government slogans on a platter. They will make use of the situation and attempt every trick in the book to overthrow the ruling government and grab power.

Without any local or global negative crisis, the economy showed a huge downturn during the ruling period of the last government. The GDP growth of 5% recorded in 2015 dropped to 2.3% in 2019. It shows the inefficiency of the performance of the previous government.

In fairness, President Rajapaksa was given a mandate with a substantial majority for five years. Unfortunately, two years out of the mandated five years were wasted due to Covid-19. The economic impact due to lockdowns, additional medical expenditure, huge amounts spent on vaccines, and various relief packages given to the citizenry is conveniently forgotten.

The government is now forced to fight against an unseen and fiercer enemy. The pledges given to the country during the election have to be postponed until the economic situation improves, at least to a bearable level.

As always, petty politics overshadows any move the government is making to control the situation. The opposition is having a field day due to the obvious shortage of essential commodities. However, the frustration of the public is completely justifiable and cannot be blamed.

None of these politicians who cry foul have a genuine intention of solving public problems. Whilst the leader of the main opposition declares that he will give many things free to the masses, the so-called left-wing parties say that they should be given power merely because the leaders are uncorrupted. For cheap political gains, almost every one of them is playing to the gallery.

Viable plan

They never present any viable plan to overcome the prevailing economic crisis or how they will stop corruption and malpractices that exist in the already rotten public service. Throughout history, this so-called left-wing party has disrupted successful business entities, good foreign investments, and created many hardships for the general public through unjustifiable protests and strikes.

Any main political party can collect thousands of supporters to protest. Therefore, instead of gathering party supporters in Colombo and making a media circus, the opposition parties present their plans to the country. If a political party can produce a more convincing future economic plan than the incumbent government’s manifesto, the public will vote them into power in the next election.

Both fiscal and monetary reforms are not only necessary but also unavoidable. Similarly, restructuring loss-making government institutions that are the heaviest burden on state coffers is also a dire requirement. Whilst solving short-term public issues such as LP gas, fuel shortages, power cuts, etc., sound mid-term and long-term plans are essential for the country to survive and grow. Hence, first and foremost, the government and, secondly, the entire parliament membership are required to work in harmony as they are accountable to the wellbeing of the citizenry.

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