Hopes alone not enough, concrete measures vital – Economists | Sunday Observer
Reviving the economy

Hopes alone not enough, concrete measures vital – Economists

22 May, 2022

Living on hopes alone will not suffice to get over the economic crisis which needs concrete measures on the ground to stimulate the crippled economy, economists told the Sunday Observer Business on Friday.

They said the country has come to the state where finding the ‘next meal’ has become the pressing need for many living a hand to mouth existence.

Former Central Bank Deputy Governor Dr. W.A Wijewardena said if foreign allies come to Sri Lanka’s help that is good and encouraging. But similar sentiments were expressed by Ajith Nivard Cabraal first as State Minister and then as Central Bank Governor.

That became nil as subsequent events revealed. An ally will help if Sri Lanka has a credible and acceptable policy package.

Prime Minister Ranil Wickremesinghe is yet to present such a package. Hence, everything will depend on ‘if tomorrow comes; but we know that tomorrow will never come’; all we can do is to wait patiently undergoing the immeasurable suffering that we are undergoing today. Hopes or promises won’t help; but real world achievements. 

Professor in Economics, University of Colombo, Sirimal Abeyratne said, “I am not surprised by the speech of the Prime Minister. However, as we have been slipping towards this crisis over the years, at least since the end of the war and, seeing the glimpse of the crisis since early 2020, this is the first time that one of our political leaders accepted and spoke about the depth of the crisis honestly. As he categorically mentioned, now the country has come to the point of finding the “next meal” of the day.

Everything that we have been talking about regarding our fragile external finance position and the government’s weak fiscal position was revealed in a few lines by the Prime Minister. Acting upon it requires making corrections regarding internal and external finance positions which is achieving macroeconomic stability and ensuring foreign exchange generation through trade and investment achieving growth momentum.

Addressing the nation last week Premier Wickremesinghe said the economy is in a precarious state and added that although previous regime budgets  projected a revenue of Rs. 2.3 trillion this year the reality would be Rs. 1.6 trillion.

He said the estimated government expenditure for the year is Rs. 3.3 trillion but due to the rise in interest rates and additional expenditure of the former government expenditure would rise to Rs. 4 trillion. The budget deficit for this year is estimated at Rs. 2.4 trillion which is 13% of the GDP.

The premiere said the approved debt ceiling for 2022 was Rs. 3,200 billion. However by the second week of this month the country had spent around Rs.1,950 billion.

He said the Cabinet had decided to increase the approved limit for issuing Treasury Bills from Rs. 3000 billion to 4,000 billion.

The country’s foreign reserves were at USD 7.5 billion in November 2019 but today the Treasury is unable to provide even US$ 1 million. The Ministry of finance is unable to raise US$ 5 million to import gas.

Former Finance Minister Ali Sabry told Parliament early this month that the current Foreign reserves in Sri Lanka is lesser than US$50 million.

First Capital Research (FCR) in an economic outlook report published in the final week of April forecast the growth to come between 0.5 percent to a minus 1.6 percent in 2022, when the economy amid the worst-ever economic crisis faced by the island nation. 

Meanwhile the International Monetary Fund has slashed its expectations for global economic growth over the next two years because of Russia’s invasion of Ukraine, comparing the ripple effects from the conflict to an “earthquake.”

“The economic effects of the war are spreading far and wide,” the organisation said in its latest outlook, published Tuesday.

The IMF now expects the world economy to expand by 3.6% this year and next year, a sharp deceleration from growth of 6.1% last year. The new forecasts reflect downgrades of 0.8 and 0.2 percentage points from its January forecast.