26 March 2024 12:00 am Views - 420
If Sri Lanka continues to rely on borrowing to address the imbalance between imports and exports, the nation will inevitably confront another economic crisis within a decade, says President Ranil Wickremesinghe. He made these remarks during the inauguration ceremony of Bodhigara and Golden Fence, constructed near the historic Mangedara Tempita Viharaya in Kegalle on March 20.
In the same week, the International Monetary Fund (IMF), on the advice of which Sri Lanka is currently running the economy gave a similar warning on the future of the economy. IMF’s Senior Mission Chief for Sri Lanka Peter Breuer at the media briefing following the conclusion of the Second Review of the $3 billion four-year Extended Fund Facility (EFF) programme said “We see some green shoots in the economy, and that’s the beginning of a virtuous cycle and we have to keep it there. It is a knife edge and could easily go back to a vicious cycle, and that’s what we want to prevent,”
The President during his speech explained the government’s immediate plans to strengthen the financial status of the country. Concurrently to the staff-level discussions with the IMF which were concluded last week discussions with China were ongoing, and discussions with private creditors are underway, he said. “Following the declaration of our bankruptcy-free status, a joint meeting of the World Bank and the IMF is planned for April.”
He expressed hope that once all these are completed by June and July, Sri Lanka would be capable of repaying its debts, which will lead to the return of aid money that the country hasn’t received yet and an increase in the country’s dollar reserves. He was also hopeful that many banks and companies that are hesitant to engage in business with us will resume business with us. “Consequently, our available funds are expected to increase.”
When moving from bankruptcy to “normalcy” these activities guided by the IMF are inevitable and will offer some respite to the pressure on the economy and the hardships undergone by the people. However, what the government is expecting through these activities is loans which are going to be added to the existing debt burden that we have to repay. Wickremesinghe also accepts this fact by claiming “stabilizing the country’s economy alone will not solve all our problems because we are currently reliant on imports, leading to a trade imbalance where exports are lower than imports.” This gap, he said is often bridged through foreign loans, which sets us up for another economic crisis in about a decade.
Then he proposes his solution. “To prevent such a scenario, I plan to hold discussions with the World Bank, the Asian Development Bank, and the International Monetary Fund to initiate a programme aimed at swiftly transitioning the country towards an export-oriented economy.”
Yet, we cannot expect an export-oriented development plan from these banks. It should be a homegrown one which is always emphasized by the experts. Do we have one or are we going to prepare one?
It is pertinent to remind the government of the “National Transformation Roadmap” built on “four key pillars” and presented by President Wickremesinghe in a special statement to the nation on June 1, last year. In that, he said “Our goal is to transform Sri Lanka into an export-oriented economy that is globally recognized, following the successful models of countries like South Korea and Singapore… “We aim to prioritize modern and sustainable efforts such as renewable energy, green hydrogen, and digitization. We can draw inspiration from the Andhra region of India.
“Over the next few months, we will make a special invitation to the private sector to submit their own business proposals that align with our vision of modernization and sustainability…”.To ensure the effective implementation of these business proposals, we will introduce a new system called the Lab methodology…” Under the Lab approach, we will bring together Government Ministers, government officials, subject matter experts, and key representatives from the private sector to collaboratively engage in detailed discussions over a period of six weeks…”Following extensive efforts, we anticipate revealing the National Reorganization Plan during the final quarter of this year (2023).”
What happened to this road map? It is high time to revisit it, if it is not abandoned.