CCC calls for broad economic recovery plan

The Chamber believes that the proposed measures would facilitate Sri Lanka to achieve a ‘U-shaped’ economic recovery at national average level where Sri Lanka regains its economic growth rate within 6-8 months of COVID-19 exit

• Says it should be based on shared vision of public and private sectors
• Proposes to set up Economic Recovery Task Force headed by President
• Directional budgetary provision of 2.5-3.0% of GDP for holistic economic recovery 
• Calls for digitisation of government services for access by citizens and biz
• Proposes to formulate Winter 2020/21 targeting specific markets to revive tourism
• Wants govt. to engage with multilateral and bilateral funders for loan moratoriums

The Ceylon Chamber of Commerce (CCC) has called for a broad economic recovery plan based on a shared vision of public and private sectors aimed at an accelerated post-COVID-19 recovery of the country’s economy.
The CCC recently submitted its recommendation to President Gotabaya Rajapaksa for a proposed broad economic recovery plan, which includes a comprehensive recovery strategy and a supporting stimulus package targeting to return to growth path within 6-8 months.

“We believe that an explicit way forward and underlying comfort of stimulus support will provide confidence to internal and external stakeholders of Sri Lanka’s economy,” CCC stated. The Chamber outlined that publication of such shared vision in terms of livelihood parameters and economic recovery indices would allow both private and public sectors to commit to their roles with a clear planning and execution horizon.

The Chamber mooted the establishment of an Economic Recovery Task Force (ERTF) headed by President Rajapaksa and comprising senior government officials and private sector representation through the CCC, supplemented with representation of economic think tanks and local and international experts.

A key highlight among the CCC’s proposals was to setup a directional budgetary provision of 2.5 percent-3.0 percent of GDP (Rs.375-450 billion) to facilitate a holistic economic recovery.

The Chamber pointed out that the stimulus measures announced to-date amount to approximately 0.6 percent of the GDP and are likely to be inadequate. 

 “The rapid relief through cash disbursements and credit facilities is commendable and much needed. These measures may however be inadequate to facilitate a holistic economic recovery. Our study of 18 countries show that on average, countries have committed about 3.4 percent of GDP as of end March 2020,” the CCC pointed out.
In particular, the Chamber emphasised for an underlying focus on livelihoods while addressing the sustenance of large, medium and small enterprise in their capacity as the providers of sustained employment and drivers of domestic economic activity with respect to the scope of the stimulus package.

The Chamber also called for a comprehensive digitisation of government services for access by citizens and businesses via the acceleration of ongoing digitization efforts.

In order to revive the country’s tourism industry, it was proposed to formulate ‘Winter 2020/21 Visit Sri Lanka Campaign’ targeting specific markets to cater to pent up demand for overseas travel amid preference for less affected Indian Ocean destinations.

The CCC stressed that the strategy should be well funded and designed in alignment with COVID-19 exit planning of airlines including the national carrier.

Further, the government is also urged to consider employment assistance schemes for cash-strapped firms, in particular for those in export oriented and tourism related sectors as well as their domestic supply chains, as a medium-term measures.

The Chamber believes that the proposed measures would facilitate Sri Lanka to achieve a ‘U-shaped’ economic recovery at national average level where Sri Lanka regains its economic growth rate within 6-8 months of COVID-19 exit, while aiming for a ‘V-shaped’ recovery in the longer run.

In order to secure the country’s macro-economic stability amidst challenge of funding the economic recovery strategy on the backdrop of the global economic environment, the Chamber prescribed the government to engage with multi-lateral and bilateral lenders to obtain loan moratoriums, a greater engagement with the IMF and other multilateral agencies as well as exploring potential swap lines to ease pressure on the rupee and the country’s BOP.

Further, the Chamber backed the move by the Central Bank (CB) to provide financing to the government by purchasing government securities.

“With aggregate demand low at this point and expected to continue, such a measure is not expected to have a significant impact on the economy by way of increased inflation. The CB can also consider converting a part of its external dollar reserves to rupees to finance the purchase of government securities,” it elaborated.