PM presents comprehensive reform package to emerge from worst crisis

•  Says Sri Lankan economy would tank 6.9% in 2022 citing IMF forecast 
• Wants to restart economic growth engine from 2024 with some stimulus 
• Expects to balance the budget or achieve primary surplus at least by 2025 
• Proposes slew of policies to overcome impending food crisis 
• Says SL will confront its toughest 3 weeks from now on for oil and gas
• Says SL needs at last US$ 5bn next six months for people to live a normal life
• “We cannot find this money from within. We have to get help from outside.”-PM

Presenting what appears to be a comprehensive reform package, Prime Minister Ranil Wickremesinghe yesterday charted a three-phased path for the country to emerge from the current economic abyss caused by the pandemic, which was then compounded by extremely poor economic management.

The Premier in his speech to parliament made explicit yet again the true depth and breadth of the economic crisis at present, which he said would persist through 2023, before achieving some semblance of economic stability by the end of next year, which could be possible through a multi-pronged package of austerity, fresh borrowings and donor funding, a likely rescue package from the IMF and debt restructuring. 

Wickremesinghe said the government intends to re-open its spigots to provide some stimulus to the economy to take off from 2024 to achieve the growth it badly needs to uplift the people from their current depths and ensure their economic wellbeing. 

“While fighting all these issues, we also must design plans to increase the GDP and implement them,” he said as he expressed hopes of Sri Lanka attaining developed country status at least by 2048 when the country celebrates its centenary since independence.

However, he made clear that the path that he would take would be starkly different from the path taken in the previous two and half years where fiscal profligacy was common, partly leading to the current economic crisis characterised by soaring inflation. 

Instead, he said he expects to balance the budget in 2025 or at least record a surplus in the primary account of the budget, which he once did in a single year during his final five -year stint as the Prime Minister, under the last International Monetary Fund (IMF)-backed programme. 

Nevertheless, citing IMF forecasts for the current year, Wickremesinghe said the economy is projected to tank 6.9 percent in 2022, making the worst dip ever recorded by Sri Lanka. This is much deeper than the 0.4 to 0.5 percent contraction forecasted by the Central Bank for 2022, according to the data cited by Wickremesinghe. 

As he has been doing ever since he was appointed as the Prime Minister, Wickremesinghe took the opportunity even yesterday to anchor the people’s expectations during the next 6 to 18 months at a much lower level citing these scary numbers. 

He said Sri Lanka will confront its toughest three weeks from now on for oil and gas as the government is scrambling to muster dollars required to fund shipments. 

However, allaying fears to some extent, he said the government would strive to provide oil and gas thereafter without a shortage through the year end.  

He said Sri Lanka needs US$ 550 million and US $ 40 million a month respectively for oil and cooking gas imports amid soaring global market prices, making the next six months’ requirement at US$ 3,300 million and US$ 250 million, respectively. 

While there is no major concern in the stocks of medicines and related equipment for the remainder of the year due to the multilateral and bilateral aid received for the sector thus far, food security was highlighted as a matter of concern given the poor harvest in the forgoing Maha season and the weak Yala season due to shortage of fertiliser. 

The government annually spends US$ 600 million for chemical fertiliser imports, which was scuttled due to President Gotabaya Rajapaksa’s flopped organic fertiliser drive, bringing the country into the brink of a famine.  
Under these circumstances, Wickremesinghe said Sri Lanka is compelled to spend US$ 150 million per month to make up for the shortage of food. 

Nevertheless, he said seamless supply of fertiliser remains a higher priority to ensure that local production is revived for both domestic consumption as well as for export crops, and all eyes are now on the coming Maha season, of which the harvest will only be ready from the end of February next year. 

Meanwhile, in a slew of other measures, Wickremesinghe also announced a farmer loan forgiveness programme with immediate effect for those who have arable lands less than two hectares and to provide them with freehold land status in order to relieve them from other challenges stifling them, so that they could put all their efforts into cultivating enough to feed the nation.

What could be expected from the upcoming interim budget, he said, food security for all and increased welfare for the vulnerable and marginalised will be at its heart, as the government has also indicated very clearly of these needs during their talks with the IMF for a rescue package. 

Under these circumstances, he proposed even to provide meals for free if required for those who cannot afford three meals a day and also proposed to parliament to increase the current welfare threshold to at least US$ 900 million per annum from the current US$ 700 million. 

Announcing urban sector home ownership reforms, the Premier also proposed to provide those who currently live on rent, the option to own the units at a concessionary payment scheme. 

While being grateful to India, Japan and China among other bilateral partners for coming to the rescue of Sri Lanka, he renewed his calls to the IMF to provide their assistance and leadership to establish an international donor conference to assist Sri Lanka to emerge from its current depths. 

“Under the circumstances, Sri Lanka requires at least US$ 5.0 billion in the next six months for the people to live a normal life,” he said. 

“Meanwhile, the rupee must also be strengthened in order to ease the hardships on people’s lives. For this purpose, we will at least need another billion dollars. This means, we need at least US$ 6.0 billion in the next six months in order to run the economy to prevent a collapse.

We cannot find this money from within. We have to get help from outside,” he added vowing that Sri Lanka will never renege on its loans to its foreign creditors as work on debt restructuring has begun. 

He therefore made a clarion call from all people’s representatives devoid of their ideological differences to join hands to bring about urgent and crucial reforms to the governance structure, economic management, State sector and State-owned enterprises, and the watchdogs such as the Bribery Commission and the likes to deliver the good political and economic governance people in Sri Lanka are yearning for. 
“We are all in this together.” Wickremesinghe stressed. 

“Therefore I request from everyone in this House for your support to deliver on the economic, political, social and State sector reforms. And once we come out of this crisis in a specified time frame, we can then go back and do our politics according to our political beliefs and agendas,” he said.