Sri Lanka becomes regional example for how an economy should ‘not’ be managed

Sri Lanka is becoming a popular example in the South Asian region as to how an economy should ‘not’ be managed with poor decision making that supports political agendas instead of prioritising the wellbeing of the people.

In the wake of Sri Lanka’s economic crisis having spiralled out of control, economists and think tanks in the region are highlighting the island nation as an example that should not be followed in the path towards economic development and growth.

One such nation that has been warned and urged to learn from the mistakes of Sri Lanka is Nepal.
The Nepal Institute for International Cooperation and Engagement (NIICE), an independent and apolitical think-tank asserted that the crisis in Sri Lanka has sent an important message to developing countries like Nepal, which have unstable politics and weak external sectors.

“The Sri Lankan experience shows the world what happens when politicians make the wrong choices. Sri Lanka is also a good example of how the commitments made by the big political parties in the last election for cheap popularity have put the overall economy in jeopardy and how it could turn into a nightmare for the next election, “NIICE said in a commentary recently.

As the two nations share many similarities, such as being dependent on tourism, remittances, external debt, grants, and imports, Nepal should also avoid cheap popularity in the upcoming local and provincial election that can aggravate the economic crisis, stressed NIICE.

It stressed that policymakers need to understand that macroeconomic indicators become negative as budget deficits become higher when tax rates are reduced unexpectedly.

Calling on the Nepalese government to learn from the mistakes of Sri Lanka, the landlocked country was urged to refrain from acquiring huge loans for unproductive sectors and getting caught in a debt trap that can challenge its economy. (SAA)