Subsidies, deficit budgeting, and the end of the welfare state - EDITORIAL

Since independence, the Sri Lankan government has implemented a number of welfare state measures, such as subsidizing the costs of food, fuel, transport, providing free education and free health care. These measures were intended to gain electoral popularity, but they also led to a weakening of the economy.

Between 1958 and 1965, the government began to impose import controls, tighten exchange control measures, and increase state intervention in the economy. This was done in an attempt to manage the growing budget deficit.
The period from 1970 to late 1977 was characterized by trade imbalances and foreign exchange shortages. This led to stringent exchange and import control regulations, the rapid growth of state ownership of important segments of the economy, and state monopolies.

The industrial base of the country was widened, but many of the new industries started out as import substitution measures. Sadly, quality standards were never put in place, and the poor quality of products from the newly opened industries meant they could not be marketed outside of Sri Lanka.
The 1970 to 1977 period was also seen as an era of queues and shortages of all manner of goods and services, including medicines. Frustration with the shortages and the low quality of goods and services resulted in the massive political upheaval at the 1977 General Election.

The changed political leadership in 1977 ushered in the liberalization of the economy, and there was an expectation of GDP growth. However, after an initial spurt of 8.4% in 1978, growth tapered off and was reduced to 5.1% by 1982 as a result of internal strife, growing corruption, and an escalating ethnic problem in the country.
However, whatever its shortcomings, the liberalized economy saw the opening up of the health sector and the emergence of multiple private medical institutions and hospitals. Claims that the opening up of the health sector to private institutions would lead to the death of free health services in the country did not materialize.

In reality, it saw a growth of a plethora of medical institutions and medical facilities which were available at a cost. They also reduced the stress on state-provided medical care.
Likewise, the liberalization of the education sector saw the setting up of private fee-levying schools and degree-awarding private institutes affiliated to universities abroad. However, the setting up of private universities in the country, especially medical universities, was opposed by protesting university student organizations and supported by the Government Medical Officers Union (GMOA).

Today, seventy-five years after independence, the exponential growth of corruption, nepotism, and ill-advised economic policies has led Sri Lanka to a state of financial collapse, bankruptcy, and the rapid unravelling of the welfare system we have been used to.
In the aftermath of the economic crisis, the subsidy on fuel has been completely lifted, as has the subsidy on food and transport. While state schools provide free tuition and texts, a majority of students avail themselves of paid private tuition.

Similarly, while we do enjoy the facility of free medical examination and stay at state hospitals, most medicines have to be purchased from private pharmacies and or private hospitals.
According to World Bank statistics quoted by Trading Economics, the ratio of physicians per 1,000 people in Sri Lanka was reported at 1.2291 in 2020. The average for 2020 based on 27 countries was 3.56 doctors per 1,000 people.
In other words, we are faced with a shortage of doctors in the country. With our country’s economy in ruins, there is little possibility of the state’s ability to set up new medical universities to ease this shortage.

An alternative is to commence private medical universities in the country. Today, large numbers of Sri Lankan medical graduates are forced to study abroad as they cannot be accommodated in our medical faculties.
A study by The Sunday Times reveals the cost of studying medicine in Russia or Belarus for a period of six years will be about US$ 120,000 - Rs. 44,500,000 in Sri Lankan currency. Such a move will also save valuable foreign exchange spent by Sri Lankan medical students studying in universities abroad.