- State Finance Min. Shehan Semasinghe & COPF Chair MP Dr. Harsha de Silva debate the strengthening of aspects of economic revival amidst rising poverty
Even though Sri Lanka has attained some level of economic stability, it is not a guarantee for the complete economic revival that the country needs. While the country continues the economic recovery plans, various indirect adverse impacts of that plan, such as increasing poverty, should not be overlooked.
These pros and cons of the present economic recovery plan, and how the overall plan, which has a lot to do with the International Monetary Fund (IMF), needs to be improved, were discussed during a recent discussion held in Colombo. Titled ‘Is There an Alternative? – An Inquiry into the Economic Crisis and Solutions’, the event was organised by a group of civil society organisations named We Have a Dream. A book on the economic crisis and the recovery plan authored by senior journalist C.J. Amaratunga was also launched at the event.
Among those who spoke at the event were Finance State Minister Shehan Semasinghe and Committee on Public Finance (COPF) Chairperson MP Dr. Harsha de Silva.
Difficult yet essential decisions
Both speakers acknowledged that some of the decisions required for economic revival are difficult in terms of the resultant adverse impacts, the necessary legal and policy frameworks, and implementation related challenges. However, they had diverse opinions about the economic recovery related approach that Sri Lanka has adopted.
Semasinghe noted that in a context where some level of economic stability has been achieved, attention has been drawn away from the economic crisis due to the concerns relating to elections. He explained that certain unprecedented decisions taken by the present Government were questioned by various parties, adding that had those decisions not been taken, there would not have been any space to even consider achieving the economic stability that the country has achieved. He further opined that the prevailing economic stability would not have been possible if there was no political stability within the Parliament, especially when it came to Parliamentarians’ backing for laws and regulations that were presented to the Parliament. “Understandings and agreements reached with the IMF, debt restructuring related bilateral talks with Sri Lanka’s creditors, and working in a manner that does not damage the confidence that those parties have kept in Sri Lanka as far as reforms are concerned were the key to achieving this progress. In the reforms processes, the public were also economically affected to a certain extent. But, if we didn’t take those decisions that affected the people in the short run, I don’t think that it would have been possible to achieve this economic stability. I think that economically, we have a suitable plan.”
He opined that strengthening and continuing the existing plan will decide whether the economic hardships experienced in the 2022 era would recur or not. According to him, it would be impossible to change the present course of action without triggering another crisis. He also spoke about the importance of Sri Lanka’s economic recovery plan having international recognition, and it being more practical than popular. “At no point in our country were specific and target oriented plans implemented within a law or a framework,” he opined, adding that it was a reason for the country’s downfall.
Econ. Transformation Bill
The recently tabled Economic Transformation Bill was a key matter discussed during the event. While there was some consensus about the necessity of a legal framework to transform the present economic structure, especially when it comes to revenue and debt management, the importance of improving the Bill was also highlighted.
In this regard, Semasinghe said: “This Bill was presented in a bid to prevent the recurrence of this type of a situation in the country. Even if we as a country became stronger through economic reforms, there are global influences which we may have to face. Such were experienced on various instances, and examples are the Covid-19 pandemic, conflicts between various countries, and the crisis in the Middle East. Therefore, it is extremely crucial to create an economy that could withstand such challenges in the future.”
He pointed out that so far, the country has not worked in accordance with a specific plan on revenue and expenses, which he said has affected the economy. Having had economic stability for a year, he said, is not a guarantee for a better future. According to him, among the matters that require attention in this regard are how Sri Lanka maintains its debts, at what levels should the country pay attention to handling money, and also how the country should maintain debt servicing. “The Bill is a Bill with such specific goals. If it needs to be improved, we expect that representatives of the public would present their opinions to various Parliamentary committees that would be discussing this Bill. Instead of suggesting amendments to this through a political perspective, it is important to take steps as a country to further improve this. Otherwise, in 10-15 years, the country will have an economy that depends on imports and does not pay attention to exports, and will be on its way to a crisis.”
Meanwhile, speaking about the said Bill, Dr. de Silva pointed out that the Bill contains certain provisions which he said are ‘ad-hoc’. He added that the numerical targets mentioned in the Bill, which he said were a result of various conditions imposed by the IMF on Sri Lanka, could be further discussed in order to be improved. “There are a lot of good things in the Bill. However, there are also a lot of things that need to be corrected,” he said, drawing attention to certain contradictories in the Bill.
Sustainable economic recovery
Dr. de Silva acknowledged that massive economic reforms are necessary for economic revival. His opinion was that at the same time, attention must also be paid to ensuring that those reforms do not adversely impact the public. He said that what is necessary is a combination of both a market based economy, and political freedom, justice and social fairness. Therefore, while the idea of economic revival is agreeable, balancing the two aspects is important, according to Dr. de Silva. “First of all, we need to build a successful institutional system,” he said. With regard to ensuring that the economic recovery plan is not just a plan to deal with the economic crisis but is also a tool that helps deal with the factors that have created an economic crisis, he said: “The key to creating a successful economic system is having a plan to eradicate corruption. In fact, the biggest political discussion is also about stealing, corruption, and fraud. We need to focus on eradicating this, and no plan can materialise without doing it (first). What politicians can do in this regard is create the transparent and accountable institutional framework necessary to fight corruption. The Government should fulfil this basic need.”
Acknowledging that the country has achieved some level of economic stability, Dr. de Silva pointed out the indirect impacts of the crisis that do not receive attention in the said economic stability: “There is another side to this. Back then, there were no queues to get cooking gas and fuel. There were only three million people in poverty. Today, again, there are no queues to get cooking gas and fuel. However, today, seven million people are in poverty. Poverty has increased more than two times. This is the new status quo. Attention must be paid to the fact that achieving economic stability has affected the public.”
He pointed out four key factors concerning economic revival. They are: managing the debt crisis, stabilising the financial system and exchange rates, improving revenue, and controlling expenses. With regard to State revenue, Dr. de Silva opined that increasing State revenue should not be done merely through increasing taxes. He noted that more attention should be paid to streamlining and strengthening the tax net and the process of collecting tax revenue, than increasing the tax rates. The use of technology was also flagged by Dr. de Silva.