Sri Lanka optimistically looks ahead to 2024, which the Government envisages will be a year of stability and recovery, aiming to get debt restructuring complete and to say farewell to bankruptcy.
The outlook that many ordinary Sri Lankans perceive for 2024 differs significantly from the view the Government has, and rightfully so. With more austerity measures planned, and no one being actively held responsible for the economic downfall of Sri Lanka, despite a landmark Supreme Court order on the matter, how can the common man expect “change for the better”. The fact remains that, while some segments of the Government remain convinced, a majority of Sri Lanka, doesn’t buy the “2024 recovery” story. This is because the Government has not been transparent enough, nor made a consolidated effort to explain the rationale behind its policies.
For external observers who are new “Sri Lanka watchers” the need for the proposed austerity measures, and the proposed restructuring plans may be convincing. However, they need to place these policy changes in context. Sri Lanka, which already had weak state institutions, and poor governance for decades, has following an unprecedented economic crisis, political upheaval and having survived a pandemic that could have been better managed, is asking the citizenry to “tighten their belts” even more. Austerity measures also come at a time, where the trust deficit between the public, the state apparatus and the political elites are at its worst.
A survey conducted by the Department of Census and Statistics (DCS) has found that the impact of the economic crisis alone left a profound impact on household finances. The study titled “Household Survey on Impact of Economic Crisis – 2023” found that 60.5% of households have reported a decrease in their total income. While another 33.9% saw no change despite the crisis, despite inflation and cost-of-living soaring. Some have tried to cope, while many have not been able to do so. The study by the DCS found that with income decline, households have employed various coping strategies, with 6.6% turning to secondary jobs or additional income sources. Notably, 73.6% did not adopt specific coping strategies. The economic crisis also led to changes in household expenditure, with 3.6% reporting a decrease, 91.1% indicating an increase, and 5.3% noting no change. World Bank and think tanks have pointed out that Sri Lanka's economic crisis has pushed Sri Lankans into poverty. LirneAsia, a regional policy research organisation, stated that the number of poor Sri Lankans had increased to 7 million this year, from 3 million in 2019, before the pandemic hit. The latest figure is equivalent to about 31% of the population.
As such, it is vital for the Government, state institutions and the multinational agencies which assist Sri Lanka to be transparent, and explain policy changes to the masses who have already suffered much. While it is understandable that the Government needs to move quickly on some policy changes, railroading them with little understanding for the grassroot level, is a dangerous approach. As more Sri Lankans endure more hardships for a longer period without a good understanding as to why such is necessary, the same push factors which lead to political instability and civil disobedience of 2022, can reignite. Sri Lanka is still very much a powder keg. And if the Government thinks it can use heavy handed tactics and “truncheon discipline” to hold protesters at bay in 2024, they may be in for a rude awakening.
The Government has used the urgency for fiscal and state sector reforms, to avoid explaining why the austerity measures are needed. The Government also uses the urgency of needing to improve state revenue to railroad tax policy changes, and avoid criticism. The Government has also conveniently avoided questions about long-term tax evasion by key industry tycoons, long standing unpaid loans by top companies and business personalities.
Therefore, it is paramount that adequate space is given for a robust policy discussion, and the Government needs to make a consolidated effort to explain new national policies to the public. There also has to be some policy consensus as well. Without such, a wide segment of the Sri Lankan population remains in a tinderbox, untrustworthy of the Government, and extremely vulnerable, and in 2024 will face more austerity measures. How they react to such measures, could decide if Sri Lanka makes advances or retreats next year.