The government was taking steps to stabilise the economy and ensure fair conditions for paddy farmers, Senior Advisor to the President on Economic Affairs and Finance, Prof. Anil Jayantha Fernando, told The Island on Wednesday (06).

Addressing the challenges faced by the agricultural sector, Fernando noted that Sri Lanka’s rice market was dominated by a few major players. “The government has to make temporary interventions until the conditions for a competitive market are established,” Fernando said, adding, “We are already planning to purchase substantial amounts of paddy from farmers, in the next harvest season, to support them and prevent market manipulation.”

Prof. Fernando pointed out that the government has extended a fertiliser subsidy to paddy farmers, with the expectation that yields will improve in the coming seasons. He questioned the logic of leaving market conditions unchecked when a few large buyers acquire significant stocks, controlling prices at the expense of farmers. “Can we do nothing by saying this is how the invisible hand of the market operates?” he asked, stressing the need for government intervention to ensure farmers can at least recover production costs.

Addressing broader economic policies, Fernando asserted that the National People’s Power (NPP) government is steering the economy in the right direction, although he cautioned that visible results may take time. “When we took over, we recognised the economic challenges left by the previous administration. We identified key priority areas, though they may not always align with the public or media’s immediate concerns,” he said, adding that the focus remains on strengthening productive sectors and restoring price stability in the long run.

One significant challenge, according to Fernando, is rebuilding trust with both local and international investors. “We’ve made progress, but winning confidence back takes time,” he explained. Additionally, Fernando highlighted the lack of coordination among state agencies, which has hampered development efforts. In response, the government has appointed Dr. Hans Wijayasuriya, CEO of Axiata’s Telecommunications Business, as Chief Advisor to the President on Digital Economy. Wijayasuriya is tasked with creating common databases and a centralised platform to streamline efforts across sectors.

Regarding the country’s limited land resources, Fernando emphasised the need for scientific land management and criticised the stagnation in agricultural productivity over the past 40 years. National physical plans need to be updated, he argued, to ensure sustainable land use.

In response to allegations of money printing, Fernando clarified that the government is not engaged in this practice. He explained that what some media outlets refer to as “money printing” is actually a system through which the Central Bank temporarily provides funds to banks, which are returned within a day or a week. This mechanism is aimed at gradually lowering interest rates in the money market to stimulate the economy, he said. “This is not the same as the Central Bank buying Treasury bills and lending to the government. That practice has been completely halted.”

Explaining the rationale behind this approach, Fernando outlined how daily liquidity management supports the banking sector. “If the Central Bank doesn’t do this, the banking system might collapse,” he warned, noting that liquidity imbalances among banks require a regulatory solution to prevent systemic risk.

Fernando also addressed recent criticisms from opposition figures regarding fuel prices. He explained that Sri Lanka’s debt restructuring agreement with the International Monetary Fund (IMF) mandates an increase in government revenue to 15% of GDP by 2025. “Fuel taxes are essential for meeting this revenue target,” he said, adding, “If we can demonstrate to the IMF that we are on the right track, we may consider tax reductions in the future.”

In summary, Fernando outlined the government’s multi-pronged approach to stabilise the economy, support paddy farmers, and maintain fiscal discipline. However, he cautioned that the public might need to wait for significant improvements, as the NPP government’s policies are designed for long-term recovery rather than immediate relief. (RK)