By Rathindra Kuruwita

Until Sri Lanka has access to international money markets, which will allow it to ensure there are no short-term dollar shortages, relaxing the restrictions on vehicle imports is out of the question, Professor in Economics at the Department of Economics at Colombo University, Dr. Priyanga Dunusinghe, said.

Even then, relaxing vehicle imports should be done in a slow and methodical manner, he said.

“A lot of people ask me whether I can give a date when this could be. However, giving a timeline is difficult because we have not yet managed to restructure our international debt. The government says this can be done in the middle of the year. Once the government manages that, we will have access to bilateral credit. After a while, we might be able to slowly relax restrictions on imports.”

Prof. Dunusinghe said people must not expect our economy to return to 2018 levels, soon after foreign debt is restructured.

He added that even if the government succeeds in foreign debt restructuring, it is improbable that the rupee will strengthen. It is likely that the rupee will hover around the current rates or be in a slightly depreciated state.

“We see increased economic activity, and with this, the demand for imports will rise. However, given that market mechanisms govern the exchange rate, I don’t see large fluctuations.”

Even with recent hikes, the tax revenue of the government is not adequate to cover the expenses. When the daily revenue is about 11 billion rupees, the daily expenditure is around 19 billion rupees, he said.

“The government needs to reduce its expenditure. It should also take steps to collect the taxes it can. The government says it has stabilised the economy, but many fear that it’s not a ‘stabilisation’ that can lead to growth in the medium term.”

Prof. Dunusinghe said Sri Lankans see Ministers still enjoying perks. They have not reduced their expenditure. There are also many issues with the procurement process.

Recently, Verite Research issued a report, and they said Sri Lanka’s procurement guidelines don’t allow for blacklisting contractors/suppliers involved in fraud and corruption, and the compliance gap is shown by the failure to maintan a blacklist for defaulting contractors.

“We are the only South Asian country that doesn’t blacklist contractors/suppliers involved in fraud and corruption. There are so many instances where companies provide low-quality goods to government agencies. We see so many substandard constructions. Things are increasingly getting worse. Companies make profit by selling a 100-rupee item at 250 to the government and make profit. How can the government reduce expenditures like this? If we make the procurement process transparent, a lot of waste can be reduced.”

Prof. Dunusinghe said corruption and bribery have to be stopped for the country to go forward. Government, as well as senior bureaucrats, have a significant role to play.

He added that Sri Lanka has a great potential for tourism. However, the country should be mindful that the industry seems to face extremely challenging situations once every three to four years.

“This is like a bubble that can burst. We should focus on tourism, but we must also focus on boosting exports. Remittances are also important, but overdependence on them becomes a curse. In recent years, we have become increasingly dependent on remittances and tourism, and we don’t focus on anything else. We don’t think about boosting exports. We send our youth and professionals abroad, hoping they will send a lot of money. This is how we plan on running our economy. Let me be clear: no country has developed from remittances.”

Prof. Dunusinghe said a strong export sector, based on correct Foreign Direct investment (FDI), is the path for development for Sri Lanka.

“Depending on tourism alone is also very risky. We need to diversify,” he said.