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Direction Sri Lanka calls for independent National Planning Commission

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Civil society grouping Direction Sri Lanka has said that the country required an Independent National Planning Commission.

The following is the text of a statement issued by Direction Sri Lanka: “It is the considered position of Direction Sri Lanka that the neglect of evidence-based national planning in the Country now for over four decades has resulted in a highly distorted, imbalanced and unsustainable economy, leading to the collapse of many industries established after independence, compounded by social polarisation in the key social sectors such as Education, Transportation and Health. As apposite illustrations; • A fairly equitable system of education gave way to an unequal system of education where the well to do moved away their children from public education to private education dominated by private and public schools; • A mostly public transportation system gave way to a polarised system dominated by private vehicles which in turn contributed to a deterioration of public transport services in the Country; These and other changes encouraged many people in all parts of the Country to look for wage employment abroad, particularly in oil-rich Middle Eastern countries. With a widening of the trade gap due to rapidly increasing industrial imports, labour migration soon then became the leading exchange earner for the Country.

Labour migration post – 1977 resulted in labour shortages in vital sectors like agriculture forcing many small holding farmers to abandon labour intensive crop production in rural areas. Large numbers of school leavers also migrated to urban areas as informal sector workers, construction workers and three – wheeler drivers. Meanwhile, the importation of cheap substitutes for local products from many rural industries, eventually led to a decline of these industries. People engaged in such rural production activities eventually moved into other economic pursuits in urban areas. All of the above developments contributed to the loss of the rural – urban balance in population distribution, leading to increasing urbanisation, particularly in the Western Province. Many people migrated to this region not only for earning higher incomes but also to enjoy better amenities and services. Another significant development under post-1977 neo-liberal reforms was the compounding problem of public finance due to low tax regimes that were introduced. State revenue that was as high as 40% of GDP in the early 1970’s came down to about 12% of GDP, making it impossible to maintain a high level of public investment in critical areas such as education, health and public transport. The response of the governments at the time was to invite private sector investment. These investors established private hospitals, international schools and imported all types of vehicles for private transport and the roads were quickly filled with cars and other private vehicles. The rich and the other higher income generators began to use private services, while the poor had to manage with underfunded public services. Meanwhile, there was no diversification of export industries and the foreign income of the Country came from a few exports such as garments and tea. This was grossly inadequate to pay for the rapidly increasing import bill.

The easiest thing for successive governments at the time was to promote the export of labour. Foreign remittances from workers in the Middle East became the largest single exchange earner, reaching about USD 7.5 Billion and covered about 70% of the trade deficit. Tourism was identified as the next foreign exchange earner, reaching approximately USD 5 Billion at its peak. What was worse came soon thereafter, which was borrowing money from foreign sources to invest in projects, several of which subsequently became ‘white elephants’, not generating any return for the investment but adding to the rapidly growing foreign debt burden. With the onset of the pandemic in 2020 and traditional foreign inflows substantially declining, the situation aggravated to where the Government could not even pay for essential imports. To compound matters, the Government of President Gotabaya Rajapaksa made several policy blunders including the ban on fertiliser imports and drastic reduction of income taxes. As is now well understood, it is the developments outlined above that eventually prepared the ground for the unprecedented economic crisis that Sri Lanka is presently facing. What is clear from the above is that it has been due to a series of public policy failures and the mismanagement of economic and social affairs of the Country for over four decades that led to the present crisis. It is the considered view of Direction Sri Lanka that the absence of a well constituted policy planning body to provide guidance (like the National Planning Council that existed up until 1977 which accommodated the best brains in the relevant fields) and the resultant lack of policy coherence across sectors paved the way for a highly distorted, imbalanced and unsustainable economy and society in Sri Lanka.

In such a context, political leaders and their cronies drawn from their own political circles continued to mismanage the economy and the social sectors leading to the present disastrous situation in the Country. It is in these attendant circumstances that Direction Sri Lanka identifies the urgent need to establish an independent National Planning Commission with necessary legal sanction and adequate empowerment as soon as possible in order to take control over the national policy making process and come up with a recovery plan based on the best evidence available and through objective and unbiased decision making. Direction Sri Lanka calls upon the President, the Government, the Opposition and all Political Parties represented in Parliament to champion the cause of setting up an Independent National Planning Commission (with necessary legal sanction and adequate empowerment) that would be the apex authority in formulating and presenting national policies that would run across all governments and the political divide for a designated period of time.



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Sri Lanka’s foreign reserves up by USD 2billion over the past year – Acting Finance Minister

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Acting Finance Minister Ranjith Siyambalapitiya during a press conference held today (21) at the Presidential Media Center, focusing on the theme of ‘Collective Path to a Stable Country’ said that over the past year, the government successfully increased the country’s foreign reserves from 1.8 billion dollars to 3.8 billion dollars.

He added that in August 2022, the exchange rate stood at Rs. 361 per dollar, but by August 2023, one dollar could be acquired for Rs. 321. This shift is not the result of artificial control but rather a reflection of the rupee’s value adjusting in response to supply and demand for the dollar, which holds significant economic importance.

The interest rate for deposits, previously at 14% in 2022, has been lowered to 11%, while the loan interest rate, previously at 15.5%, has been reduced to 12% this year. Notably, last year, the primary account deficit was Rs. -247 billion, but this year it has turned into a surplus of Rs. 27 billion. This marks the first surplus in the primary account balance in over 40 years.

Tourist arrivals, which numbered 496,430 in 2022, have surged to 904,318 during the first two quarters of this year. Equally impressive is the growth in tourism earnings, which rose from 832.6 million US dollars in 2022 to 1,304.5 million US dollars in the first two quarters of this year, reflecting a remarkable 56.7% increase compared to the previous year.

In the past year, the amount of money remitted by Sri Lankans living abroad to Sri Lanka has surged from 2,214.8 million US dollars to 3,862.7 million US dollars this year, marking a remarkable 74.4% increase according to data from the Ministry of Finance.

On August 1, 2022, the QR code system was introduced as a measure to manage petroleum demand due to foreign exchange shortages. This led to a significant disparity between normal demand and supply, resulting in a notable increase in diesel consumption by 28% and petrol consumption by 83% in June 2023, when the QR system was partially relaxed. However, as of September 1, the QR code system, which directly impacts economic growth, has been completely lifted.

Upon assuming office, President Ranil Wickremesinghe faced a daunting challenge of addressing a 14-hour power outage, which had a direct impact on the economy. Presently, the government ensures a continuous and stable electricity supply to the population.

As of August 23, 2023, there were 1467 imported goods banned due to foreign exchange shortages. Currently, the ban applies to only 279 items. Furthermore, the import of vehicles, which had been halted in 2020, now includes buses and trucks for public transport.

In April 2022, the country faced difficulties in meeting its debt obligations. However, the government has since secured the first installment under the International Monetary Fund’s Extended Credit Scheme, contributing to stabilizing the country’s economy compared to the previous year.

(PMC)

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President Wickremesinghe meets US President Joe Biden in New York

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President Joe Biden and first lady Jill Biden hosted President Ranil Wickremesinghe and first lady Maithri Wickremesinghe for dinner on Thursday

President Joe Biden of the United States and President Ranil Wickremesinghe engaged in a cordial meeting  in New York on Thursday (20).

The high-profile meeting took place amidst a lavish dinner hosted by President Biden, for all the heads of state who had participated in the 78th session of the United Nations General Assembly.

 

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Ministerial Consultative Committee unanimously consent to canceling the nominations submitted for the Local Government Elections

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The Ministerial Consultative Committee on Public Administration, Home Affairs, Provincial Councils & Local Government chaired by  Prime Minister Dinesh Gunawardena as well as the Minister of Public Administration, Home Affairs, Provincial Councils and Local Government  unanimously consented to cancel the nominations submitted for the Local Government Elections given that those who have submitted nominations have faced great difficulties due to the postponement of the elections.

 

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