The longer reforms are postponed, the worse the problem becomes which makes remedies even more difficult to implement

The only path out is for all parties, the government and the opposition to work together on a common minimum programme of reforms

The reforms are so difficult that no party will want to even contemplate let alone implement them fearing loss of popularity

Sri Lanka is already in one of the worst economic crises in its history

by Sanath Nanayakkare

We are no longer talking about a crisis that is about to engulf us. We are now in its midst, though not its depths. The hope that the 2022 Budget would give the right signals, has evaporated, Prof. Rohan Samarajiva, a leading policy analyst and an advisor of the Advocata Institute said, last week.

He made these comments at Advocata’s latest event , “A National Consensus for Economic Reforms or “ආර්ථිකයට ජාතික සම්මුතියක්?”.

Professor Samarajiva provided a breakdown of severe economic and social challenges facing the country. His keynote speech stressed on the importance of building a national consensus to implement immediate reforms to tackle a wide range of issues ranging from unsustainable debt to shortages of essential items in the country.

The present macroeconomic instability lies in the failure of the state to implement deep structural reforms to the economy for nearly twenty years. The COVID-19 pandemic has exposed Sri Lanka’s fundamental weaknesses that have plagued the economy for a long period of time. The event brought together politicians representing the main political parties to discuss the importance of a united course of action, to drive Sri Lanka’s economy towards a path of growth.

Prof. Rohan Samarajiva, explained the seriousness of the crisis. “We cannot get out of the crisis without taking some bitter medicine. It is increasingly becoming clear that debt restructuring in the context of an IMF (International Monetary Fund) programme is essential. Unlike in previous IMF programmes, we cannot afford to abandon discipline at the earliest opportunity. Unless we own the reforms, we will keep falling back”. He said, stressing that what we need is a common minimum program of reform agreed by many. ” We need an attention-grabbing action that will credibly communicate the intentions of the national government. Divesting Sri Lankan Airlines on the same lines as Air India is a good candidate. The objective is to protect the taxpayers of this country from having to continually cover the losses of this technically bankrupt state-owned company”. He said, highlighting the importance of immediate measures to improve public finances. The national carrier Sri Lankan makes a daily loss of LKR 129.03 Million rupees. In the last four years of operation it has cost the economy 137 billion in the form of accumulated losses.

MP Vijitha Herath of the JJB, reflected on the need for a national consensus. He remarked that “the Sri Lankan economy is in the ICU (Intensive Care Unit). We are right now using minor reforms to push back certain death. But we need surgery to help the patient”, highlighting the need for deep structural reforms. He further commented that there is space for all parties to come together and agree on such a programme of action for the benefit of the nation. However, he laid out conditions for this including the President shedding his executive powers for a collectively agreed upon period of time.

Prof. Ranjith Bandara, MP, SLPP commented that “We need to prioritise the issues we need to solve. We need to be policy consistent in the long term”. Highlighting another key aspect of policy reform to achieve long term stabilisation.

Trade reform is another area to boost productivity and achieve growth. Dr. Harsha De Silva elaborated on this aspect. “Import substitution mentality should be abandoned. We need to face and compete in the competitive international economy. We have been excluded from the global value chain because of our narrow mindset of import substitution and complete self sufficiency”.

Patali Champika Ranawakaa- MP, SJB, commented on the importance of energy sector reforms to address the present crisis. ” The power issue is the next crisis. If the rain dries out for 6 weeks then we are certainly headed to a big power crisis. Substitutes to generating electricity ( kerosene) are also scarce. This crisis could lead to a rift in society” highlighting the urgency of reforming the energy sector. Dr. Suren Ragavan- MP, SLPP, was of the opinion that ” We need national consensus which capitalises on the unique competencies and skills of the different communities” further emphasising on the need for national reconciliation to come out of the present economic crisis as one country shedding communal differences.