It was reported that the trade deficit, to end August 2020, was US $ 3.8 billion, compared with US$ 4.8 billion to end August 2019. There is no doubt that the current reforms will provide solutions to some of the structural issues in the economy; yet there is a need to address the country’s emerging macroeconomic vulnerabilities.
While improving trade balance with increased focus on exports, import substitution and restricting non-essential imports will help to resolve the debt service issue in the medium term, a failure to raise foreign currency funding, in the near future, may retard economic growth prospects. Even the Government’s medium-term development programme could get destabilized. The country would then be compelled to ask lending institutions to restructure its debt portfolio in order to avoid Sovereign default.
The recent Sovereign rating downgrade is one example of how perceived and potential macroeconomic vulnerabilities could provide opportunities for malicious forces to destabilize the country’s ongoing progress. Manufacturing and service sectors are badly affected and the agriculture sub-sector could only contribute 10% to the GDP, although such revenues are getting tricked-down to most vulnerable social groups in the bottom of the pyramid.
It is essential that all efforts are taken to ensure that ground level improvements are reflected in GDP estimates, on which other key ratios of the economy depend. GDP estimates of Sri Lanka have been constantly subject to criticism as being unable to capture new economic activities, such as the digital economy, home gardening and Port City related developments, etc.
Several indicators, such as the budget deficit and debt levels, are monitored by rating agencies and foreign investors as a ratio of GDP. While rectifying anomalies in GDP compilation is critical, there is an increasing need to address these factors with a medium-term fiscal consolidation programme, as envisaged in ‘Vistas of Prosperity’.
Economic indicators to enhance investor climate
The Department of Census and Statistics, which calculates the GDP numbers, would have to make an attempt to capture all value-added services during the partially closed down months. Nevertheless, it is expected that the 2nd quarter GDP growth rate is in negative and it could be a substantially higher negative growth, say in double digit. A large adverse GDP growth estimate in Q2 could result in a large negative growth during the year. It was reported recently, in the prestigious ‘Economist’ magazine, that except China, all other countries have recorded negative growth during the second quarter ’20. This would mean that all the socio-economic ratios, such as debt to GDP, government budget deficit, current account deficit, per capita income and GDP growth rate itself will record huge adverse variances. The level of gross official foreign reserves, coming down to below US$ 6 billion, by end December 20, will create issues as it could be equivalent to just four months of imports.
The presentation of the National Budget 2020 will provide the Sri Lankan Government the best opportunity to spell out its strategies to address these key macroeconomic vulnerabilities, allay the fears of investors and creditors, and decisively tackle adverse publicity spread.
Until international capital markets commence normal operations, it may not be that easy to raise international sovereign bonds. Therefore, continuous engagement with friendly countries, and multilateral agencies, of which we are members, is essential in order to raise required funding needed for debt servicing and continue development activities. Alternatively, it is important to explore possibilities of raising bi-lateral – government to government – loans. The writer is of the view that along with the fiscal consolidation, there is an urgent need to provide fiscal stimulus packages, which would require funds even to meet the upcoming significant foreign debt service repayments. In the circumstances, it is prudent to take immediate measures to obtain at least US $ 1 billion to enhance foreign currency reserves.
Territorial mindset, a recipe for disaster!
By Chani Imbulgoda
I recall a documentary on animal life on a TV channel. Describing the behaviour of lions, a caretaker said, “These lions are from the Dehiwala zoo. They are vigilant of other lions entering their territory, if one crosses the boundary they fight to death. They won’t like other lions entering their territory.” The announcer remarked, “Just like humans!”
Exactly, just like us. In the animal kingdom the survival of the fittest is the norm and not crossing others’ territory is a rule of thumb. Since the beginning of human civilisation there have been tales of battles. The Trojan war, Alexander’s, Caesar’s, Napoleon’s wars degraded human values. Saddled with cynicism, hostility and jealousy, we humans, like beasts, are at war with ‘others’ who do not fit into our ideologies or our comfort zones. History is a storehouse of tales of human battles over territories in the guise of civilisation. So-called civilisation itself was won over battles. In the local context, the native ‘Yakkhas’ were massacred by Prince Vijaya to develop ‘Sinhale’. America, Canada, Australia inherit a dark history of looting territories of indigenous people in the name of civilisation. Portugal, Spain, Britain tasted the blood of their ‘colonial slaves’. Centuries later, we have not yet shed our primary animal instincts. We battle tooth and nail to protect our territories, our autonomy, values and interests all in the guise of civilised behaviour.
We rarely welcome outsiders into our territories. In the 40s and 50s, women were kept out of men’s territory. Late British Prime Minister aka Iron Lady, Margaret Thatcher, had to struggle many years to break through another of man’s territories, the Parliament. In the movie ‘Margaret Thatcher: The Long Walk to Finchley’, she sobs to her husband that contrary to what she previously believed, despite hard work she cannot win on merit and that dedication and passion are irrelevant. One-time Prime Minister, Edward Heath condemns Thatcher’s outspoken nature to force her out of politics. Heath says that the Parliament is akin to an orchestra made up of many musicians and Thatcher is a French horn more loud than appropriate, that threatens the orchestra’s harmony.
This is how men and also women of the same flock air their resentment towards outsiders, in their own words ‘intruders’ who are colourful and loud in action. Insult, indifference, suspicion, suppression, oppression are not uncommon experiences of pioneers in anything in history or at present. I once heard a senior Professor advising a young colleague attempting to change the system for the better, “Lady, look, do not swim upstream, people would not like it.” Yes, despite good intentions any novel act breaks the harmony…That is why the Buddha had many foes. That is why the notorious thief Barabbas was chosen by the crowd over Jesus.
I tried to uproot a tiny cinnamon sapling that grew through my interlock pavement blocks, failing which I crushed it. It made me realise that this is what happens, no matter how valuable you are. If you crop up in a place where you would not be accepted, every effort is made to root out, failing which, crush you, to ensure that you would not resurface. I suppose many of us had faced similar circumstances at work places, in politics or within social circles. Why does this happen, because of ego, envy, distrust or insecurity? Or because someone deemed a threat by another individual, a leader or a group enters their territory?
A pack of wolves has a leader; the protection of lions’ territory is the responsibility of the leader; the leader is the first to announce danger. No outsider can cross the boundary. We see certain lions, wolves and foxes as alphas. The mentality ‘I am the boss, I know everything’ blinds them. They live on ego, with a superiority complex, under the assumption that no one can challenge their power. If the newcomer is meek and sucks up to the leader, he or she survives and can slowly squirm their way into the pack.
I have heard parents complain about how difficult it is to enrol their kids into various sports clubs in schools. I have worked in private as well as public sector organisations, local and overseas. I have experienced antagonistic behaviour in these organisations. Driven by their insecurity, superior or inferior complexes, they would go to any lengths to harass the outsider and go to any extreme to protect his or her territory. They are myopic to the point of rejecting ideas foreign to them no matter how good they are, as they see ‘danger’ in ideas alien to them. Some group ideologies are thicker than blood. Certain professional groups rarely welcome females. They believe that women cannot meet challenges as men do and can be fiercely territorial. Many qualified and capable individuals are ostracised from organisations or industries or expelled from positions because of this territorial mindset.
A person with a territorial mindset is often overcome by thoughts of safeguarding or enhancing his or her power, control, influence and self-proclaimed status. These are primitive emotions. Taking ownership and defending what people believe belongs to them is a positive trait. But it is this mentality that subjects newcomers to agony when they grow too smart for their own good. They are stifled when the power of those with a territorial mindset is threatened. Many novel ideas and skills go to waste while some newcomers or ‘misfits’ are forced to leave their workplaces, others would continue the fight or be forced to conform.
We talk of harmony, reconciliation, tolerance and unity in diversity. Why cannot we synergize each other’s differences? A French horn would add glamour and at least amuse the audience. A garden consisting of a variety of flowers is more awe-inspiring than a garden of roses alone. Poet Khalil Gibran said that when a river enters the sea, the river is no more, it is diluted in salt water and one cannot trace the river in the sea, but the river grows larger and so does the sea. When we come out of our confining shells we are exposed to greater opportunities as well as benefits for both the newcomer and those already in that society.
(The writer holds a senior position in a state university and has an MBA from the Postgraduate Institute of Management [PIM], Sri Lanka and is currently reading for her PhD in Quality Assurance in the Higher Education Sector at PIM. She can be reached at email@example.com)
The importation of chemical fertilizers, pesticides and herbicides was banned by a Cabinet Memorandum, dated April 27, 2021, to promote the use of organic fertilizers and natural pesticides. As a result, inorganic fertilisers such as urea, Triple superphosphate, Muriate of Potash and other agrochemicals (insecticides, fungicides etc.) became scarce. Agriculture Ministry in the meantime promoted manufacture of organic fertilisers (OF) but they were unable to get sufficient amounts of organic fertilisers manufactured. Most of what was available were of low quality with high C/N ratios. Agric. The Ministry is yet to produce natural insecticides, fungicides, etc. Thousands of farmers, all over the country, started to protest demanding that inorganic fertilisers and appropriate pesticides are made available, because they knew that these agrochemicals are necessary to get better yields from the crops they cultivate. The Soil Science Society of Sri Lanka, representing mostly the Soil Scientists and Agronomists of Sri Lanka, and the Sri Lanka Agricultural Economics Association, the professional body representing the agricultural economists of Sri Lanka predicted massive economic losses due to potential yield losses, with the implementation of the import ban on fertilisers and pesticides
In spite of all these protests, the Ministry of Agriculture (MOA) continued to ban import of inorganic fertilisers and pesticides, This caused immense economic and social problems to the people in general and to the farmers in particular. Farmers who cultivated Paddy in the current Maha complain of a reduction in the yields, and those who cultivated vegetables and other crops had to bear up a substantial decrease in quantity and quality of their produce. Production of maize decreased, resulting in a drop in poultry feed.
Reduction in local rice production made the government importing large quantities of rice from China and Burma. Food prices have increased causing thousands of people mainly the poor, going hungry resulting, health and social problems. Incomes of nearly two million farmers got reduced which affected their buying capacity resulting in numerous undesirable effects such as increasing unemployment, poverty and related issues. Tea small holders complained of reduction in quantity and quality of tea affecting their income, and also a decline on foreign exchange earnings which those in the Finance Ministry, Central Bank and other relevant institutions are frantically searching. All these are the result of the ban of inorganic fertilizers and pesticides, a faulty decision.
In August, the Cabinet removed the ban probably realising the utter foolishness of the decision to ban import of inorganic fertilisers and pesticides. However, it is too late as it takes time to import fertilisers and other agrochemical which were in short supply due to the ban.
The main reason given for banning importation of inorganic fertilisers was that it caused chronic kidney disease with unknown aetiology (CKDU). Several research studies have been conducted since the year 2000, when it was reported to occur in some parts of the country. The findings of these studies do not indicate that there is any relationship between CKDU and fertilisers. CKDU has not been reported in many countries such as China (393 kg/ha) India (175 kg/ha) and United Kingdom (245 kg/ha) where the amount of fertilisers used per hectare is much larger than that of Sri Lanka (138 kg/ha). Note- the fertiliser consumption data given are for 2018 and are based on values given by Food and Agriculture Organization.
The growth rate of Sri Lanka has declined after 2015 . It dwindled to 4.5% in 2016 and 3.1% in 2017 and in 2020 it was -3.6 %. The Trade Deficit ( the difference between exports and imports- TD) shows a decrease but at present it stands at 6.1 US$ billion. Exchange rate continued to increase from Rs. 111 to a US $ in 2010 to Rs, 186 in 2020. Currently it is around Rs. 200. According to Central Bank, External Debt in Sri Lanka increased to 51117.43 USD Million in the third quarter of 2021. These figures indicate that Sri Lanka is heading towards an unprecedented economic crisis. Hence, the government need to implement appropriate strategies to increase exports and reduce imports.
Sri Lanka annually imports food worth Rs. 300 billion. Most of the food imported such as sugar, milk food, lentils, onion, maize, etc., involving around Rs. 200 billion can be locally produced, thereby reducing expenditure on food imports. In view of the current shortage of foreign exchange, it has become extremely important to promote the production of food locally which hitherto have been imported. The plantation sector, which includes tea, rubber, coconut, cashew, sugarcane and minor exports crops such as cinnamon, cardamom, cocoa ,plays a very important role in the economy of the country earning a substantial amount of foreign exchange, Hence, it is important to implement strategies to increase the productivity of the food crop and plantation crops sectors. Inorganic fertilisers, synthetic pesticides and herbicides play a very important role in this regard.
However, the Government is emphasizing that organic fertilisers (OF) are used in the coming yala season as well . Those in the government who made this faulty decision need to realise that OF can never replace inorganic fertilisers and that it can only be supplementary. They need to give serious consideration to the bitter experience of the farmers who applied OF to their crops during the current Maha. The Government needs to understand this fact and reconsider this faulty decision if they want to increase local food and export crop production.
In the year 2022, there will be a severe shortage of food negatively affecting food security, unless the government implements a realistic and effective programme from the beginning of 2022 to solve this issue. Implementation of foolish decisions such as to replace inorganic fertilisers with organic fertilisers, as done in 2021 is not going to solve this problem. Among the 17, he Sustainable Development Goals (SDGs) adopted by the United Nations in 2015, several are related to increase crop production. The Sustainable Development Council of Sri Lanka has a responsibility for coordination, facilitation, monitoring, evaluation and reporting on the implementation of strategies related to development of the agriculture sector in Sri Lanka.
As indicated by Edgar Perera, a former Director of the Dept. of Agricultural Development (Ref. The Island of 17 Jan, 2022) the most appropriate thing to be done is to use OF as a soil re-conditioner along with chemical fertilisers, which will give the much-needed plant nutrients in adequate quantities, to achieve the required yield levels which will be sufficient to meet the national targets.
Dr. C. S. Weeraratna
Have pity on Afghans
Is there no end to the torment inflicted on the ordinary people of Afghanistan, by the United States?
Having being defeated militarily, and decamping ingloriously within 24 hours, like thieves in the night, the USA now inflicts starvation and destruction on Afghanistan from a “safe distance”.! Money that rightly belonging to the Afghan State is being withheld by the American dominant Financial system. Let this be a lesson to us.
A report in The Island of 17 January revealed that Afghan families were selling children and their organs in order to survive.
After all, what crime did the Afghans commit in resisting an invading foreign power? Sri Lanka should seek ways of offering direct Aid at least in small ways, to Afghanistan, whether the Americans approve or not.
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