TURMOILS IN SRI LANKA
In essence, it has been observed that the countries whose leaders at the helm of affairs think more about their own interests and less about the countries of whose affairs they handle then the resultant dilemma would not be far to seek. The mismanagement and inept handling of available funds results in downward slide in any economy. This happened in case of Sri Lanka too.
A PERSON AT THE HELM OF AFFAIRS SHOULD COMMAND RESPECT
It is also a fact that a nation’s affairs cannot be handled by wishful thinking. It calls for jointmanship and sincere concrete plan of action by the Government in which every minister is accountable for the ministry he/she is dealing. If anything goes amiss, efforts should be made to plug the loopholes, however, nothing should be done to sweep aside the failings under the carpet. For this to be meaningful, there should be efficient handling of all the affairs by a trusted team of economists and policy makers, of course, under the stewardship of a leader who commands respect of all.
POWER VACUUM CAN UNDO ALL THE GOOD WORK DONE IN THE PAST
Thought of forming a Government of all parties is being considered but only time will tell about its success. A strict discipline in spending along with economic prudence in allocation of funds for factors of production on different heads is the need of hour. Sri Lanka has the abundance of natural resources along with enterprising human resources. Let these factors of production be exploited so that Sri Lanka comes out from the morass of their own making.
POWER VACUUM CAN RUIN AN ECONOMY
Evidently, there is a power vacuum. The President has fled the country and the PM has already resigned while his house has been torched by the protesting people. In this sort of sordid and unpredictable scenario, the best option, first of all, is to maintain peace and establish modicum of law and order.
PRESENT STATE OF DISMAL SITUATION
Taking into account the present predicament in Sri Lanka, every right thinking person is concerned about the chaotic condition prevailing in Sri Lanka where the general masses have revolted against their own establishment. The President has fled the country and the PM along with some ministers have already resigned.
MANMADE ECONOMIC MESS
The reckless borrowing resorted by the Government and not using the borrowed funds for productive assets creation resulted in present chaos. The loans taken from countries viz China on stiff terms and conditions and difficulty in repayment of such loans with high rate of interest is a contributing factor. Though countries like India has loaned some money yet the malaise runs deeper which cannot be alleviated with sops from here and there. The IMF and other financial institutions including countries like India and other countries should come forward for shoring up the economy of Sri Lanka.
MANMADE DEBT TRAP
The external debt in case of Sri Lanka averaged to around 47,424.42 USD Millions with effect from 2012 to 2019 and presently it is more than this since interest servicing will also come into play. In this, the debt from China is 9.83% (3.4 Billion USD) as on 2019 which again has increased because of stiff rate of interest. The debt servicing could not happen due to decrease in foreign remittances due to Covid-19 pandemic conditions.
REASON FOR ANGER OF GENERAL MASSES
The anger amongst the general masses is due to the following factors:-
1. Presently there is food inflation to the tune of 57.4% due to which some people are not able to meet two square meals.
2. There is fuel shortage for transports due to which supply chain got disrupted. No oil exporting country is willing to give fuel without surety of payment. Due to dwindling of foreign exchange reserves, fuel is not being imported causing problem for the country.
3. China Debt trap. Sri Lanka imported goods which increased the debt and in the absence of paying capacity, resulted in debt servicing difficult in the long run. Then the hidden conditions on different projects too accentuated the economic situation.
4. Commercial borrowing. Then there was the problem of commercial borrowing by Sri Lanka but this borrowed funds were not used to create productive assets so as to create employment avenues or avenues for enhancing production in agriculture sector or tourism or textiles etc.
5. Tourism industry. It is a fact that 25% of Sri Lanka comes from tourism. Due to Coronavirus pandemic, this industry suffered hugely which is the huge contributing factor for downward slide in the economic strait of Sri Lanka.
6. Servicing outstand payment problem. There is a increased problem of debt servicing to the upward of 35 USD. This created chaos and confusion in the minds of those in the helm of affairs.
7. Mismanagement of the economy. It is a fact that there was a huge mismanagement of the economy. The borrowings and especially so the commercial borrowing could not be used for creating assets which could enhance employment, increase production and create goods and services both for domestic consumption and for exports. But faulty planning and mismanagement accentuated the problem.
8. Manmade Disaster. There are some decisions by the Government which accentuated the problem in Sri Lanka such as shift focus from fertilizer based factor of production in agriculture to organic farming. Then loans taken from various sources without thinking of debt servicing. Then loan taken were not used to create assets or increase production of goods and services.
The main engines of growth in Sri Lanka which got impacted due to a variety of factors. These are given below:-
1. Export of textile finished products. The lockdown conditions impacted the production therefore export of textile products suffered.
2. Export of rice and other agricultural products. The policy reversal of Government to stop using chemical fertilizer as a factor of production and shifting its focus on organic farming impact production of rice and other agricultural products. With less agricultural produce, not only export suffered but also domestic needs too got adversely affected. This resulted in depletion of food stocks, due to which there was surge of food inflation to 57.4% while inflation of non-food items rose to 30.6% as per the data available.
3. Tourism is the main stay of Sri Lanka. It is a fact that tourism industry is a biggest contributor to the national economy of Sri Lanka. It plays a stellar role to budgetary allocations, earning of foreign exchange along with employment generation. Besides, tourism helped the country in provision of goods and services for running the tourism industry. This factor of economic development suffered due to Covid-19 pandemic because of very less tourists visiting Sri Lanka thus adversely impacting the tourism industry.
4. Export of tea. Due to lockdown conditions during Coronavirus pandemic, export of tea and other items suffered which contributed to the deceleration in forax reserves.
5.. Foreign remittances. Due to Coronavirus pandemic, while all the economies suffered, Sri Lanka could not remain immune to the adverse affects. There were job losses and business losses globally owing to which foreign remittances hitherto done depleted. This aspect too contributed to economy going southward.
ADVERSE EFFECTS OF COVID-19 PANDEMIC
Sri Lankan economy was also adversely affected by
Covid-19 pandemic as it happened globally. Due to failure of businesses due to lockdown conditions and job retrenchments, the foreign remittances dwindled leading to economic melt-down. In Sri Lanka, as there was no economic activity during lockdown during Coronavirus pandemic, all the above engines of growth too dwindled. The debt servicing with stiff conditions made the economy going southward.
ADVERSE AFFECTS ON AGRICULTURAL DUE TO CHANGE IN AGRICUTURAL PRODUTTION METHOD
The adverse implication of agriculture due to adoption of new method of production, from intensive use of fertilizers to manure based agriculture input as a factor of production. Due to this change as factor of production, the agricultural produce got impacted.
MAIN REASON FOR REVOLT BY THE GENERAL MASSES
The fundamental reason for revolt by the general masses is due to high rate of inflation of all consumer items. The cost of food items including vegetables have increased to disproportional level partly due to faulty agricultural methods of production. Then the stoppage of imports from Ukraine and Russia too is a contributing factor due to ongoing war. The petroleum products are not available to meet the transportation needs. All these factors have contributed to disenchantment in the general masses who are reeling under high rate of unemployment.
The problems started with the loans taken on stiff terms and conditions and commercial loans but these loans were not used for enhancing production capacity and creation of employment opportunities.
HOW ALL THIS HAPPENED?
The countries which rely more on foreign loans and foreign doles cannot progress in any way. Such countries cannot run the affairs (Internally and externally) coherentl. Their smooth economic development cannot be ensured. The loans taken are misappropriated through corrupt practices. This happened in Sri Lanka.
In essence, the resources taken from international Monetary Fund, Asian Development Fund and other concerned should be used for creation of assets including spread of knowledge and activation of economic growth and development.
LESSONS FOR OTHER COUNTRIES
• External loans taken should be utilized for creating productive assets.
• The commercial borrowings, in the first place, should not be taken. If at all taken, then, there should be debit serving as and when required otherwise it will create economic mess. Again, borrowing taken should be used for creation of employment, enhancement in agricultural production and other sectors of production which could help in economic recovery.
• The economic produce in expenditure on unproductive assets should be avoided. Need is to first of all debt servicing and then judiciously use of these funds for production of goods and services.
• The human resources should be taken as an important factor to run the engine of growth. Even in dire economic chaos created by Covid-19 pandemic, some countries took care that they do not fall into debt trap and maintained economic prudence – spending and creation of resources.
• Schemes such as MGNREGA should be launched so that the common man does not suffer during the natural disasters or economic slowdowns etc. This will facilitate the general masses to eke out their daily living for them.
• If and when there is a need of taking hard decisions for stabilizing the economy, steps should be taken after due consideration. These steps should be in tune with the wellness of people in general.
• Every ministry should be held accountable for their sphere of functioning. Anybody found to indulge in corrupt practices should be dealt with according to the law of the land.