From left: Sampath Bank PLC Director Deshal de Mel, Ceylon Chamber of Commerce Chief Economist Anushka Wijesinha, Institute of Policy Studies Deputy Director Dr. Dushni Weerakoon and Frontier Research Lead Economist Shiran Fernando. Pic by Damith Wickramasinghe
By Chandeepa Wettasinghe
The government’s current reform agenda is both ad-hoc and unlikely to be completed, according to a panel of economists who said this could exacerbate the current low growth climate, adding to the woes of a volatile coalition administration.
“These are a series of ad-hoc reforms and are not in any sense a systemic reform effort—(not) the kind that the Sri Lanka economy needs now to move from public investment infrastructure-led growth to a private sector investment export-led growth process,” Institute of Policy Studies (IPS) Deputy Director Dr. Dushni Weerakoon said. Speaking at an ‘Economic Insights’ seminar organized by the Ceylon Chamber of Commerce, she said the country needs reforms that have broader impacts, such as on labour and skills development, instead of pushing for trade policies which have a relatively limited impact on the economy.
“So, unless we get these reforms underway, we may not see GDP growth reviving even as the macro environment stabilizes,” she said, after pointing out that the macroeconomic fundamentals would improve this year due to commitments under the International Monetary Fund programme.
Sampath Bank PLC Director and senior economist Deshal de Mel noted that as the local government elections approach, the government may relax its commitment towards the reform agenda and even resort to fiscal stimulus in order to obtain a favourable electoral outcome.
He further added that the timeline of IMF reforms do not complement the government’s timely need for political capital.
“The early IMF reforms did not have much political baggage, but the later reforms of SOEs (state-owned enterprises) and trade policy liberalization have political baggage, and the commitment to reforms is crucial for global investor sentiment,” he said.
Dr. Weerakoon added that in Sri Lanka’s past, reforms had usually taken place immediately after a change of government with a clear parliamentary majority, and that given the parliament has now been sitting for a long-period of time without a clear majority, large-scale reforms were unlikely.
This is despite the current low-growth, low-inflation climate being ideal for reforms, she said.The incumbent government is currently coming under increasing public pressure due to its failure to take action on corruption of the previous regime, and for large scale corruption that has happened during its administration in the last two years.
Some of the government’s promises for reforms under the 100-day programme have not been fulfilled even after two years.
Further, the governwment hasn’t been able to attract major foreign direct investments or finalize a number of trade and investment agreements which have been delayed for months and years.
Frontier Research Lead Economist Shiran Fernando noted that the government’s communications related to its reform efforts have been poor as well, compiling problems for the government.
“Of the new legislation for the Agency for Development and for three-wheelers, what people remember are the super ministry and tuk-tuk quotes,” he said.
Finance Minister Ravi Karunanayake had recently admitted that the government has fallen short of communicating its policies to the public effectively.