Possible Solutions to SL’s Economic Crisis

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“During an economic crisis, what matters is the Government keeps its foot on the accelerator” – David Ignatius-US Journalist

We are at crossroads, facing multiple crises, as well as the present impasse of an unwanted Executive with all powers and an inadequate Legislature with little powers. The call of citizens, united in their diversity, is for real. This requires clear priorities and a framework for a sustainable development plan which assigns responsibility to its Executive, Legislature and Public Service. The Finance Minister has made a request for a rapid financing instrument with the IMF. What are the chances for a bailout?

The coffers have all but dried up and it cannot afford to pay for imports. Millions of its people are bearing the brunt of the country’s economic crisis. Basic goods are in short supply, power cuts are frequent, prices are soaring and incomes erode. The people blame the president for the worst economic crisis in more than 70 years and they have taken to the streets to demand he steps down.

With regard to foreign exchange, foreign debt, inflation, fiscal and economic crises they were created by monetary and fiscal mismanagement. Solutions include preparation of a sustainable plan to raise confidence, restructure debt, obtain immediate bridge financing for a social safety net and essential imports of food, medicines, fuel, gas, intermediate goods to regenerate the economy and foreign earnings. 

Combatting corruption indicates a  law and order crisis–In recent years the country has experienced crony capitalism, blatant corruption at the highest levels and the plunder of  assets, while the application of the law was seen as discriminatory, partisan and unequal. The recent independent stand of the bar association questioning state action reflects this. Restore confidence of citizenry in the integrity of the executive, legislature, police and justice systems, by strengthening relevant laws and strict implementation of the same, while ensuring independent, equal application of the law to all citizen COVID-19 related health, welfare and economic crisis

 The immediate remedies include

  1. Reduce the powers of the Executive and bring in checks and balances, by introducing a 21st amendment to the Constitution that repeals the 20th amendment and re-introduces the 19th amendment with relevant changes.
  2. Select professionals with knowledge, experience and acumen to key Public Service positions.
  3. Limit Government Cabinet to, at most, 20 Ministries. No State or Deputy Ministers. Opposition parties to establish a shadow cabinet for oversight purposes.
  4. Assign each Government institution to the relevant Ministry.
  5. Review all Government institutions with a view to eradicating duplication of responsibility by retaining/combining/ closing institutions, as necessary.
  6. Reassign staff to those that remain, accordingly.
  7. Appoint experienced and capable professionals, giving due recognition to the Sri Lanka Administrative Service (SLAS), as Secretaries to all Ministries. Establish chains of command, responsibility and accountability within, and co-ordination between, ministries. Hold Secretaries responsible for smooth functioning of their ministries and all Government institutions under their respective ministries. Monitor performance and implement stiff penalties and fines under the law for any Government official found guilty of bribery or corruption.
  8. Close all loopholes that allow for political patronage. Ministers will be responsible only for policy-making and legislating in their areas of responsibility, not day-to-day running of institutions.
  9. Reduce wasteful Government expenditure, including excess security and unnecessary “perks” currently provided to Cabinet Ministers and other MPs.
  10. Establish codes of conduct to ensure all non- Cabinet MPs attend to their responsibilities in their electorates and on parliamentary oversight committees to which they have been appointed to serve. Hold Party Leaders responsible for monitoring adherence to such regulations.

Sri Lanka is a country that relies heavily on its agro-industry, more specifically in the yield of rubber, tea and rice. Sri Lanka’s economic crisis is partly due to the 2019 policy by President Gotabaya Rajapaksa, in which all farmers in the country must use organic fertiliser, with the aim that the country would replace all synthetic fertilizer in the subsequent 10 years. As a result, the country’s own rice production has been falling by 20% and other domestic crop production (i.e. rubber, tea and coconut) has experienced devastation. Moving all of Sri Lanka’s agricultural growth into organic fertilizer dependence has shown that manure-based farming cannot support its economy. It also cannot help solve Sri Lanka’s economic crisis in the long run.

One can also attribute Sri Lanka’s economic crisis to the COVID-19 pandemic. Sri Lanka is a country that people have historically touted as a prime travel destination. However, due to the cases of COVID-19 that first emerged in Sri Lanka in March 2020, travel restrictions have crippled the tourism industry by reducing the number of tourists from 1.9 million in 2019 to 570,000 in 2020, effectively cutting off earnings from what is supposed to be the country’s third-largest market. Alongside this decrease in visitors from abroad, there came a decrease in the funding for projects for new beach resorts and hotel developments which received 60 million dollars in 2020 according to the International Trade Administration.

One of the main ways to resolve much of the economic strain in the country is by rolling back the manure policy that President Rajapaksa put in place and instead investing in methods of making artificial fertiliser less prone to environmental damage. For a second point, investing in non-farming jobs primarily includes looking at the resort and tourism expansion in Sri Lanka.

In conclusion, there is good reason to believe that Sri Lanka’s economic crisis could reach a resolution, and a pathway for future economic growth could emerge using the aforementioned starting points. With more nuanced labor laws and democratic leadership, Sri Lanka’s economic crisis should disappear in time

The writer is an Attorney-at-Law with LLB, LLM, M.Phil. (Colombo) [email protected] 

By Lakshman I. Keerthisinghe