24 March 2021 09:33 am
By Shabiya Ali Ahlam
A multi-pronged approach is required to rebuild the hard-hit economy, which was already on downward path even before the pandemic struck, according to senior economist and former central banker Dr. W. A. Wijewardena.
Pointing out that there are no quick fixes, nor a single step fix to resolve the vast array of economic issues faced by Sri Lanka today, he asserted that policy makers must start with removing the restrictive policies currently in place, which serve little purpose in achieving a meaningful recovery.
He highlighted the need to have a clearly announced timeframe for exiting the restricted economic policies, such as the import ban, introduced at the onset of COVID-19 pandemic as temporary measures, so that the public is aware when the restrictions are removed from the system.
“These types of restrictive economic policies would work when an economy is in a crisis by delivering a shock to the economy. But if it is prolonged and retained beyond the required timeframe, the shock becomes unbearable, and it will start hurting all economic activities, preventing the economy from returning to the long-term economic growth path,” he told a bankers’ forum in Colombo this week.
Dr. Wijewardena pointed out that as the country needs to return to the long-term economic growth path, there is no place for restrictive policies in the macroeconomy.
He also highlighted the need to increase the government’s revenue base and pointed out that the government’s move to print new money to finance its expenditure programme leads to inflation.
Dr. Wijewardena asserted the need to have the revenue base reach at least to pre-COVID-19 levels and the approach towards that should be by expanding the base via taxation and other non-tax revenue measures. He stressed that the government should immediately change from bank financing to tax financing.
He also emphasized the need to have a 360-degree link with the rest of the world to create economic relations with global peers without discrimination. Doing so would allow Sri Lanka to become an inclusive, and not an exclusive member of the global economy, he noted.
“No country today can remain in isolation from others by confining itself to a single country or a group of countries. In this case we can take an example from India. India today has economic relations with all the countries in the world, including its rivals like China or Pakistan.”
Sri Lanka should not consider any particular country or group of countries as enemies. But treat everyone as economic partners,” he added.
Dr. Wijewardena also highlighted the need to increase productivity in key sectors of the economy, such as agriculture and industries, by introducing new technology as productivity in these sectors remain woefully low.