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The need for a pragmatic economic policy framework for implementation can hardly be overemphasised. However, the current preoccupation with political bargaining, power machinations, constitutional reforms, uncertainty of political developments and post-election outcomes are hardly conducive towards political parties focussing on economic issues and preparing long-run economic policies for development.

In a parliamentary democracy, political parties should determine their economic policies and policy framework and place them before the people prior to the parliamentary elections. The election of a government that does not have a clear vision and strategy to achieve economic and social development could be a serious drawback to achieving economic development.

In this context, the Pathfinder Foundation’s “Charting the Way Forward: Prosperity for All” provides a comprehensive discussion of economic policies that could be a basis for an intelligent and well informed economic programme and plan of action. An open discussion of these proposals could clarify issues and lead to a pragmatic strategy for economic development by the new government.

Propitious time
The Pathfinder Foundation (PF) considers the time propitious for a government to pursue economic policies that develop the country to become a high income economy. “Sri Lanka has the most propitious set of circumstances for over 50 years. Over the last five decades, there have been major drags on the economic prospects of the country, such as severe terms of trade decline, the rapid population increase and a high dependency ratio; inappropriate inward-looking policies and, most damagingly, the civil conflict. Today, there are no such major drags on the economic prospects of the country. In addition, economic geography is particularly favourable. Sri Lanka is located in Asia, the most dynamic region in the world.”

“However”, the Pathfinder Foundation cautions, “the benefits of such a positive historical conjuncture can only be realised through a concerted programme to increase productivity/competitiveness of the economy which also strengthens the growth framework.”

The Pathfinder Foundation proposals seek to contribute towards charting the way forward by presenting a menu of options that the Government of the day could calibrate the speed and sequencing of the changes. What is needed is informed discussion of the issues to develop the best practices for the new Government to adopt.

Economic stability and reforms
An important Pathfinder perspective is that while resolving fundamental economic problems is essential to ensure economic stability, institutional reforms that unleash the country’s potential for growth are imperative. It contends that while correcting the fundamental macroeconomic weaknesses is a prerequisite, it is insufficient to generate higher sustainable economic growth in the medium and long run. A range of reforms are needed to enhance the economy’s full thrust towards growth. It also emphasises the need for policies that ensure effective alleviation of poverty rather than wasteful handouts.

Macroeconomic weaknesses
The resolution of the economy’s macroeconomic weaknesses is fundamental to enabling the fiscal space and economic capacity to implement growth policies. The problems of a large public debt, high debt servicing costs, the continuing large fiscal deficit, the inadequate revenue collection, the large trade deficit, the massive foreign debt and increasing foreign debt servicing costs have to be resolved. The deterioration in these macroeconomic fundamentals is startling and their resolution is no easy task.

Most serious of these weaknesses is the inability to bring down the fiscal deficit. In 2014, the fiscal deficit exceeded the target of 5.2 per cent of GDP to reach 6 per cent and government revenue was barely adequate to meet its servicing cost. This, in the context of a declining revenue to GDP ratio to as low as 12 per cent, is a serious concern. The resolution of this fundamental fiscal problem requires many strategic policies that require a strong political resolve.

What is required is a fuller discussion of tax reform, including the taxation proposals of the Presidential Commission on Taxation. These proposals were made several years ago, but they remain undisclosed. Practical measures to increase government revenue and prudent measures to curtail government expenditure are imperative.

Institutional reforms
While the resolution of these fundamental economic and fiscal problems is vital and urgent, that alone is inadequate and insufficient to ensure sustained high economic growth.  The Pathfinder Foundation argues that reforms in several areas such as education, administration, state owned enterprises and in land, labour and capital markets are essential.

The Pathfinder Foundation points out that reforms are necessary in agriculture to increase productivity. Reforming education, expanding training and skills development and reforming of State Owned Enterprises (SOEs) are necessary to drive the economy to a trajectory of high growth.

It also emphasises the need for reforms towards efficient public service delivery and effective social protection. These areas of reform require detailed discussion and careful study by a new government.

Final word
Regrettably, elections are not fought on the basis of economic policies and programmes, but on competing promises that have aggravated economic conditions. The Foundation suggests that “All handouts, subsidies and other welfare measures, included in the manifestos, should be costed and specific measures should be identified for financing the incremental costs involved.” This will make “a clean break from the ‘auction of non-existent resources’ which have characterised party manifestos in the past.” Such an expectation is, however, unrealistic in our political milieu.

It is the responsibility of all major parties to formulate their economic and social programmes. An open discussion of economic policies that could filter into the formulation of economic policies of the main political parties is a responsibility of civil society, think tanks and the intellectual community. The Pathfinder Foundation has provided a framework for discussion. It underlines the issues that must be examined in detail and discussed fully. It has given indicative areas rather than definitive policies. It is now open for others to take up the issues and propose their programmes.

Will political parties engage in constructive discussion to formulate an economic and social programme that ensures sustained high economic growth with social justice and equity?