Eminent economist outlines lost opportunity for economic reforms
The present Sri Lanka government came to power without an economic plan and it never developed one and it eventually unveiled a “Christmas tree wish list” of things that’s going to happen by 2025.
With elections in the near future and no sign of a take-off, Sri Lanka is faced with a choice between continued dysfunction and continued incompetence where the role of the State is too large and the role of markets too restricted.
The other choice is for relapse, with another decisive shift towards the State. It is as if Sri Lanka is faced with a choice between the devil and the deep blue sea.
International renowned Sri Lankan–born economist Dr. Razeen Sally who is a Visiting Associate Professor of the Lee Kuan Yew School of Public Policy at the National University of Singapore, made these observations while delivering the 69th anniversary oration of the Central Bank in Colombo on Wednesday.
Introducing himself as a “failed policy advisor to the Sri Lankan Government”, Dr. Sally noted that he experienced the “utter shambles” of the decision-making process at top ministries.
He claimed that in those ministry meetings, there was no coherent agenda, there were five or six different people speaking at the same time veering off in five or six different directions, everybody talking and nobody listening, and nobody talking notes.
There was no conclusion and the process starts all over again. He questioned as to whether any top private sector corporate head would ever run a meeting in this manner?
Sri Lanka has missed a rare lifetime opportunity to implement economic reforms but it is continuing with a China-driven controlled economy, where modest political reforms achieved could also be reversed, he said.
The present government which came into power in 2015 had the best opportunity since 1977 for liberal and economic reforms, he said adding that it has achieved modest success in correcting the past.
Referring to the previous regime, he emphasised that Sri Lanka during the ‘Mahinda Chinthana’ period of de-liberalisation in the context of an “illiberal democracy and ethnic agenda, the country has experienced a combination of crony capitalism and crony socialism that was highly centralised and a foreign policy tilting strongly towards China”.
“The first is that this government came into power wholly devoid of talent and expertise, quite in contrast to the economic team that was put in place soon after July 1977.”
The LTTE and JVP in combination did a spectacular job at destroying the best of Sri Lanka’s political elite and the new government also came to power without an economic plan and it never developed one.
He noted that he has observed the dire state of the Sri Lankan state or in the academic jargon a serious lack of state capacity and he came to the conclusion quite quickly that even fairly simple reforms were difficult and perhaps in some cases impossible to push through because of the “dysfunction” of the Sri Lankan state.
Delivering the address of welcome, Central Bank Governor Dr. Indrajit Coomaraswamy expressed the belief that the new Monetary Law would be passed in Parliament.
The Central Bank has been moving towards a flexible inflation targeting regime, he said adding that Sri Lanka is now a flexible inflation targeting country.
“So the flexible inflation targeting regime is embedded in the law and nothing would change after that,” he said.
He pointed out that the planned law will remove ‘fiscal dominance’ and the Treasury Secretary would not be a member of the Monetary Board of the Central Bank.
The proposed law has been referred by cabinet to a parliamentary committee for review he said adding that a note by President Maithripala Sirisena had also called for greater public debate on it.