New economic development model deviates from notorious structural adjustment; CB Governor
View(s):Sri Lanka is set to move away from an import-oriented market economy towards a production-oriented strategy despite a multitude of economic issues including the COVID-19 pandemic.
The government’s intention was to ensure the people’s economic freedom with a production economy facilitated by structural changes within the framework of a market economy, Central Bank Governor, Prof. W.D. Lakshman divulged. This strategy is quite out of way from the notorious structural adjustment programme of international financial agencies, he said pointing out that it envisaged sustainable foreign financing measures and increased non debt foreign exchange inflows into the country.
He was making the opening remarks at a webinar on “Tomorrow’s Budget Today?!”organised by the Economic Students’ Association (ESA) of the University of Colombo in collaboration with the Sri Lanka Association for Political Economy (SLAPE) on Sunday.
The Government will be implementing an alternative economic model in order to tackle structural issues deviating from neo liberal policies after several decades. The budget 2021 was an initial articulation and presentation of this new economic development model which is to be implemented carefully and constantly, he revealed.
The alternate economic policy also intends to strengthen the rural economy by improving infrastructure facilities such as roads, bridges giving prominence to agriculture development including fisheries and diary sectors.
Outlining the outcome of the 2021 budget, Dr. Chandranath Amarasekera, the Central Bank’s Director of Economic Research, noted that it will be strengthening the domestic production economy by promoting exports and attract foreign direct investment, specially manufacturing oriented investment.
This is the only way forward, he said pointing out that the financial sector reforms support the production re-opening the business process to achieve this objective. He said large annual foreign debt repayment needs to be curbed and borrowings should be managed properly while increasing domestic savings and investments. The country has to continue annual debt servicing of over US$4 billion from 2021 -2025.
Deshal De Mel, Research Director, Verite Research noted that the budget has failed to convince the global market as the country is facing debt repayment risks with pressure on external and liquidity position and depletion of foreign reserves.
Treasury bonds amounting to several billions of rupees and Rs.1 billion in sovereign bond are expected to mature next year and the Central Bank will have to intervene in deficit financing under these circumstances. The risk of deficit financing from the domestic market could be inflationary, he predicted.
Sumanasiri Liyanage, retired Professor in Political Economics at the University of Peradeniya, was of the view that industrialisation of agriculture and fishing will incur massive debts, impossible to be paid back without falling below subsistence levels.
He warned that a small group of corporate élites will grab benefits from the budget impacting on the poor from loss of livelihoods due to COVID-19.
The government has failed to articulate how access to technology, market and credit could be expanded to farmers, fishermen and smallholders without further degrading the already dilapidated conditions of living, he opined.
Dr. Nisha Arunatilake, Director of Research, IPS, expressed the belief that welfare measures in the budget will help to cushion the incomes of those affected by pandemic-related job losses.
She added that that investing in employment intensive public investment programmes is the best means of reviving growth and creating jobs during a recession. (BS)