Sri Lanka’s Road to Reform and Recovery: How the Nation is Overcoming her Crisis
View(s):Despite only emerging less than two years ago, the Covid-19 pandemic has affected more than 213 countries and territories around the world, changed the lives of millions of people, and pushed global economies into a mass lockdown. Despite the fact that days of being confined inside helped contain the virus and saved numerous lives, it also triggered the worst recession the world has seen since the infamous Great Depression in the 1920s.
As a country already riddled with government debt and an overwhelmingly heavy reliance on Chinese imports, Sri Lanka could not literally afford to be plunged into an economic crisis. After the first wave of Covid-19 struck the paradise island in March 2020, the entire nation was ushered into an extensive lockdown to try and control the increasing case numbers.
Despite a positive initial response to the health crisis, the situation quickly worsened across the country in late September of last year, triggering several lockdowns over the next few months.
Today, Sri Lanka is struggling to claw its way out of the severe health crisis the pandemic has forced it into. Even though Covid-19 has taken a heavy toll on Sri Lanka’s economy and changed the lives of all twenty-one million people that call the island home, the economy is still said to recover in 2021 according to a World Bank Sri Lanka Development Update released in April of this year.
Sri Lanka is not alone in its case of being slammed with an unprecedented economic downturn due to the pandemic; nations across the world were plunged into crisis as the virus spread rapidly. But as the world begins on a road of recovery and relief, as vaccines are administered and distributed, Sri Lanka joins the rest of the globe on this journey.
Sri Lanka’s economic growth is expected to recover to 3.4 percent in 2021, mainly as a result of foreign investments as well as normalising tourism and other economic activities. As a tropical island thriving with wildlife, renowned beaches and scenic resorts, Sri Lanka’s tourism industry has traditionally been the third largest foreign exchange earner in the country. It is estimated that the sector earned around $3.5 billion in 2019 but experienced a severe decrease owing to the aftermath of the Easter Terror Attacks. Tourist arrivals dropped by 18% to 19 million in 2019 and just as the country was beginning to recover, the closing down of airports due to the quick spread of the virus occurred.
The rate of Sri Lanka’s recovery seems to greatly depend on the US-China dynamics and supply chains getting relocated from a manufacturing point of view. However, the government has also firmly planted Sri Lanka on a path towards recovery by acting decisively with steps such as cash transfers and postponed tax payments, easing the already staggering burden on its affected citizens as unemployment rates increase and pay cuts become the norm.
The Central Bank’s introduction of a debt moratorium and other measures to encourage lending also helped in decreasing the negative impact of the pandemic on businesses and livelihoods across the country.
“As in countries around the world, COVID-19 has had an unprecedented impact on Sri Lanka’s economy and people’s livelihoods.
But we are already seeing positive signs as the country enters the recovery phase,” said Faris H. Hadad-Zervos, the World Bank Country Director for Maldives, Nepal and Sri Lanka. “Through an enhanced focus on an export-oriented growth model that taps the full potential of private investment, Sri Lanka could increase its competitiveness and raise growth in a sustainable manner.”
In the World Bank Sri Lanka Development Update, a special focus section is included, which discusses the impact of Covid-19 on poverty. With the emergence of job losses in urban areas and among private sector employees and informal workers, the $3.20 poverty rate is projected to have increased from 9.2 percent in 2019 to 13 percent in 2020.
The report describes that those who have been forced into unemployment could be supported through reintegration by the current social protection system. It suggests that a more targeted social safety nets could help the authorities to scale up support to the poor and vulnerable communities across the nation.
By increasing investment in digital technologies and literacy, more and more Sri Lankans can also achieve a greater level of economic stability and find new economic opportunities.
Corruption is one of the most prominent barriers to economic progress in Sri Lanka. According to the sources of Transparency International the country ranked 94th out of 180 countries in the corruption index. A large part of this occurs in the public service sector and the political elites are usually the most blamed in this category.
The taxes paid by the citizens of the country are used for personal privileges of the politicians on most occasions. The export of luxury vehicles and fuel allowances are often seen as unnecessary privileges given to the politicians and indirectly a means of misusing the taxes paid by the commoners.
Proper reforms on the anti-corruption laws and applying them on all citizens equally with no exception for elites or political forces could be another step forward in the journey towards economic progress of the country.
Sri Lanka is a country familiar to challenges and the problem of the current economic crisis is severe.
But as a nation, we are accustomed to overcoming obstacles that lay scattered in our path towards establishing ourselves as a developed nation and we are sure to surpass this trial as well, leaving it far behind in the dust as we progress.
Session XIV of SLMUN will be held on the 6th and 7th of November 2021 at the Bandaranaike Memorial International Conference Hall (BMICH), Colombo, Sri Lanka. Registrations for delegates, admins and IPC delegates are now open until the 30th of September 2021.
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- Kavya Chandrasiri
(News and Media Team- SLMUN 2021)