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Reviving the economy amidst political instability and social unrest, soaring import prices and negligible foreign reserves is a massive challenge. The economy can be revived to its potential only with substantial foreign assistance.

Priorities

While the resolution of the scarcities that are affecting the livelihoods of people are immediate tasks, the strengthening of the economy by increasing the production of agricultural commodities, manufacturing goods and services are of utmost importance.

The country is not only at a low level of production of goods and services, but will continue in this downward trend, if remedial measures are not taken quickly.

Current concern

The current concern of the government, and of the people, is the severe shortages of food, fuel, medicines and fertiliser, owing to the lack of foreign currency to import them. These are affecting livelihoods and threatening the lives of people, especially the poor.

However, the resuscitation of the economy is imperative to resolve these problems in a sustainable manner. It is the most urgent and challenging task.

Blow to agriculture

The biggest blow to the economy was to agriculture. The ban on chemical fertiliser and agrochemicals was the severest set-back to the economy.

The country that had reached self-sufficiency in rice, became dependent on rice imports from India, China and Myanmar. Tea production and exports fell. Coconut and rubber production too declined. Currently, agricultural production is severely hampered by the lack of fertiliser, agrochemicals, diesel and seed material.

Resuscitation

The resuscitation of agriculture is vital. The Maha paddy crop that was harvested in March/April is estimated to be one-half of the previous Maha crop. Vegetables and other crop production too have fallen drastically and their prices have skyrocketed.

Tea

Tea production has fallen in the first quarter of this year compared to the same period in 2020 and tea exports have decreased. Tea exports are expected to decrease from US$ 1.5 billion to about US$ one billion this year.

Revival of agriculture

The revival of agricultural production is possible provided the needed fertiliser and agrochemicals are imported and made available to farmers at reasonable prices.

Import costs

Prior to the ban on imports of fertiliser and agrochemicals, the cost of their imports was around US$ 250 to US$ 300 million. The costs of these inputs would be much higher now. Therein lies a serious constraint to the revival of agricultural production. These imports must be considered a priority and foreign assistance sought for their import without a delay.

Availability

The government must ensure that adequate quantities of fertiliser and needed agrochemicals are imported and made available to farmers at affordable prices and credit.  This is especially so as farmers have suffered severe loss of income owing to the ‘fertiliser fiasco’. The availability of diesel is also vital for farming.

Industries

Manufacturing industries are hampered by disruptions in raw materials, power cuts, diesel shortages and difficulties of transport for workers and goods. The root cause of these is the lack of foreign currency.

Dependence

Since the domestic production of goods and services is dependent on imports of fuel, fertiliser, agrochemicals and raw materials, the supply and availability of these have to be strengthened through foreign assistance till there is an improvement in the balance of payments.

Impact

The reduction in agricultural and industrial production would further aggravate the shortages of essentials and increase import needs and decrease export earnings.

Foreign aid

Foreign financial assistance is needed promptly to resolve the constraints in domestic production. The foreign assistance already received provided a breathing space to overcome the severe scarcities that threaten the lives of people. Immediate and short-term remedial measures could redeem the immediate problems to some extent.

Production

The current dearth of foreign currency is threatening the production of goods and services. Therefore, it is imperative that we obtain foreign assistance to not only meet our essential needs of food, fuel, medicines and other essentials for our livelihoods, but also fuel, fertiliser, agrochemicals and raw materials for industry and services. The quantum of needed foreign assistance is therefore large.

Political stability

Obtaining such assistance would be facilitated by a stable government and political stability that are woefully lacking.

Political unrest

The current political unrest and instability is not conducive either for obtaining such assistance as well as enhancing the production of goods and services. However justified the peaceful protests may be, they are not conducive to the functioning of the country’s economy. Furthermore, their repercussions on the polity and economy are uncertain at best and potentially anarchic.

Challenging task

Economic recovery is difficult and challenging due to the depths the economy has fallen, the political and social unrest in the country, and the unfavourable global conditions. Nevertheless, an economic recovery is imperative and urgent.

Focus

The recent focus of the country has been on the scarcities of essential goods and services, the severe hardships of the people owing to the soaring prices and the unavailability of basic needs for living.

The social upheavals, political protests and the recent widespread violence and arson have compounded the problem. Even in the midst of these difficulties, the legislature has been preoccupied with political controversies, personal attacks and the difficulties faced by Parliamentarians recently. There has been little focus on how the economy could be revived.

Summing up

The revival of the economy amidst political instability, soaring import prices, negligible foreign reserves and a global recession is a near-impossible task. The economy can be retrieved from its perilous state and its production capacity restored only through foreign assistance.

Initially, foreign assistance is needed to overcome the shortages of essentials that are threatening the livelihoods and lives of people and reducing the production of goods and services.

Further foreign assistance is needed to provide the inputs for agricultural and industrial production to reduce food imports and increase the production of goods and services for export. It is only by enhancing production that the country’s trade balance can be improved.

As the domestic production of goods and services are dependent on imports of fuel, fertiliser, agrochemicals and raw materials, the capacity to import these has to be strengthened through foreign assistance.

The current political unrest and instability is not conducive either for obtaining such assistance and enhancing the production of goods and services.