The Sri Lanka Cricket team that got into the semi-finals of the ICC Twenty 20 World Cup has been warned about taking for granted the remaining match in the semi final and if they win it, the finals. The advice given to them is that though they have been victorious in all the matches up to the semi-finals, they should be aware their opponents would attempt to counteract their strategies in the two remaining matches. In brief they have been asked to be guarded in their optimism. Readers of this column would know the results of the tournament, whether we have won or lost. Whatever the result, the advice given to them is extremely sound. Let not the initial successes blind you to the challenges in the future.
There is much more work to be done for the eventual victory. We hope that advice would guide them to success
In as far as the economy is concerned, this advice of guarded optimism is even more opportune at this time.. The victory at war is seen by many as a victory for the economy as well.. There can be no doubt whatsoever that the war was a financial burden, a hindrance for investment, a crippling of several sectors in the economy and the most serious set-back to the economy. The danger at the moment is thinking now that the war is over, economic growth and development is to be expected as a matter of course. Merely because the war is over, the economy will not prosper. It is more accurate to view the state of the country as that of one of the main obstacles to development having been removed and to now look to ensuring that other pre-conditions for development have to be put in place. The peace dividend is not automatic; it requires putting in place a number of factors that are needed for development.
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It is true that peace by itself would contribute to economic growth but that is not the full and potential dividend we are aspiring for. We have to get the best possible dividend from the peace so that peace itself would be a durable and permanent one. It is a time when we can repeat the words of SWRD Bandaranaike in response to the Throne Speech on regaining our independence on February 11 1948 at the ceremonial opening of Parliament. “We must not, we cannot, allow our newly regained freedom to run the risk of remaining merely a theoretical concept, a thing dead and without real meaning for the vast mass of the people.
We must see that it quickens into a life of greater happiness and prosperity for us all. Political freedom comes alive, only when it is utilised to achieve other freedoms—freedom from poverty, freedom from disease, freedom from ignorance, freedom from fear. Nor is that all. We have to fan the flickering flame of democracy so that each individual is assured of those freedoms for which democracy has always stood.”
What are the preconditions that we must establish to usher in a period of economic growth and prosperity. The first and most urgent task is to expedite the rehabilitation of the internally displaced persons (IDPs). This is no easy task both owing to the massive numbers involved, the lack of adequate resources and the essential security scrutiny of the IDPs. Yet this has to be expeditiously and efficiently performed to minimise the loss of life and the proper resettlement of these people to enable them to obtain a livelihood.
The second requirement is the successful rebuilding of the devastated areas and the reconstruction of economic and social infrastructure. This too is no easy task. There is little doubt that a massive investment is required and the country’s own finances are quite inadequate to fulfil this task. The country is fortunate that India has come up with a large financial package and even a plan to develop the North and East.
Likewise China and Japan have promised huge sums of money. Large as these may be, even these may not be adequate for the reconstruction. It is therefore necessary for the country’s political and economic diplomacy to be of the finest finesse and subtlety. As the Japanese special envoy Akahasi reminded us, this is a period when we must build bridges with those countries that may have hurt us by their inconsiderate words and sometimes acts, as they are all needed to make the rebuilding of the country so important. We cannot afford to lose friends who have helped us in the past.
Then it is essential that we get our economic policies and economic management in place. Otherwise much of the benefits that we expect would not be realised. The peace economy must be based on sound economic principles, as the laws of economics are iron laws that act irrespective of persons or political agendas. It has been repeatedly pointed out that fiscal consolidation is a must for economic stabilisation and growth.
Admittedly it is a difficult task in the current state of the economy and yet it becomes even more urgent as we undertake the reconstruction phase. A popular misconception is that if we get adequate foreign assistance to reconstruct the devastated areas, all’s well. On the contrary the foreign expenditures would themselves release inflationary pressures as the demand for goods and services would rise. This would be especially so in the initial stages when bottlenecks for the production of needed materials would be many and there is bound to be increased demand for essential commodities. This means that there is a need to cut waste and prune expenditures in other areas to bring down public expenditure and reduce the fiscal deficit. Without such improvements in fiscal management, there is the danger of inflation that could destabilise the economy, particularly exports.
At this historic juncture we must not be overwhelmed by optimism that leads to complacency and contentment. It is necessary to be guarded in our optimism and expectations. There must be a realisation that the benefits of the peace would take some time and can be reaped in full measure only if the correct economic policies are pursued.
The peace has conferred on the country a new opportunity and an environment conducive for economic activity. There are many pre-conditions that have to be established to usher in economic prosperity. The macro economic fundamentals have to be strengthened, inflationary pressures must be contained and institutional and legal reforms that would be favourable to economic investments are necessary. The economy will not achieve its full potential merely because the war is over. An economic policy framework conducive to development must be put in place. |
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