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Economic crisis showed there is no room for populist and unsustainable policies, says Treasury report
View(s):Titled ’2022 Economic Crisis – Lessons Learned and Way Forward’ in the latest annual report of the Ministry of Finance, Economic Stabilisation and National Policies, which comes under the purview of President Ranil Wickremesinghe, the report noted that it has also provided an important opportunity for the country to revisit its economic model that has been followed for decades.
Considering the unfavourable trends last year, particularly since mid-2021, the report pointed out that had corrective economic policy measures been taken well in advance, including seeking the assistance of the International Monetary Fund (IMF), the situation could have been managed better and the worst outcomes of the crisis could have been mitigated. “Attempts to obtain some foreign assistance as a last resort were too little too late and proved to be unsuccessful.”
The report also stressed that despite there being numerous forecasts and debates on the potential economic crisis, both officially and publicly, they were ignored until it was too late.
The crisis, the report further noted, showed that there is no room for reliance on populist and unsustainable policies, and it has clearly shown the dangers of over reliance on politically and ideologically motivated decisions as opposed to evidence-based decision-making with objective judgment.
Stressing that it is critical for Sri Lanka to efficiently manage its expenses, considering the limited fiscal space available in the current context, the report said that this involves prioritising spending on essential services such as healthcare, education, and critical infrastructure, while cutting back on non-essential expenses. “There is no room for ostentation given the serious issues in the fiscal sector, and hence managing public finances with utmost care and with strong discipline has become more important than ever,” the report added.
The report also reiterated that the IMF programme will help to re-establish economic stability, but “it will not be a panacea for all the ills faced by the country,” while noting policies that would go beyond the IMF-EFF programme are essential.
“It is critically important to understand that any attempt to change the direction of the economy without a proper, convincing and implementable alternative, and merely based on politically motivated rhetoric will only deteriorate the situation and create further distresses for the already weak economy,” the report warned.
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