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The presidential election in less than a month is of paramount importance for the country’s economic future. The economic policies of the new president and the government to be elected in the parliamentary election thereafter would determine the direction of the country’s economic future.

A decisive result in the presidential election too would be of utmost importance to ensure political stability, which is so important for economic development.

Promises and policies

However, neither the promises they make nor the policies in their manifestos are what they may implement when facing the hard economic realities they face when they form a government. Consequently, the country’s economic future is uncertain.

Critical issue

The country is at a critical point in its economic future. A key issue is whether the International Monetary Fund (IMF) would agree to revise its ‘conditionalities’ or will the new government abandon the IMF agreement. This is the crucial question.

Fiscal targets

In a nutshell, this depends on whether the next president and his party could come up with alternate policies that are less burdensome on people and achieve economic targets.

Fiscal deficit

Most important would be the achievement of an acceptable low fiscal deficit by increased revenue and lower expenditure, as well as achieving a satisfactory current account surplus in the balance of payments.

Economic policies

Very little is known of the presidential candidates’ economic policies at the time of writing. In any event, the elected president’s economic policies may be a far cry from the promises in his party manifesto. It is more politically advantageous to make attractive promises on what they would do rather than how they would achieve economic stability and growth.

Nevertheless, the broad contours of the party policies could be gauged, though what changes they may introduce when in power remains to be seen.

Broad contours

Therefore, we discuss the broad contours or economic perspectives of presidential candidates Ranil Wickremesinghe, Sajith Premadasa, Anura Kumara Dissanayake and Namal Rajapaksa. There are significant differences in the policies of the four parties.

Gas cylinder

As far as President Wickremesinghe is concerned, we could expect a continuity of the current programmes with some modifications, as he has realised just before the polls that some relief has to be given to alleviate the hardships of workers. However, the increased wage bill will add further difficulties to containing the fiscal deficit that is so vital for economic stabilisation. How he would increase revenue to achieve the required lower fiscal deficit remains to be seen.

Telephone

The Samagi JanaBalawegaya (SJB) has announced its policies as being of a social market economy. It will combine social welfare policies with market-friendly economic policies.

This is a continuation of the welfare policies pursued in the post-independent years within a liberal economic framework. It would also combine its market-friendly policies with state intervention to correct market failures.

Its policies are fairly predictable. They are a continuation of a welfare state within a largely market-friendly economy. It is likely to be a mixed economy.

JVP/NPP

The National People’s Power (JVP) vows to reform the country’s political culture, eradicate corruption, and strengthen the country’s agriculture, small and medium industries and information technology services. It promises to enhance expenditure on health and education and social safety nets. Finding the finances for these expenditures would be a problem.

IMF programme

The NPP has said it will continue with the IMF reform programme. More recent statements indicate that the party is opposed to privatising state-owned enterprises. This could lead to a breakdown of the IMF Extended Finance Facility (EFF).

The NPP’s economic system remains somewhat undefined, though it says it will have a mixed economy with private enterprises playing an important role besides state enterprises in key economic and social services.

FDI

The NPP, though agreeing to allow private enterprises, is not likely to attract foreign investments and domestic investors until it is clear that they are supportive of private enterprise.

Uncertain

The manifestos and election promises are not necessarily the economic policies that will be pursued by parties. Perhaps their past performances and pronouncements would be a better indicator of the economic policies they will pursue.

Higher revenue

Whichever party forms the next government will have to devise effective policies to enhance government revenue and curtail expenditure.

A tax system that could reduce tax evasion and tax avoidance and bring into the tax net a large number of tax evaders is imperative. A more efficient, less corrupt, and reformed tax system is vital to achieving this.

IMF

The continuation of the current arrangement with the IMF is feasible only if the tax system is able to collect adequate revenue. An efficient and corrupt administration is vital, and there is no political interference.

Promises

Election promises and election man Manifestos are not what matters in this election as in the past. It is the political resolve and implementation that matter. Perhaps parties that have not been in power are more likely to implement such effective policies. Yet there is no certainty of this.

Concluding reflection

The economic future of the country depends very much on the ninth president of the Democratic Socialist Republic of Sri Lanka and the composition of the party that obtains a majority in parliament. Hopefully, the next government will steer the economy to a stable economy with realistic and pragmatic economic policies and their effective implementation.

The country is entering a period of political and economic uncertainty. The economic policies pursued by the next regime will determine whether the country’s economy will be stabilised for growth or face another crisis.

It is prudent to continue with the IMF’s EFF programme with a few modifications to ensure fiscal consolidation and an improvement in the balance of payments to enhance external reserves.