Columns

The new government that commands a two-thirds majority in parliament has raised great expectations and hopes of national unity, good governance, and a more egalitarian society. Will the government be able to eradicate corruption, forge national unity, and usher in a prosperous country for all?

Enormous opportunity

For the first time in the country’s post-independence history, there is a strong possibility of resolving the country’s foremost problem of achieving national unity.

Elections

The two elections this year have been sans communalism. The two main political parties—the JVP-led NPP and the SJB—promised equality for all. Almost all political parties promised equal rights and opportunities for all communities.

Northern MPs

Most significant was the election of NPP MPs from the North, East, and the Indian Tamil community. The cabinet sworn in on the 18th has a Tamil MP from the North and a member from the Indian Tamil community. However, there is a conspicuous absence of a Muslim in the cabinet.

Good signs

These are good signs that augur well for national unity. They are a rejection of communal politics both by the people and the government.

Communalism

Communalism has been the single most distractive and destructive cause of the country’s economic retardation. The outbreak of communal violence in 1958, 1977, and 1983, and the prospect of such violence erupting, frightened away foreign investors and weakened the external finances and capacity for economic growth.

War

The civil war weakened the economy immensely. The financial costs of the nearly three-decade war, the human lives lost, and the exodus of valuable human resources weakened the country’s economy in diverse ways.

Apart from the costs of the war and the destruction of the national assets, the exodus of human capital undermined the country’s development capacity. The prospect of national unity brings with it expectations of foreign investment from the diaspora, foreign investors, and governments. The economic gains from national unity are enormous.

Opportunity

Now there is an opportunity to develop the North and East, attract foreign investment from the diaspora to the North, and develop fisheries and agriculture in the region. National unity will also attract foreign investment to other regions as well.

Foreign investors

Foreign investment flow to the country was deterred by several waves of ethnic violence and corruption. National unity and the eradication of corruption would remove two of the main disincentives for foreign investments.

Fundamental

National unity is a foundational prerequisite for economic and social progress. The achievement of national unity would undoubtedly contribute towards national prosperity.

Economy

Nevertheless, the economic problems and challenges are enormous. The continuity of the IMF programme with lesser burdens on the people and the reduction of the fiscal deficit, while increasing salaries, granting subsidies, and social security expenditure are among these critical problems.

External finances

Improving the country’s balance of payments and enhancing the foreign reserves are also imperative to meet the country’s foreign debt obligations and finance essential imports. This could be difficult if the tensions and uncertainties in West Asia and the Russian-Ukrainian war front continue. Moreover, if a trade war erupts, it would affect our imports, exports, remittances, and tourist earnings adversely.

Economic policies

President Anura Kumara Dissanayake will have to follow economic policies that will lead to stabilisation and economic growth while resolving the severe problems of reducing prices, increasing employment, and diminishing poverty and malnutrition. These are formidable trade-offs to resolve.

The new government faces formidable problems amidst enormous expectations of economic improvements in the living conditions of the lower-income earners and the poor.

Multiple challenges

The repayment of foreign debt; reducing the fiscal deficit; ensuring economic growth; reviving agriculture and industry; enhancing tourism; and reducing inflation, poverty, and malnutrition are formidable challenges.

Initial thrust

All these cannot be achieved immediately or completely, but the initial policies to achieve them have to be taken expeditiously. The promises given to the people and expectations are indeed difficult to fulfil. Yet meaningful steps must be taken expeditiously.

Fiscal deficit

Among these objectives, the reduction of the fiscal deficit to about 5 percent of GDP is imperative but particularly difficult, as many of the election promises increase expenditure and reduce revenue. Yet meaningful steps must be taken expeditiously.

IMF programme

The NPP, which had vowed to discontinue the IMF’s Extended Finance Facility (EFF) owing to its burdens on the poor, has veered towards a more realistic posture of continuing it with modifications of its taxation measures that are onerous for the low-income earners.

Poverty

Poverty and malnutrition have increased in the country.

About a third of the population is below the poverty line, and a quarter is in hunger and malnutrition. This is undoubtedly intolerable. Yet how can the IMF programme be modified to reduce these unacceptable conditions and meet the macroeconomic targets set by the IMF that are vital for economic stability and revival?

Concluding reflection

We have arrived at a turning point in the country’s history that cannot be frittered away. First and foremost, the political transformation could usher in an era of national unity that would contribute immensely to the country’s economic development. The reduction of corruption would have immense benefits for the economy. Nevertheless, the economic problems of the country are enormous.

The continuity of the IMF’s EFF arrangement with modifications remains difficult, especially as containing the fiscal deficit, while increasing expenditure to fulfil election promises, is challenging. The unwillingness to privatise loss-making state enterprises is another huge obstacle. The evolving global conditions of two wars and the unpredictable policies of the 37th President of the United States are huge uncertainties. Trade restrictions that are a trump card of the next US president could affect our external finances adversely. Meeting our foreign debt obligations would be enormously difficult if our external finances don’t improve.

Conclusion

The country has arrived at a decisive moment in its history. The government that commands a two-thirds majority in parliament has raised hopes of national unity, good governance, and a more egalitarian, equitable, and just society.

In as much as the people’s expectations are high, the economic problems and challenges are formidable. The resolution of the nation’s fundamental political, social, and economic problems will determine the future of the country.

Will the government be able to eradicate corruption, forge national unity, and usher in a prosperous country for all? There are great expectations of a quantum leap in governance, national unity, and the emergence of an egalitarian society. For the first time in the country’s post-independence history of 76 years, there is hope of resolving the foremost problem of achieving national unity.

Final word

The country awaits the effective and successful implementation of policies that will take them to the promised land of a prosperous country for all.