6 August, 2020

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Friday Forum Calls For Domestic Reforms, Says International Community Goodwill Alone Will Not Help Economy

The Friday Forum has underscored that no amount of goodwill on the part of the international community will help Sri Lanka’s economy without discipline and the domestic will to reform.

The Forum, comprising of a group dedicated to democracy, good governance, human rights and rule of law said that it recognizes the extremely difficult economic policy choices that our society and government have to make in the present circumstances.

Economic forum“These circumstances include total expenditure in excess of incomes earned in the economy requiring borrowing abroad year after year; a continued failure to raise government revenue adequate to meet government expenditure; a rampant rise in government expenditure pushed by competitive populist measures espoused by the main political parties at elections; the consequent recourse by government to debt financing, borrowing in both domestic and foreign markets to pay for rising expenditure and servicing accumulated debt of government absorbing a large and rising proportion of government receipts; and denying resources to undertake both rising current expenditure and to continue with current investment projects, leave aside new investments. The rupee cost of servicing foreign debt rises with the devaluation of the rupee and worsens domestic public finance problems,” the Forum said in a statement released on Thursday.

The international economic conditions now and in the near years not holding prospects of rapid growth in the principal economies of the world as in the previous decade or so, to enable the Sri Lanka economy to grow faster pulled by export demand. “It is probable that interest rates in world capital markets may rise after several years of very cheap money and that rise will make refinancing of government foreign debt far more expensive. Remittances from earnings overseas by Sri Lanka nationals did not rise in 2015 and that may worsen the problem in the balance of international payments.

Slow growth in the economy enforced by these circumstances will reduce the increase in living standards and cut own growth in employment opportunities. It is imperative that whatever mix of policies is chosen, that mix includes measures to minimize adverse effects on those least able to bear them. To make an understatement, these are unpleasant situations for any government to handle,” the statement said.

According to the Friday Forum, Sri Lanka has a small number of options to choose from, which are however not easy to implement. “The temporarily pleasant choice is to go on regardless and finance increased government expenditure by printing money and extending credit to the private sector on easy terms to expand private expenditure in the hope of growing out of economic difficulties. It is as temporarily pleasant as it is in the longer run impracticable. Boosting domestic demand in that manner will soon create a crisis in international payments, raise domestic prices rapidly, depreciate the rupee against all currencies and lead to other nasty consequences, which have the potential to destabilize society, both economically and politically,” the statement signed by Dr. G. Usvatte- Aratchi and Prof. Savitri Goonesekera said.

The other choices are likely to cause hardship in the short term but may bring back stability to the economy and given wise policies to a long term growth path. Hardship will come because easing the severity of current crises in the economy will require restraining the growth of total domestic demand bringing down rates of growth, with little expansion in export demand. “Government will need to review seriously incentive structures and institute fundamental reforms in government finance and administration,” the statement said.

The Forum noted that the Central Bank has the responsibility to bring the financial system to sound health. The severity of hardships can be mitigated, but by no means eliminated, with the help of the international community whose good will to the people of Sri Lanka has been high since January 2015. “However, no amount of goodwill on the part of the international community will help the economy without discipline and the domestic will to reform,” the group said.

“Further there is the possibility of direct controls on imports and capital movements. We are all too familiar with the consequences of these controls from experience in the 1970s. Discretion to allocate resources in the hands of politicians and bureaucrats will corrupt whatever is left of a working government machinery. In so doing we also would infringe international agreements which we had entered into. All assistance from intergovernmental financial institutes will come under serious questioning. Private net capital inflows would most likely dwindle at best to a trickle,” the statement said.

According to Friday Forum, whether we can muster the will to make any of these options depends on the public and government appreciating the severity of the crises and the dire need for corrective action and for taking difficult decisions, therefore the Forum invited universities, institutions providing higher professional training, research institutes, civil society organisations and competent individuals to make every effort to inform the public of the nature of the problems and the consequences of leaving the crises unattended as well as those that follow from adopting alternative corrective measures. Friday Forum also requested all media, print and electronic, to provide space in which these alternatives can be discussed widely and in depth.

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Latest comments

  • 2
    8

    What are you on about dudes…

    Yahapalana PM Batalanada Ranil, our Economic” Whizz kid” got the Norwegian Fish Import Ban lifted..Or is he still lifting ???

    And he reckons the GSP Plus is also getting lifted..And it will be all good..

    Obviously you guys must be reading only Fitch report and Morgan Stanley Forecasts perhaps.

    Batalanada who has been working on his 4 year plan since May 2015 was to be out this week.

    Batalanada’s One Million jobs for the Dalits must be in it.

    But Today is Friday by the way , but we got only this from Friday Forum.

    Did you guys say the growth is slowing in the West, and things don’t look that crash hot in the next few years?.

    Not according to the Singaporean who runs it like his Toy Bank.

    I mean our Yahapalana Central Bank.

    He lifted the growth to 4.8 this year, from a lousy 4.4 last year and even lousier 3.8 the previous year.

    How marvellous !! What a set of beautiful numbers.

    I am surprised Shinto Abe didn’t ask the Singaporean also to come over with Bodhi Sira ..

    I hope the Singaporean wasn’t reading from his Family Trust Acciuntants report.

    But then you guys wouldn’t know because the Singaporean ain’t going to tell anyone how he fixes the Yahapalana Bonds.

    Sorry, I mean how the the rates are fixed for your EPF.

    I don’t think you guys have any dosh in our Yahapalana EPF .. Right.

    The two in the Middle are of course set for life even with or without the EPF..

    • 9
      1

      MERITOCRACY should be the basis of award of all positions and appointments, but today Sri Lanka’s governance institutions are full of CORRUPT political DEADWOOD — the cronies of Sira, Ranil, CBK, and Mahindar Jarapssa.

      • 3
        1

        Quite right Dodo.

        Also, there are no Tamil professionals in SL govt. Ministries and foreign service national and international level at because of patronage politics and racism.

        If the Sl govt. wants to do real reconciliation they had better pro actively advertise for Tamil professionals – instead of pretending that Muslims are Tamils!

        • 0
          0

          ” real reconciliation they had better pro actively advertise for Tamil professionals”. Good idea…but is a bit racist.

  • 7
    0

    FF: Why not name and shame the corrupt insider trader at the Central Bank who lacks qualifications for the job – Arjuna Mahendran?

    Mahendran claims he is a victim of a racism and political campaign, but he is an insult to all decent and honest Tamil professionals.

    Mahendran does not have the qualifications to head CB, but is there because he is Ranil’s crony.

  • 5
    0

    the friday forum has left out the most important reasons for our stagnation and lagging behind other countries,which is labour reform.Due to its sensitiveness we tend to look the otherway,but unless our economic army is better than other countries economic army,then we are going to lose the economic war.

    when it comes to terminating an employee it becomes quite difficult in srilanka.It is much more easier in singapore,HK,malaysia,taiwan,china,india and thailand.In indonesia,bangladesh,pakistan and vietnam it is a bit more difficult than these countries but far easier tha in srilanka.

    investors will not likely to hire if they find that it becomes difficult to fire.When they compare our labour laws with the countries i have mentioned it is bye bye to srilanka.Our archaic labour laws Devised during the NM perera days should be overhauled into the modern age if our economic army is o win the war and bring in the revenue.Just like our other army was reformed by sarath fonseka and the war on terrorism was won,someone should do it to our industrial army too.If we do that investmen will flow into the country.

    Another factor to look at is the redundancy costs.This also will cheese off investors from hiring because if they want to restructure,the costs are prohibitive.At least we should keep it on par with india,so that we can position ourselves to become the gateway to india.

    so the friday forum looking at the economic problems is looking at the symptons,not the root cause of it.We are competing with other asian countries for investment and we have to have our labour looking better than theirs.then the money comes in.It is like going to the massage parlour and selecting a woman.The woman who gives you a friendly smile,and has done up her face and dressed herself nicely will catch your eye and gets your money assming that all the other girls are equally pretty.

    • 1
      0

      I was struggling to understand what you were going on about, but this

      “It is like going to the massage parlour and selecting a woman.The woman who gives you a friendly smile,and has done up her face and dressed herself nicely will catch your eye and gets your money assming that all the other girls are equally pretty.”

      makes it crystal clear. :))

      • 0
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        nimal

        once you have hired the friendly one,fire away non stop.Never hire the sour puss however beautiful cos then you will be firing from the rear.

      • 0
        0

        Oh that’s exactly how we pick politicians…The problem is after being picked they don’t even give you the massage they promised, let alone a bit extra for a few extra notes…If anyone from the massage industry is offended, apologies.

        • 0
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          nuwan

          The politicians don’t need the salary you pay them and the perks you give.They can make big bucks with the deals they make.In the massage parlour it is different.The poor woman is not paid a salary.She is dependent on your money to feed herself and her family.In otherwords she is desperate for your money just like sirsena is desperate for money from the rest of the world and has gone with the begging bowl to G7.

          While he is trying to beg,another begger the indonesian is trying to sell him train carriages in case he succeeds in his begging.So as i mentioned earlier in my commenet lot of competition among the beggers.

          The only way out of this desperate situation is to make our industrial army smash the other beggers industrial armies.China did that and with its industrial army built up all its infrastructure without getting a penny from the global financial system.Living on loans only leads to a pyramid scheme where you need a fresh loan to pay the earlier one and one day when the fresh loan does not materialise kaput.

  • 5
    2

    Mr. PM, It was the media which you have inherited, made a picture as ‘RW is a great economic strategist and if given a chance, would do miracles’ kind of an image. But you have proven (along with the incapable FM and the cardboard President) for last one year or so that your capabilities are near zero. The current economic situation is just a case in point. However, you are better than this so called forum which has no sense at all of what the common man of this country feels, eats, drinks or what cloths they wear, what transport they use or so on. Beware! Let them have their tamashas at 5-star joints at their choice. They in fact get to gether not for the betterment of the country but for the time pass over a glass bear or wine. So Mr. PM, go back to the history and read what late President Ranasinghe Premadasa did for the country in terms of economy. You could learn from him immensely.

    • 1
      0

      Max – THIS IS no fair.

      Do you think any leader could make miracles with the ground situaton ?

      Be real man – we are a poor nation. We perfectly know the situation of the current day. Even if not much is clear by now, they the Rajaakshe men looted the state treachery as no other did – latter is a fact.
      Eeven today, with journos further support to MR and his thugs, people are being kept away from the truths. Situation is more or less like what Gadafi regime left behind in Lybia. And dont forget this country is pro Mahinda Raja or the kind of crime friendly men – even 2nd of the nation is pro corruption than anti. Considering all these, even Dr Merkel or any other powerful from the west would not do the job in lanken context.

      Attacking is very easy, and the today situation is miles away from the situation Premadasa faced in 80ties.

      • 0
        0

        “Situation is more or less like what Gadafi regime left behind in Lybia”

        You mean Free Education, Healthcare, housing for all, a stable, if draconian political space, a rich economy and being the first Oil-Country to take the lions share of oil profits away from the private, Western interests and direct it toward itself ?

        Yeah, all horrible things for the Libyan people who are now enjoying all the wonderful gifts the West recently gave them

        • 2
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          maalumiris

          ” if draconian political space, a rich economy and being the first Oil-Country to take the lions share of oil profits away from the private, Western interests and direct it toward itself ?”

          A small petty cash sum was kept aside by Gaddafi for the rainy days.

          Gaddafis’ hidden billions: Dubai banks, plush London pads and Italian water

          http://www.theguardian.com/
          world/2011/feb/22/gaddafi-
          libya-oil-wealth-portfolio

          If he was so popular and people were grateful to him he could have easily gone for democratisation of the entire country.

          Like all those dictators he too never trusted the people, but his cronies, Mukhabarat el-Jamahiriya (repressive unintelligent service), brutal force, ….

          MR should be eternally grateful to Sirisena for saving him from the same fate that befell on Gaddafi and Romanian Nicolae Ceaușescu.

  • 3
    0

    Just wait and see how diligently the West is going to trap the good governance leaders. At least MR had some room to move around. Former President JR done lot of damages to the country, but his nephew will do far worse. He has already divided the Sinhalese and sold to the foreign power, as Tamil leaders have done. Only one thing left is dividing the country. Trust me, he will do it, by doing so he will become the worst leader for creating endless war between North and South. The civil war was the Asia’s longest brutal civil war, thanks to JR’s policies. But his nephew will create an endless war, thanks to his policies.

    • 0
      0

      If that happens, go forbidding, RW will fail in his mission. West must ensure by all means the peace prevails and they can do it, by controlling diaspora living in the West. Otherwise, a single misstep can bring China back into the theater. Look what a mistake it was to take the wrong side during the war. It opened a gaping hole that Chinese walked very freely through.

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