By Milton Rajaratne –
Management of the economy is more important than management of a firm because it is a macro phenomenon that essentially influences business environment also. Management of a firm generates private wealth whereas management of an economy generates public wealth which is an indicator of economic development of a country. Economic management is a prime responsibility of the government because a government has to be committed to uplifting macroeconomic and socioeconomic condition which also leads to enhancement of business and industrial climate of a country. Economic management or mismanagement of a government can be measured using economic indicators that pertain to the tenure of that government. Reliable economic indicators can scientifically conclude the condition of the economy and whether it is managed or mismanaged.
Sri Lankan government changed hands in January 2015 and the UNP led government came to power. Improvement of both macroeconomic and socioeconomic condition of the country was given prominence among its main pledges. Its tenure has almost come to the end and thus it is timely a topic to investigate whether the government has been able to manage the economy and bring about the proclaimed results in both macroeconomic and socioeconomic spheres. This article aims at analyzing, using economic indicators constructed by the Central Bank of Sri Lanka, whether the government has been able to manage the economy during the past four plus years.
Above table presents data on 25 economic indicators from the year 2014 to 2018 of which 2014 is considered as the reference year of the subsequent four years of the present government. Four year averages of economic performance has also been calculated and presented. Average values help avert analytical errors and biases compared to absolute values of each year. For comparison purpose another calculation was carried out to derive the difference of indicator values between the year 2014 and the average indicator values during the period of 2015 and 2019. The last column of the table presents the conclusions i.e. whether the present government has passed or failed in economic management as far as these 25 economic indicators are concerned. The absolute data presented in the table have been solely drawn from the recent Annual Reports of the Central Bank of Sri Lanka. Among the 25 criteria presented here, each criteria from 1 to 15 indicates that the higher the value the positive the performance while each criteria from 16 to 25 indicates that the higher the value the negative the performance. Therefore, the differences for the first set of criteria were obtained by deducting the 2014 values from the 2015- 2019 average values. The reverse calculation was performed for the second set of criteria. Thus the greater the difference of value between the two periods the more mismanaged the economy is.
All the 25 criteria given in the table indicate that the average performance of the economy during the past four years is as failure compared to the performance of the year 2014. The mal-performance of the economy is an indication of mismanagement of the economy. Mismanagement in turn indicates deterioration of economic activities. Since in the past, there was a common belief that UNP regimes are good at economic management and as a result the economy was boosted every time when UNP government come to power. However, this time this
conviction has been proven failed. In addition, economic performance of the first two quarters of the year 2019 has been disappointing as all these criteria have further deteriorated.
Due to mismanagement of the economy during the period between 2015 and 2018, the expectations of the business and the households sector have been shattered and the economy is caught in number of traps such as low investment-low economic growth trap, low export-high import trap, low public revenue-high expenditure trap, debt- development trap, debt servicing trap, high tax-low real consumption trap, high production cost-competitiveness trap, low exports-high imports trap, and many other traps. The year 2020 is the time for electing a new government. The government to be elected in 2020 should stick to both economic and economic management fundamentals in order to correct the past mistakes and to head for accelerated economic growth and development to overcome these (and other) traps.