By Milton Rajaratne –
Prof. 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.
nimal fernando / October 7, 2019
Prof. Milton Rajaratne,
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I couldn’t stop laughing when reading this! You appear from time to time ……….. this time also you have appeared to make the case for one side of politics.
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Heaven help us if you guys are the ones training our economists.
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Where did you get your PhD? Zimbabwe?
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The best economic achievement of this government – or any post-independent government – is stoping commercial flights taking off from Katunayake and landing in Mattala 5 minutes later!
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Care to talk about that? :))
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Shamil / October 7, 2019
Both sides (UNP and SLFP/PP) have miss-managed the economy largely because of fake foreign aid projects that spread corruption among local politicians and their cronies, and benefit foreign fake aid donors and their strategic business and security interests. USAID and MCC has been particularly vicious with fake aid in the past 5 years and even before that to turn the Parliament into a Cesspit of corruption, perks and parlimentary priviliges for politicians and to debilitate national institutions and privatize SOEs. and enable scams like the Garbage importation by Halleys, Central Bank Bondscam, National Survey dept, Provincial councils debilitation is all part of the Special Provisions Bill plan to build super-ministries for the MCC project and bypass local government structures while spreading corruption. Fake foreign aid to debilitate governance and national institutions and over-sigth mechanisms is the root of the economic crisis in Lanka today, and the solution is not more privatization but institution strengthening with qualified and honest people and less corruption and politicization of institutions.
While local neoliberal think tanks, like Advocat and Verite harp on structural reforms and the free market as a solution when the West is turning away from the neoliberal model that spreads corruption, rent-seeking and inequality, the fact is that transparent monitoring of all so called foreign “aid” and aid for trade projects and the reduction of corruption with real development policies based on national and local development priorities is the solution.
IN sh
I
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nimal fernando / October 8, 2019
Prof. Milton Rajaratne,
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Anyone can cook up the numbers …….. and many do. During Rajapakse’s time the numbers were sent back and they were asked to be changed. People have short memories!
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Many countries spend on infrastructure to boost the economy …….. especially in times of stagnation or downturns.
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How did it help the Lankan economy when the Rajapakses borrowed from China at commercial rates …….. and on China’s conditions: all the construction companies were Chinese and all the work-force/labourers were Chinese. Could you please elaborate how that helped the Lankan economy?
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It sure helped China’s economy.
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Can we please get away from the usual partisan nonsense Lankans always dabble in and have a honest appraisal.
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Can you please quantify the effects of the vast expenditure on infrastructure of the Rajapakses on the Lankan economy/GDP?
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Lankan / October 7, 2019
Not meet economy and finance ..
All departments ‘re mismanaged by MR and co..
What about giving PhD to his son…
What about giving the director post to his cousin in Sri Lankan airport…
What about white van?
What lasantha?
What about others ?
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shankar / October 7, 2019
it would have been better if the author had done an average for the last 4 years of the mahinda rajapakshe government(2011,2012,2013,2014),instead of only 2014,and compare with the average of the last 4 years of the maithripalnaya .That way an average with and average can be compared.
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Milton / October 8, 2019
Very correct and very welcomed suggestion. I just wanted to compare the worst performance during 2010-2015 period. And to say whether we are behind or ahead of 2014. Thanks.
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ajith / October 8, 2019
Milton,
When you say 2014 is the worst during 2014, that indicates the economy is started to fail in 2014. this could be due to the impact of loans obtainedat high rates and investment on unproductive sectors and corruption of the previous regime.
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Thappu / October 7, 2019
Ameer Ali, Kindly dissect the data provided and present ‘your’ findings on how our economy has performed. How fair is it to compare the results of a single year (2014) with 2015-2018? Thank you.
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kebab / October 7, 2019
Ranil talks and acts as if he is the last word on economics and governance.
His entire career has been a charade , which suits the prejudices of the Colombo middle classes.
But while he is bluffing them this conman dares to be arrogant towards his stupid followers, acting like a superior “man” who is suffering fools !
Now his game is up. The UNP must open its eyes to the truth. It has worshipped a falsehood for 25 years . Only sensational thing Ranil has done is the Central bank heist !
Ranil was advised by the NGO guys like Paki that we cannot fight the LTTE . So Ranil decided to con the LTTE and lead it in to a bad situation ( like how his scheming ended up with Colombo having a taxi driver as mayor !) The LTTE did not even vote for him, ending in the Rajapakse win in 2005 !
Because of Ranil’s stupidity and obvious cowardice the Rajapakses became heroes.
Today Ranil cannot open his mouth. Under him the UNP became very mediocre and even this time they have nominated a foolish and empty Sajith as its nominee. There are no proper leaders in the UNP. Only old Royalists and suckers.
Those who blindly followed Ranil for three decades stand naked today.They cannot open their mouths.
These statistics tell the story of a non-performing conman.
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Ruwan / October 7, 2019
Looking at the poor statistics how can we trust the UNP and the current consortium to resurrect the economy? The JVP too supported Ranil to continue being the PM of the country! We definitely need a change and the politicians should come up with strategies as to how the country can be resurrected from the mess we are currently facing! The politicians should also not promise freebies, increasing salaries, increasing Samurdi recipients etc without clearly indicating from where they would get the finances to fund these expenses! Please tell us how you intend to reduce corruption, enhance education, increase exports, boost and protect local industries without compromising quality, resurrect the farmers etc I would also appeal to sajith not to say that he will work 24 hours a day for 365 days as this is an impossibility. He also said that he will not be living in the presidential house, will not use bullet proof vehicles and he will donate his salary to resurrect the poor. We all know that these are promises that cannot be kept!
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ajith / October 7, 2019
Prof. Milton,
I just checked your table and I couldn’t understand your comparison about the results. How did you get all negative figures? Have you considered what impact the loans obtained at high rates during 2009 to 2014 influenced the economic indicators? As a professor you should have considered all the factors that contributed to the current economic status? You simply lost your credibility to your profession. It is sad that the professions do not maintain their credibility by falling to the political manuring.
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Milton / October 8, 2019
Dear Ajith, Please read the relevant para that describes how the differences a derived. That will answer your question of ‘negatives’. Thanks.
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Siri / October 7, 2019
Hey, big fellow your base line is subjective, having taken for only one year, 2014!! Ha, ha, ha, what sort of an economist are you? Where are the trend lines up to 2014 and after that? Your number crunching system is totally flawed in the case! You seem to be biased towards one one party and very supportive towards the other! Rather than looking at these numbers alone you should have been looking at the white elephants created by the Rajapakse administration to see how must of wealth we were loosing over the last five years. That includes the opportunity cost of capital invested as well, on those white elephants, if you were to make a resound assessment about the two periods you are talking about!
If economics is this simplistic, as you had expressed in your analysis, I just wonder how could people like your caliber be placed in institutions of higher education in training others to become professional economist? No wonder in a country like Sri Lanka opportunists flourish when the poor masses are perished because of the indifference towards vital issues as demonstrated by your absurd and half baked analysis!
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Hela / October 7, 2019
Siri,
You are asking for trouble mate. If you go back from 2014, you will find the same story. But the point made is that none of the indicators have improved under yahapalana “aarthika osthars”. It reveals the caliber of yahapalana economic managers and their failed policies. You can’t continue to hoodwink masses.
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Siri / October 7, 2019
Big fellow who taught you to use average values without their standard errors! It silly and erroneous in using averages without showing their standard errors and the related statistics! You being professor I would have expected you to have precision in analysis and rigor in your thoughts! Where are they? Dashed by the subjective bias towards Rajapakses! I feel sorry for you !
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Hela / October 7, 2019
Ok Siri the statistician, show us the standard deviations and explain.
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Siri / October 7, 2019
Hela, sorry mate I have no time or a data base to do all that! Not that I cannot! Yes as you so very kindly implied I am more than a statistician [ worked at the ABS, Australia] as I have also experienced as an agriculturist, agricultural economist, quality management specialist, senior SAS programmer, a visiting research fellow of the ANU, an associate research fellow of the ANU, visiting lecturer in development economics both at the Jaywardenapura and the Colombo campuses, was managing an international organisation [as Secretary General] based in KL So they are some of, not all, my credentials you may wish to take note of. Thanks.
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Hela / October 7, 2019
Shall we request the yahapalana economic guru Mangala Samaraweera toexplain this?
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Bandara / October 7, 2019
The analysis is superficial and poor. Simply misleading the general public and creating a wrong picture without any effort. Please pay attention before posting articles in this nature.
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Yahapalanaya / October 7, 2019
As some who have already commented on the article it will be interesting to go backwards say up to 2008 data and do the analysis. What would the trendlines for each parameters show including the std. deviation. With some of the parameters we may see the negative gradient that had been controlled somewhat during the current regime but obviously with economics Guru’s like RW, Harsha., Eran ..and other advisors in the current team this is not acceptable.
Also have the factors of pumping money into the economy (and has that stimulus worked ) through the unproductive white elephants and the drastic rise of the US$ in the recent year been accounted for in these statistics. I hear that principle payments for the commercial interest loans obtained for the mega projects didn’t take place until this year which means that big chunk of money that would have otherwise flowed into the economy had to be diverted elsewhere.
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Lester / October 7, 2019
Based on this data, it looks like the Government borrowed massive amounts of money from foreign lenders (21), yet failed to grow the economy in any meaningful way. In fact, as the first row shows, the economy actually contracted during every period of this government’s tenure. This is also reflected in the trade deficit (6), which in turn led to currency depreciation (22). Row 15 shows that the current regime also failed to attract any significant amount of foreign investment. Unemployment (16) remained flat, meaning the regime failed to stimulate the domestic economy, despite taking on large amounts of debt. These are the most important indicators. They show that the present regime has no useful economic plan. They are simply borrowing money and doing who knows what with it.
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Lion / October 7, 2019
First and foremost one should look at whether there was an Economy to manage in the Country since 2005 after MR became the President.. The Global recession started in 2006 and US forced the Govt to negotiate with the LTTE as they could not fund the war..by theit time the Country has swallowed US$ 250. bn.. MR turned towards China who lent on condition …2007 Hambantota Port ..Mattala Airpot …Port City.. and 10ac land of Army Headquarters… They sold the Country to China ..as a result of the fund flow the 3.4% growth in 2009 shot suddenly shot upto 8.9% during 2010-2012 ..and in 2013 it dropped to 3.4% ..by selling other assets the MR Govt maintained it at 4.8% during 2013-2015 those were not FDI.. Since 2015 as a result of regaling GSP+ ..improving relations with US the Govt ..selling Hambantota to China ..Govt maintained 5.3% growth..No FDI…now it has fallen back again into 3.4% ..the levels of 2009 ..2013. This is the sustainable levels for our Country.. The last 15 years there were nothing to manage by both the Govt …the Global recession has hit China and things will be worse in the next year immaterial of the Govt in power…Whoever comes to power will be fired to sell major assets either to US or China with the approval of India..
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Lion / October 7, 2019
The assymetrical development of energy guzzling projects is forcing the Govt to outsource energy from barges… Yet again China’s gain..they would invest and their orchestrating a regime change…. The Country will be in the hands of China who is salivating to take control of Sri Lamka
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K.A.Sumanasekera / October 8, 2019
A Fantastic Analysis of the pathetic Fiscal and Monetary Management of a Government which purported to be the most most Liberal , Democratic and Neo Capitalist Party Alliance of the Mahavamsa History ,brought in by the Intellectuals of the Top End of the Town. which promised a Debt Free Booming Economy, which will propel our inhabitants to Singapore standards.
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Everything is down and down except National Debt, Unemployment ,Budget Deficit , and the cost of Living.
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Smart Money of the Global Investors always get it right.
All we need are just three indicators to see how smart they are.
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*Market Capitalization is Down.
*All Share Price Index is Down
*Value of All Shares Traded is Down..
All because the Investors did a Cut & Run as soon as the Yahapalana First Bond Transaction..-
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And the FDI has been Down by a whopping USD 500 Million.
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I have noticed a slight up ward trend or at least a stabilization in all those three Indicators,since late, starting from the time the announcement of Nandasena as the Presidential Candidate..
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Has the Smart Money sensed something in the horizon?.
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Rizwan / October 8, 2019
Your conclusions are not scientific and the data provided is incomplete.
What use is an AVERAGE value for measuring trend? Why have you omitted the years 2005 to 2014?
What we want to see is the TREND. Is the trend improving or getting worse. It is meaningless to compare an AVERAGE of the last 5 years with ONE year’s (2014) data.
Please provide these same numbers from 2005 to 2014. Please plot charts with the data points. So if the trade deficit shows a flattening of the curve indicating reduced loan taking (as I believe it may), then we can conclude that this government is being fiscally responsible.
A fiscally responsible government is not looking for short term gains. It is looking 20 to 30 years down the road. It is looking to save the next generation from debt.
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chiv / October 8, 2019
Milton, I am no economist though I had studied briefly years ago. Now that I am in Medicine we are taught to read research articles,know statistics, analyze and understand these studies. In medical world we are now well aware, how a research study can be interpreted into different conclusions (for and against) by different experts as per their needs. Same with company annual reports where the numbers can be interpreted to different conclusions. So you being the expert, giving one side of the story is nothing but a political propaganda (spin the facts) and definitely not an educational exercise.As one reader “Lion” mentioned here, you have consciously avoided the facts prior to 2014 which helps the layman , in understanding “how we came to this pathetic state”. Did you attend the same school as Cabraaaal, who I hear has stepped into planning infrastructure. I just have one comment . “Fool us once shame on you, fool us twice shame on us”. This is like a patient complaining of his medical issues now, which in fact had pre-existed for years. The patient either knew and did not bother to address or just ignored all together or self managed or ignored all advises given by previous doctors or all of the above and now blaming doctors , medicine, fate , higher power —-etc.—-etc for his/her current condition.(ICU care, money spend, one medical condition turning into multiple adversities, irreversible stage —-etc—–etc)
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chiv / October 8, 2019
Milton Uncle, right here in CT there is an article written by Mangala (of course not a professor like you) stating all the borrowing post 2016 was used to pay back Rajapaksas loans. Why dont you try explaining that to us , before writing about what happened after 2015. Now common sense says, the way Rajapaksas borrowed money from Loan sharks such as Chinese at a very high interest for projects which dosent yield any returns, alone is enough to explain the current bankruptcy. As economist will you build castles just to bear your name when you have enough and above debts to pay ????? Can you explain the hedge deal by your Guru Cabraaal which went wrong and ended up loosing in millions, How SriLankan airways is bleeding money to the tune of Billions monthly, how successful was Mihind when Srilankan was already on death bed and being resuscitated and the economics of bring a puppy in a flight from Paris to Lanka so that it dosent catch cold. I hope for time being ,this many questions are enough to keep you busy. Dont worry there is plenty more questions for you, to keep you occupied. Pardon my ignorance, information you provided here is taken out of just one source (CB annual reports). What assurance do readers have to believe these mentioned figures are actually true , especially when it was under ROGUE Cabraaal,s purview. People may tend to dismiss this as imagination, but I trust me this is one of the reasons foreigners do not invest in Lanka, now that the war is over.
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Lester / October 8, 2019
Those who disagree with the author’s data should provide their own, rather than point out statistical anomalies. The general trend in the data is correct, when one compares the latter with those provided by other sources, such as the World Bank. It is a fact that this Yalpahana regime did a miserable job in managing the economy. The only neutral element here is that unemployment did not skyrocket.
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Yahapalanaya / October 8, 2019
I wish eminent Sri Lankan economists like Dr. WA, Sandaratne would have time to read and comment on the trend and statistics.
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chiv / October 9, 2019
This one is from “Lanka School of Economics and Politicking “.
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chiv / October 9, 2019
Uncle, forgot to mention.. Recent economy report of MR and your report are pretty much the same. Did you,ll (including Cabraaaal) attend the same school , “Lanka School of Economics and Politicking”????? How fortunate you must be ???
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Lex Luthor / October 13, 2019
Economic professor.
Comparing four years of change of a single country, with a single year and correlating everything to only politics.
Wow!!! PhD has been well earned…
Viyath mage, ugathek wenna athi sure ekata!!!
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Lex Luthor / October 13, 2019
………….visiting lecturer in development economics both at the Jaywardenapura and the Colombo campuses………..
explains a lot….. won’t even comment further than that
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Lex / October 13, 2019
This guy got a PhD for stupidity… that’s for sure
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