After the fuel hikes and slide of rupee: State of Sri Lanka’s economy and future prospects
Dr. Neavis Morais is a Senior Lecturer in Economics at the Open University of Sri Lanka, and in this interview looks at the state of Sri Lanka’s economy. As couple of days ago the Economist Intelligence Unit noted that, tweet
Around the same time, Sri Lanka’s Central Bank said it cut this 2012′s economic growth target to 7.2 percent, down from 8 percent. There’s a big difference between the Central Bank’s and the EIU’s growth projection. The interview begins with Dr. Morais looking at this significant discrepancy, and why it exists. He notes that whatever the Central Bank says, it is highly doubtful Sri Lanka will achieve anything close to 7% GDP growth, and flags the failure of macro-economic reforms targeting economic growth as a central factor. Dr. Morais also speaks about the Revival of Underperforming Enterprises and Under Utilised Assets Act, which was rushed through Parliament as an urgent Bill last year and notes that it sends the wrong signals to the private sector. Noting that around 30% of the budget goes for debt repayments, and another 20-25% as salaries and wages for State sector employees, Dr. Morais flags that prudent thinking to manage high public debt and debt servicing is necessary, but largely absent.
We also speak about the impact of the increases in diesel and kerosene (very likely to go up again in July) and the resulting increase in inflation and utility expenditure on consumers, and how this could play out over 2012. Dr. Morais looks at how the exponential growth year on year of tourism inflows can help support the economy, and also how, if at all, the Euro zone crisis can impact our own economy. More generally, we talk about the Occupy Wall Street movement and economic justice, and how today, the market is not a phenomenon fully understood by even economists, and what this means for ordinary citizens.
Dr. Morais looks at the problems of budgetary allocation, where even post-war, defence spending alone has exceeded the allocation for the entire social sector (health, education etc), and that though defence spending may now embrace tourism, service delivery and other economic aspects, the comparative underspend on the social sector is deeply worrying, and a significant problem.
The interview ends with Dr. Morais stressing the need for principled reform of Sri Lanka’s economy, and that playing around with the economy is not worth the risk.