Photo courtesy of UPI
Sri Lanka’s economic crisis continues with no indication that it is going to be resolved anytime soon. The rupee has rapidly depreciated and the people’s protests are growing throughout the country and are not just limited to Colombo. As the economic crisis and political crisis worsen, the resulting social crisis has placed the country in a precarious position. A heavily import reliant South Asian nation, the country no longer has enough dollar reserves to purchase essential goods such as fuel and medicine. Electricity shortages continue with daily power cuts. The situation is precarious and complex and appears to be worsening day by day.
The need for a clear strategy to manage the economic crisis
The first observation to be made about the Wickremesinghe-Gunawardena administration is that it needs to develop a clear, workable strategy to deal with the economic problems. The country faces heavy international debt. The absence of a strategy to deal with this has contributed to the serious international debt situation. This is not the government’s fault; it is trying its best under extraordinarily difficult circumstances. The government needs to urgently adopt the following measures: first, it must assemble a team of economic advisers comprising technical economists as opposed to political appointees. This team should be limited to a maximum of 10 individuals. It can propose a clear policy framework and a specific, detailed plan to manage the debt situation, which is subject to peer review by a second group of technical economists prior to implementation. Second, the government must engage in a more strategic dialogue with its neighboring partner countries. These include but would not be limited to countries to which Sri Lanka has borrowed from and are therefore are in debt to. An open, frank dialogue could allow itto buy more time to repay outstanding debt and in the meantime to develop a strategy to bring its international debt down to manageable levels. Once international debt is reduced to a more stable figure, the government can turn its attention to other matters such as tackling unemployment and reducing inflation. However, while international debt hangs like an iron curtain over Sri Lanka, the government will find it challenging to make improvements in other areas of the economy.
Running out of time
The government is operating on a tight leash where every second counts. The more time it takes to solve the international debt problem, the deeper it becomes. They say that all political careers end in failure and that is true to some extent. There does appear to be a worrying trend emerging in politics, which is leaders being elected or appointed as president or prime minister and then being forced to resign amid pressure from the people and/or political factions. The current government must be extremely cautious about this trend and it is obviously worried about its ability to remain in office. However, the president and the prime minister should remember that the patterns of the past need not be the patterns of the future. They have a tremendous opportunity here; if they seize it, deliver on their promises and correct the economic trajectory, they could well be on their way to re-election.
In lieu of a conclusion
The political situation this September appears very difficult. The government must prioritize managing and controlling theinternational debt problem as a strategy to overcome the economic crisis. To do this it must assemble a team of economic advisers and pursue a pragmatic policy of debt restructuring coupled with debt relief. Time is a critical factor and the ruling administration must act fast before it runs out of time and becomes buried deeper in an economic mess. The political situation in September 2022 appears to be in flux and the nuances and subtleties of politics this October must be carefully considered and observed by all citizens. There is one crucial lesson in politics – you may rise to power quickly but you will also fall even faster.
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