Govt strides forward for economic growth amidst opposition’s backward pull
July 19, Colombo (LNW): While the Sri Lankan government has made significant strides in economic stabilization and debt restructuring, political opposition remains skeptical, and the real impact on the populace is yet to be fully realized.
The focus now is on maintaining the momentum of economic reforms and ensuring that the benefits of these measures are felt across all sectors of society
The government has implemented significant economic measures, including reducing fuel, electricity, and water tariffs, to alleviate the cost of living and stabilize the economy.
This move comes after a series of economic challenges, including credit rating downgrades and the depletion of foreign currency reserves, which led to a temporary moratorium on servicing the country’s external debt in April 2022.
The situation has improved following the government’s efforts to secure a $2.9 billion Extended Fund Facility from the International Monetary Fund (IMF), marking a significant turnaround under President Ranil Wickremesinghe’s leadership.
President Wickremesinghe, along with his cabinet, has made notable progress in correcting the economic missteps of previous administrations, achieving fiscal and debt stability.
This has resulted in reduced fuel and electricity prices and other favorable economic indicators, which are expected to provide relief to the populace.
A key milestone in Sri Lanka’s economic recovery is the debt restructuring agreement with China Exim Bank, covering $4.2 billion in debt.
The details of this agreement, as well as a framework agreement with international sovereign bondholders, are still being finalized. The Joint Working Framework aims to balance the interests of creditors and Sri Lanka in cases of economic performance variations.
The country is on the brink of being removed from its ‘restrictive default’ status, which has hindered potential investment. Experts are optimistic that the final approval from the IMF will confirm the negotiated terms with creditors, signaling a positive change in Sri Lanka’s economic status.
However, opposition political parties, including the Samagi Jana Balawegaya (SJB) and the leftist National People’s Power (NPP), have criticized the government’s economic policies.
They argue that despite claims of economic recovery and progress in debt restructuring, tangible benefits have yet to be realized by the population. The SJB has also expressed concerns about the lack of clarity and transparency in the debt restructuring agreements.
Despite political opposition, Fitch Ratings Lanka Managing Director Maninda Wickramasinghe has acknowledged Sri Lanka’s significant recovery progress.
He emphasized that once debt restructuring agreements are finalized, there should be no reason for rating agencies to maintain the country’s restricted default status. He also highlighted the importance of learning from past mistakes to avoid repeating them.
World Bank Lead Economist Gregory Smith and former Central Bank Governor Dr. Indrajith Coomaraswamy have shared similar views on Sri Lanka’s economic recovery.
They stressed the need for the country to achieve a primary surplus target of 2.3% by 2025, improve tax revenue administration, and eliminate tax concessions to enhance fiscal stability.
Dr. Coomaraswamy emphasized the importance of maintaining macro stability and implementing structural reforms to achieve sustainable economic growth.
The Joint Apparel Association Forum (JAAF) has welcomed the Public Utilities Commission of Sri Lanka’s decision to reduce industrial electricity tariffs by 25.3%, which is expected to boost the competitiveness of Sri Lanka’s apparel and export industries.
This reduction follows a substantial increase in tariffs in 2022, which had negatively impacted apparel export revenue.
Despite the government’s efforts, the main opposition, SJB, continues to challenge the narrative of economic recovery.
They argue that the government’s claims of progress are not reflected in the everyday lives of the people, citing market surveys indicating that over 91% of the population is spending more than they earn.
