Spotlight: Econ Op-eds in Summary (Week ended 7th July' 21)
1. Forex crisis, plea for calmness in national interest, and need for getting IMF-driven bailout
By: Dr. W.A Wijewardena
· The Central Bank Governor recently reiterated the government’s ability to pay off it’s foreign debt obligations in the coming years, dismissing negative claims made by media outlets. According to the governor, the Central Bank is in discussion with bilateral partners to obtain additional funding while awaiting the disbursement of IMFs SDR allocations in order to reduce pressure on foreign reserves. The statement also showed reluctance to obtain financing facilities from the IMF.
· Sri Lanka had had to be bailed out by the IMF on numerous occasions, the first of it being in 1988, when reserves fell to critically low levels. In 2008, Sri Lanka went to the IMF yet again, as additional foreign currency was needed to repay off weapons being used in the war. To deal with this, roadshows were conducted to try to attract additional funding given low foreign reserves, however, this option did not prove to be successful.
· The government’s current strategy of Modern Monetary Theory has resulted in speculation on the exchange rate, increasing pressure for depreciation, with the Monetary Board being responsible in preventing such instability in the currency. The current dismal economic situation is nothing new for the country, having experienced it in the past. But these past experiences should serve as a learning experience to prevent a calamity from occurring.
2. Inappropriate economic policies in a weak state of the economy
By Nimal Sanderatne
· The recent economic policies which would adversely affect agriculture seems to be adding on to Sri Lanka’s economic woes. These policies will directly depress incomes, increase prices of consumer goods, decrease food availability as well as aggravate poverty and starvation. It would further divert the country away from self-sufficiency in food production.
· The recent fertilizer ban is expected to reduce local food production and export crops such as tea, ultimately affecting the country’s export earnings. Food imports will rise as local production would be insufficient to meet the demand increasing the import costs. All while the GSP plus concession by the EU is at risk.
· There is no argument that organic food is best for health as well as the environment. However, totally relying on organic food will lead to severe food shortages. Sri Lanka could promote organic food for a niche market with a higher price, but in order to avoid severe shortages, Sri Lanka will have to rely on chemical fertilizer. Partial organic and inorganic farming is most suitable under given circumstances.
(Compiled by: Promodhya Abeysekara, Malitha Goonerathne & Mariyan Perera)
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