Spotlight: Econ Op-eds in Summary (Week ended 01st July '20)
1. Global debt and economic recovery
By: Dinesh Weerakkody
· As the pandemic continues to hit economies around the world, many low-income countries had had to resort to foreign debt to finance their economic recovery. In such a context, low-income countries, with significant existing foreign debt and facing collapsing oil and commodity prices and tourism, are at a higher risk.
· As such, major global creditors like China will have to have a major role in rebuilding the global economy by supporting these debt-ridden economies. China has already agreed to reschedule debts falling due in 2020. However, China could be expected to do more by rescheduling payments due in 2021 or provide financial relief to a broader set of countries if the effects of the pandemic are prolonged.
· A prolonged pandemic situation and a large-scale disruption of the economies means that further fiscal interventions will inevitably be needed to enable developing countries to weather the crisis. As such, forward-looking international cooperation is required in the face of a virus that knows no borders, both in terms of economic recovery and in the vaccine process.
2. Reflections on economic development policy perspectives
By: Nimal Sanderatne
· Many economic policy recommendations in the wake of the pandemic have not been overly practical and tend to be more ideological, with real effects still to be seen. Further, growing criticism of neo-liberal policies is fuelling advocacy towards inward-looking economic policies.
· However, extensive measures to restrict and substitute imports may cripple the economy as the free import of raw materials is essential for exports. Another reason is that domestic goods can lack competitiveness compared to international goods which can lead to scarcities. Similar to Sri Lanka in the 70’s, India’s import substitution strategy too failed despite its wealth of resources.
· Liberal trade policies benefit small countries with limited raw materials and small domestic market. Sri Lanka needs to address fundamental structural issues that prevent it from producing competitive goods and should have economic policies that look to increase and diversify exports, not limit imports.
(Compiled by: Chayu Damsinghe, Promodhya Abeysekara, & Eshan de Mel)
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