Spotlight: Econ Op-eds in Summary (Week ended 1st December '21)
1. Does the 2022 budget address key economic concerns?
By Nimal Sanderatne
The budget 2022 was passed by a majority this last week. The annual budget of a country should outline the state of the economy, the problems faced by the economy, solutions to these problems and how these solutions are financed.
However, the 2022 budget failed to address some of these important components. While the finance minister did acknowledge the economic hardships, the budget omitted addressing any ways of solving these problems. Instead, the budget was filled with cosmetic expenditure cuts and retrospective taxes.
Budgets are the cornerstone of a country’s economic policies. Unless and until governments prepare budgets that ensure adequate revenue through a reform in taxation that yields a much higher revenue and curtails government expenditure by structural reforms, there is little prospect of economic stability and growth
2. Home-grown solution deepens Sri Lanka’s economic crisis
By Prof. Sirimevan Colombage
While Sri Lanka is facing a severe economic crisis manifested by rising prices, consumer goods shortages, high cost of living, low international reserves, foreign exchange scarcity, and slow economic growth, the authorities are still reluctant to adopt any credible policy reform package with the assistance of the International Monetary Fund (IMF).
Fiscal deficit is one of the main root causes for this crisis. Continuous fiscal deficits have led to increased borrowings by the Government causing huge debt service commitments. The balance of payments deficit also widened before the pandemic. Relying on home-grown policies during the last two years without addressing the debt sustainability issues has led to aggravating the economic crisis.
In order to overcome these issues, Sri Lanka should approach the IMF and adopt a strict macroeconomic policy framework targeting fiscal deficit reduction and debt sustainability. Assistance from the IMF would not only enable the Government to reschedule the present unmanageable external debt commitments but also to win foreign investor confidence.
(Compiled by: Promodhya Abeysekara, Malik Nazahim & Mariyan Perera)
Disclaimer: This information has been compiled from sources believed to be reliable but Frontier Research Private Limited does not warrant its completeness or accuracy. The bullet points provided for each summarised opinion article is written by Frontier Research and has no connection to the respective author. Furthermore, the information contained in these reports/emails are confidential and should not be shared publicly. Disclosure, copying and distribution is strictly prohibited.