Spotlight: Econ Op-eds in Summary (Week ended 12th August '20)
1. SLPP has creatively disrupted politics; now it has to do the same to the economy
By: W.A. Wijewardena
· The new government is taking over an economy marked by a number of challenges including a fiscal crisis, a debt crisis and a foreign exchange crisis. As such, the government should take disruptive steps to overcome these challenges given the hard times expected in the near future due to the economic impacts of the pandemic.
· Sri Lanka’s debt crisis is mostly a result of its fiscal crisis which was aggravated by the tax concessions given during the end of last year. As such, the government on one hand could take a disruptive step to move to the previous tax regime while also reducing excessive government spending. The savings from such measures should be utilized in productive government projects.
· On the other had Sri Lanka’s foreign exchange crisis is marked by high external debt repayments as well as a large import bill. While measures had been taken to restrict imports this itself may not be sufficient to overcome the crisis. As such, the government should focus on increasing exports and attracting non-debt sources of foreign exchange such as foreign direct investments.
2. 4 critical steps for fighting a historic remittance decline in South Asia
By: Md. Shahidul Haque and Sheikh Tanjeb Islam
· Remittances account for more than 5% of some South Asian countries’ GDP. It acts as a key mechanism to boost consumption, making up the bedrock of financial security for many South Asian families. However, remittances in South Asia are anticipated to fall by more than 20% in 2020 due to the pandemic’s impact on economies and migration.
· While remittances have been usually resilient to external shocks in the past, the pandemic has affected the 3 critical drivers of remittances - economic opportunities in home countries; the international migration system and the international financial system. The unemployment of migrant workers will deepen the economic downturn and result in social disruptions.
· 4 strategies are recommended to arrest this situation- Ensure all service providers facilitating remittances are allowed to operate as essential services; Provide fiscal and monetary incentives; Engage in multi-stakeholder dialogue in host countries; Leverage technology and ease regulations to facilitate remittances towards eliminating poverty.
(Compiled by: Chayu Damsinghe, Promodhya Abeysekara & Eshan de Mel)
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