Spotlight: Econ Op-eds in Summary (Week ended 2nd June '21)

21-6-3

Snapshots


1. Sri Lanka unlikely to reach speedy V-shaped economic recovery amidst structural imbalances

By: Professor Sirimevan Colombage


  • Sri Lanka’s GDP growth was adversely affected by COVID-19 and the government implemented a series of relief measures in light of this. However, apart from the pandemic, economic recovery has been difficult given the macroeconomic constraints faced. Contrary to this, the Central Bank expects a ‘V-shaped’ recovery with GDP growth jumping to 6% in 2021. This forecast seems over-optimistic given the historic trend in GDP growth over the past five years.


  • The country needs to undertake investment in a knowledge-based economy to bolster growth. According to ‘Thirlwall’s Law’, the country is able to benefit from economic growth through a positive and growing trade surplus, however, in Sri Lanka’s case, this growth is curtailed by high foreign borrowings and budget deficits. In a bid to stabilize the exchange rate, the CBSL revised upward the rules on the repatriation of export proceeds.


  • To help ease debt repayment pressure, the government sought funding from several countries over the year through the form of currency swaps. However, with the launching of more debt funded infrastructure projects, Sri Lanka will face even higher debt repayment pressures in the future. These policy decisions could result in Sri Lanka having an ‘L-shaped’ recovery, with the recession faced by the country being prolonged.


For the full article – Refer Daily FT


2. An alternate economic development strategy for the country

By: Lloyd F. Yapa


  • A large part of Sri Lanka’s employment is attributed to the rural agriculture sectors. This sector is also recorded as one of the most poverty-stricken sectors in the country due to low productivity. Development of agriculture will allow the country to achieve self-sufficiency in food production while also protecting the natural environment.


  • Fragmentation of land and mixed cropping seems to be one of the main factors negatively affecting the productivity. Further issues in value chains such as the lack of quality plant material, no proper irrigation work, lack of secured warehouses all increase wastage and decrease productivity. Solutions provided by authorities to these issues remain dissatisfactory as they are often underfunded, poorly coordinated, inefficient and corrupted.


  • The way out appears to be to find solutions particularly for improvement of the productivity of land and developing manufacturing, especially further processing of primary agricultural produce, mainly for export, to create better paid employment opportunities for those leaving farming and not to resort to simplistic solutions like increasing the extent of cultivated land which would lead to the destruction of the natural environment as well.


For the full article – Refer Daily FT


(Compiled by: Promodhya Abeysekara, Malitha Goonerathne & Mariyan Perera)

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