Spotlight: Econ Op-eds in Summary (Week ended 20th January '21)

Snapshots

1. Financial turnaround, with Indian assistance

By:  Tudor Wijenayake

· Sri Lanka needs to settle over $6 bn in foreign loan payments over the current year and urgently requires financing support for current projects undertaken. This support mainly comes from countries including India, China and Japan. The country needs to play a balancing act in terms of maintaining healthy relationships between the aforementioned countries.

· Japanese loans are notable for their low rates of interest and long repayment periods, providing a favourable source of foreign financing for Sri Lanka. With the government however, moving toward more domestic based financing, the frequency of foreign funded projects into Sri Lanka is expected to reduce.

· The other options available, which Sri Lanka seems to be taking more steps towards, are direct financing facilities with China and India. There is around US$ 2.5bn being negotiated in the form of currency SWAPs, while additional investments are also being reported. However, if these do not materialize to the optimistic levels expected, Sri Lanka would be forced to approach the IMF for support instead.

For the full article – Refer the Daily FT

2. Budget 2021: Playing ostrich or parading in the Emperor’s new clothes?

By: Dr. Anila Dias Bandaranaike

· The government presented its inaugural budget in November 2020. However, analysts studying the numbers pointed out a few flaws including, not having numeric estimates of the revenue impact, key estimates differing between the budget speech and the statistical tables and inconsistencies between the budget proposals and associated numeric targets.

· These drawbacks are significant, given the economic environment that the country is facing in 2021. There is little provided to deal with the upcoming debt crisis, and measures for shoring up revenue are minimal as well. A lot of the estimates were also quite optimistic, and could provide an unrealistic expectation of what 2021 could end up looking like.

· As such, the estimates in budget 2021 were unrealistic and the monetary allocations in Budget 2021 were neither relevant to the government’s vision nor Sri Lanka’s short-term and long-term priorities. Given the above conditions it is imminent that, during 2021 and beyond, Sri Lanka will remain a country of vast potential and lost opportunities.

For the full article – Refer the Daily FT

(Compiled by: Chayu Damsinghe, Promodhya Abeysekara & Malitha Goonerathne)