Spotlight: Econ Op-eds in Summary (Week ended 15th July '20)

Snapshots

1. Building buffers

By: Daily FT

· As worries of another spike of COVID-19 cases grow, the biggest challenge before the Government is figuring out how to handle the economic fallout from a slower than expected recovery. This is especially true in the context of Sri Lanka’s recently weakened public finances.

· The latest Mid-Year Fiscal Position report shows this weakening clearly, with revenue declining 20.3% and expenditure only falling 3.2% in the first four months of the year. The budget deficit for the year, therefore, could be at least 8% according to the Finance Ministry, and even higher according to analysts.

· The need to add both monetary and fiscal stimulus to recover the economy after COVID-19 adds more to this problem. Even if the situation recovers, inflationary pressures and further fiscal pressures could prove damaging. Therefore, the upcoming budget document will be more important than before.

For the full article - Refer the Daily FT

2. Strengthening exports essential for economy

By: Dr. Nimal Sanderatne

· Increasing exports and foreign investment are vital for Sri Lanka’s trade dependent economy. An overreaction to the current global economic dislocation by adopting inward-looking economic policies could be damaging for Sri Lanka’s trade dependent economy.

· Thus, Sri Lanka should remain a trade dependent export led economy to achieve a higher trajectory of economic growth. The problem however lies in imports exceeding exports by a large amount and thereby straining the country’s balance of payments and external financial vulnerability.

· Exports and imports however are two sides of the same coin. It is thus, imperative to enhance the volume of the country’s current exports as well as diversify into new export products and markets. Especially enhancing agricultural exports is crucial in the country’s export strategy.

For the full article - Refer The Sunday Times

(Compiled by: Chayu Damsinghe & Promodhya Abeysekara)