Spotlight: Econ Op-eds in Summary (Week ended 13th October '21)

Snapshots

1. Economic instability likely to prevail despite Central Bank’s Road Map

By: Professor Sirimevan Colombage

• The      6-month Road Map presented by the CBSL goes beyond a monetary policy      framework. However, it fails to address concerns about the fiscal sector.      The rate of money printing has also continued to rise, despite yield caps      being removed in the face of undersubscribed T-bill auctions. The roadmap      also points to maintaining the exchange rate stable at the current rate,      despite a fall in foreign reserves.

• Banks      are seemingly complying with the stipulated exchange rate, although      foreign currency problems in the sector still persist. However, a higher      Real Effective Exchange has been recorded given higher inflation,      disadvantaging exporters. As such, certain exporters have opted to not      convert export proceeds in the stipulated time frame, as they believe the      current exchange rate is not sustainable, which the road map tries to      address through a higher tax.

• Given      macroeconomic concerns, Citibank believes that there is higher risk that      Sri Lanka would need to restructure its debt with IMF assistance. Given      this, Sri Lanka needs to take measures to bolster its debt sustainability      before it is too late.

For the full article – Refer Daily FT

2. Are we at a turning point in economic diplomacy and economic policies

By Nimal Sanderatne

• Visit      of Indian Foreign Secretary, Japanese war ships in Colombo Port, review by      EU team on country’s effort to improve human rights, all seems to indicate      a shift in Sri Lanka’s foreign policy. Further with Adani group’s      investment in Colombo Port and New fortress investment in LNG gas project,      Sri Lanka seems to be deviating from its dependence on China towards the      west.

• It is      vital that Sri Lanka is able to obtain foreign assistance and investments      for economic sustainability. Thus, despite objections from the opposition      and trade unions the government had moved to have agreements with these      countries.

• Despite      the assurance given to China that recent diplomatic developments will not      be a threat to China, Sino-Sri Lankan economic dependence seems to be      weakening. This is mainly due the developing financial crisis in China      which limits its capacity to assist Sri Lanka and Sri Lanka’s significant      dependence on Europe and North America as key export markets.

For full article – Refer The Sunday Times

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