Spotlight: Econ Op-eds in Summary (Week ended 15th September '21)

Snapshots

1. A reset of economic fundamentals in Sri Lanka: Is IMF the only hope?

By: Raj Gonsalkorale

• Sri      Lanka is currently facing an insurmountable level of foreign debt, with      International Sovereign Bonds (ISBs) accounting for 47% of it. These ISBs      carry higher interest rates with shorter maturity periods in comparison to      concessional financing offered by multilateral institutions and Sri Lanka      would have no choice but to opt for such loans if there isn’t a strong      economic recovery which takes place, given its stance on avoiding the IMF.

• Mismanagement      of economic policies by governments in the past are to blame for the      current situation, with the COVID-19 pandemic exacerbating economic      problems which already exist. The first step to recover from this      situation is to take acknowledge      that such an issue exists, and then Sri Lanka should negotiate an IMF bailout,      which would offer low interest loans and a grace period.

• The      money the IMF lends out is conditional on Sri Lanka agreeing to undergo      major structural reforms, which can be painful to bear in the short term.      However, negotiating such a program would help boost foreign investor      sentiment and bring about political stability, a key driver in bringing in      FDI’s into the country. This would ultimately pave the way for future      economic stability for the generations of successive governments to      follow.

For the full article – Refer Daily FT

2. Policy changes vital for export growth in a challenging environment

By Nimal Sanderatne

• Extreme      low levels of foreign reserves, high foreign debt, increasing import      expenditure and negligeable levels of tourism earnings are forcing the      government to continue the activities related to the export industry      despite the risk posed by the ongoing pandemic, as export earnings now      play a major role in the country facing external crisis.

• However,      in order to further develop the export industry, a change in mindset is      crucial. The country will need to adopt economic reforms and enhance      export competitiveness. These reforms include providing incentives for      export industry as well as addressing the difficulties that exporters have      to face. Import restrictions have a negative effect towards export growth      as it has limited raw materials that are much needed for the export      growth.

• To do      so, the current issues such as the possible withdrawal of GSP plus needs      to be handled diplomatically. Further the current breeches of WTO      agreements must be corrected, by informing the WTO of import policies and      getting their permission for their waiver. Alongside these measures export      growth requires a whole thrust of policies that would ensure      competitiveness in price and quality in international markets.

For the full article – Refer The Sunday Times

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