Govt. handholding essential

As new areas are placed under quarantine curfew, it is becoming ever more imperative for the Government to prioritise increasing vigilance on healthcare and public protection. This is especially necessary as more handholding is clearly going to be needed to keep economic activities going and limit public exposure to the virus. 

On this front it may be prudent for the Government to do two things. One, establish a system of quarantine curfew that has different levels. This was adopted successfully by several countries including New Zealand to have three to four levels, so level one requires somewhat less public vigilance than level four curfew, which would enable the people of each region to design their lifestyles accordingly and support businesses in their areas. 

Secondly, the Government should quickly mobilise to decentralise PCR testing facilities so that vulnerable areas such as Free Trade Zones have the resources needed to keep their workers safe. The current practice of having PCR testing at facilities, predominantly in Colombo, is impractical and could delay responses to the spread in other parts of the country. Trade Unions operating in these zones have already appealed to the Prime Minister to make this facility available to them and the Government should heed this request. 

Overall, there also needs to be stronger engagement with key institutions, particularly the Health Ministry, which has mostly remained behind closed doors. The public should have more transparency and a chance to clear up any problems that may arise from implementation of regulations outlined in the new gazette. For example, protocol to be followed if an employee tests negative for a PCR test is a grey area, where some companies will allow for a two week self-quarantine while others will demand a return to office. 

Then there are macro-issues for the Government with hopes of a strong fourth quarter dimming. The first thing the Government should do is release the second quarter growth numbers. That period ended in June and even though it is now the middle of October, there is no indication of when the Census and Statistics Department will release the data. Many analysts and rating agencies are operating on assumptions of as much as a 10% growth contraction, but this is not concrete enough. It could be that the actual news is worse or better; either way it gives a basis on which to make projections for the third and fourth quarters. 

Secondly, it is now imperative that Budget 2021 has a set of very clear policies along with a credible implementation framework. The latest World Bank South Asian Outlook report released last week estimated Sri Lanka’s deficit for 2020 to be an eye-watering 11%, higher than the 9% projected by the Finance Ministry. Given Sri Lanka’s high debt repayment obligations for next year, it is imperative that there are significant fiscal consolidation measures outlined in the upcoming Budget. 

This is all the more important as the Government has so far steadfastly refused to entertain an agreement with the International Monetary Fund (IMF). This is the right of the Government, but it should then set in place a framework for reassuring and winning investor confidence on par with what would be given via an IMF agreement.  

Having more fiscal space will also assist the Government to increase welfare and social protection measures that will become essential as COVID-19 increases.