A fresh beginning?

Tuesday, 26 May 2020 00:00 -     - {{hitsCtrl.values.hits}}

Curfew for Colombo and Gampaha being lifted after more than two months is a significant development. As two districts that contribute significantly to the economy, the easing of restrictions is positive but as two of the most populous regions additional vigilance will also be needed to ensure that COVID-19 remains contained. 

Experts have pointed out on the need to continue testing but the Director General of Health Services Dr. Anil Jasinghe has said  Sri Lanka has taken a more targeted approach to contain the virus and this seems to be the current status with test number remaining static at about 1,400 to 1,500 per day. The focus has remained on the quarantine centres and the Navy cluster and with more Sri Lankans returning from overseas it is likely that these numbers will increase and new clusters will appear. Therefore, vigilance remains key and at no point can health guidelines be less than essential. 

There are two things, which need priority. Number one, the economy and two, the political environment. The conclusion of the petition hearings before the Supreme Court and the decision by the bench will determine the latter. If a decision is given this week, which is likely, the entire focus will shift to winning elections. A short political campaign would be beneficial to contain COVID-19 and voters can go to the polls with little preamble and make the decision on who will make up the next Parliament. Given that this election has had a long gestation period it may be relatively easy for the public to make up their minds. 

There is no doubt that a swift ending to the political hiatus will be beneficial for the economy. The question of public finance would be resolved, a new budget could be presented and the country’s policy direction made clearer to aid the private sector in its journey forward. The reality is that delayed elections will cause additional concerns over public finance, transparency, accountability and the decision making process of Government. 

Additionally, Sri Lanka’s debt dynamics and related challenges mean there should not be more reason given for rating agencies to downgrade Sri Lanka. It is also clear that the Government may consider a new deal with the International Monetary Fund (IMF) or similar support and therefore needs policy direction to formulate such agreements. 

The Central Bank has expressed confidence that Sri Lanka still has the capacity to grow at 1.5% in 2020, provided there isn’t a second lockdown and demand picks up in the second half. They are also hopeful that the global economy will recover from the second half and Sri Lanka will benefit from that upswing. Having political stability at least mid-way into the third quarter will help these projections to become reality and set the base for stronger performance in 2021. 

But for genuine and sustainable progress to be made there is also need for economic reforms that have been largely put on the back-burner for the last decade if not longer. There will also need to be greater clarity on the Government’s new pivot towards an economic system more reliant on domestic producers and what they will do for exports and local consumers. 

As curfew lifts, a wagon-load of challenges are returning to the forefront and managing them will decide how Sri Lanka tackles COVID-19.