Political parties of various hues are not known for agreeing on much but one thing that they all concede is the number of issue this election season is the economy.
With latest reports estimating that Sri Lanka has only grown by 0.2% in the first quarter and growth could have contracted by as much as 6% in the second this is perhaps essential that the economy should become a bipartisan topic where all parties should cooperate based on a set of sensible, reform-led policies.
The Central Bank went on record last week saying that it will only change growth projections for 2020 after official growth numbers for 1Q are announced. But the news is unlikely to be positive for the 1H and it is imperative and whichever party wins the parliamentary election that they have a solid policy framework and recovery strategy in place to roll out from the very next day.
Given the severity of COVID-19 it will also be necessary for the Government to engage with and get the support of opposition parties and work with all stakeholders to implement prudent polices. At a time when Sri Lanka’s budget deficit is estimated to be about 9% for 2020 there will be little fiscal support that can be extended even by Budget 2021, which will be the most important policy document to be unveiled before the end of the year.
Growth in the 2H, while expected to be better than the first six months, will nonetheless depend of key sectors recovering sustainably and that will also require political direction and support. This means that the Government will have to think beyond its current reliance on promoting domestic industries and find ways to connect with global value chains, attract investment and promote exports to ensure growth momentum is extended beyond the short term.
The importance of staying the course and not having economic agendas turned topsy-turvy with each election cycle or having political parties revamp and present policies they had a whole term to achieve but failed to. This ‘old wine in new bottles’ policy simply does not meet the aspirations of voters and convinces no one of genuine change.
International rating agencies have warned that Sri Lanka debt-to-GDP ratio could move past 100% in 2021, and the country desperately needs to create fiscal space, increase trade and promote competitiveness to boost growth and find solutions to its quite serious economic challenges.
Sri Lanka will find ways to pay its debt, as it has always done, but this is not the benchmark anymore. Saddled with a rapidly aging population Sri Lanka needs to find the way to lift millions of people out of poverty, invest in education and healthcare and ready to take care of an entire generation of elderly people of whom most will be women.
These are weighty tasks that should move beyond partisan politics and petty power games. It would be best for the two main emerging victors on Thursday to join together and reach a consensus and support each other in Parliament to achieve economic goals beneficial for Sri Lanka. The situation is too serious for meandering politics.