Christmas hopes

Wednesday, 25 December 2019 00:09 - - {{hitsCtrl.values.hits}}

Christmas Day is looked forward to by all Sri Lankans as a universal celebration. This year, Christmas arrives after a long year of political turmoil and change, with the country still somewhat in transition as the new President and administration settles in after the election. The challenges for Sri Lanka still remain numerous.

The main hope of all Sri Lankans during Christmas and New Year is peace and prosperity. On the latter, the Government has already kicked off an extensive stimulus package that is also linked to a moratorium on loans of Small and Medium Enterprises, as well as welfare programs such as the Rs. 28 billion “Sapiri Gamak” effort to be kicked off early next year. Cabinet has also approved recruiting 100,000 unskilled workers into the public sector and as many as 54,000 graduates are also expected to be absorbed.

Many of these policies will be welcomed by a public weary of higher taxes and slow growth. The expectation is that the stimulus package, along with lower interest rates and an uptick in sentiment, will result in a growth turnaround. This will likely be possible in the short-term, and is politically expedient, as Parliamentary Elections loom in April.

But as frequently pointed out by ratings agencies, the Government has limited fiscal space and rolling back macroeconomic consolidation could result in higher budget deficits, and challenges in raising funds to repay Sri Lanka’s significant debt. There is also concern at slashing Government revenue and the status of State-Owned Enterprises. Economic analysts have stressed that there is still need for the Government to focus on reforms to put the country on a sustainable growth path.

These reforms include continuing fiscal consolidation by broadening the tax base and aligning spending with priorities; shifting to a private investment-tradable sector-led growth model by improving trade, investment, innovation and the business environment; improving governance and SOE performance; addressing the impact of an aging workforce by increasing labour force participation, encouraging longer working lives, and investing in skills to improve productivity; and mitigating the impact of reforms on the poor and vulnerable with well-targeted social protection spending. Added to this will probably be mechanisms to protect Sri Lanka’s vulnerable agriculture sector from the effects of climate change.

Next year will also bring other challenges in the form of the United Nations Human Rights Council (UNHRC), with the Government already indicating plans to drastically change the resolution that was agreed to in 2015. The optics of such a move will have to be carefully managed, and there will still need to be an effort to protect minorities and ensure their rights, including challenging aspects such as addressing disappearances. It will be an important test of the Government’s intent to build an inclusive and peaceful Sri Lanka.

The next year will be a time for the Government to really settle into its role, and establish its governance credentials. Many are the experts who have waxed eloquent about Sri Lanka’s potential, and as a new decade dawns, it is imperative that this potential be realised so all Sri Lankans can experience tangible peace and prosperity.