Election rumblings

President Maithripala Sirisena over the weekend ruled out early Presidential elections and insisted he would complete his full term, paving the way for a politically turbulent 2019. But as the days count down to a bitter faceoff between the United National Party (UNP) and the Rajapaksa faction, there is growing worry that the remainder of the Government’s term will get bogged down in politics at the cost of crucial reforms essential for the economy. 

Five years is a short time for any government, especially when all the minor elections and publicity events are factored in. Politicians have to be visible but work at the same time, which can be challenging, especially with coalition politics creating complex situations. Since 2015, policy stagnation has been a continued complaint from the masses. Whether it be in the areas of economic reform, rehabilitation or anti-corruption measures, stakeholders have worked hard to provide solutions that have to be implemented at the highest levels of Government. 

A host of legal changes proposed by the last Budget covering legislation pertaining to Customs, the Banking Act, Shop and Services Act, new immigration regulations for professionals, legal changes to implement trade deals, and many others are still awaiting the green light. Independent commissions such as the National Procurement Commission have presented crucial guidelines to promoting transparency that need to be debated and passed by Parliament. Large investment projects such as the Port City need legal changes along with fresh regulations for the proposed International Financial Centre. These and many others need the focus of parliamentarians. 

Unfortunately, elections are also times when investors prefer to avoid. The Government with its increased debt repayments that will begin next year, will need to continue liberalising the economy to attract investment and promote exports. However, this may become even more difficult in an environment of increasing economic instability. Tourism is also sensitive to political cross winds and all parties will have to ensure that their campaigns are conducted with minimal impact on the day-to-day lives of the masses. 

There is also the danger of fiscal slippage. As elections roll closer, governments are tempted to introduce populist policies to attract voters. Excessive recruitment to the public service is also underway, which Sri Lanka’s precarious macroeconomic situation can ill-afford. There are already nearly two million public workers in Sri Lanka and their future expenses as well as retirement benefits are a hefty responsibility that will have to be borne by the taxpayer. A higher budget deficit together with Sri Lanka’s trade deficit, amidst an appreciating dollar, creates a challenging backdrop for the Central Bank to raise low interest funds from international capital markets to repay an estimated $ 15 billion in debt from 2019-2022. 

The window for reconciliation policies is also shrinking and may close faster than the economic or anticorruption fronts. Given the anti-minority stance of the Joint Opposition and the attempts they have made previously to hamper any progress on this front by whipping up nationalist sentiments, it will be a key battleground at the upcoming elections as well. It is therefore imperative that the Government moves on multiple fronts to push forward its election pledges so that voters can reduce their frustration and make a balanced and informed decision at the next Presidential poll.