Time to implement

Progressive policy making is only the first stage of development; to achieve meaningful growth, the Government has to set about implementing its ideas through new laws, reforms and projects.  

President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe on Monday jointly unveiled the Government’s policy framework titled ‘V2025: A Country Enriched’, which detailed the broad goals that the two parties wished to achieve over the next few years.

But the policy document, which also contained a ‘Three-Year Economic Delivery Program’, was short on specifics. Both leaders also stuck to overarching statements that underscored election pledges such as creating one million jobs and highlighted past achievements, including regaining GSP+ and increasing wages of public servants. 

The policy statement was also aimed at upcoming elections, though the public are still unaware if it will be provincial or local government elections that will be rolled out first. However, the inclusion of an eight-year plan will ignite fresh speculation over whether President Maithripala Sirisena aims to contest for a second term in power. Be that as it may, the Government will have its hands full with the list of goals for the next three years.    

“Over the next years, within the 2025 Vision, we will implement a comprehensive economic strategy to address constraints to growth. We will aim to raise per capita income to $ 5,000 per year, create one million new jobs, increase FDI to $ 5 billion per year and double exports to $ 20 billion per year. These intermediate targets lay the foundation for our Vision 2025: Sri Lanka to become an upper-middle income country,” read the page titled ‘A Three-Year Economic Delivery Program’.

As generous as this wish list is for the public, the Government would also have to deal with a tough external environment, difficult reforms such as reforming State Owned Enterprises (SOEs) and dealing with increasing debt repayment obligations. International rating agencies have already warned Sri Lanka’s debt dynamics are such that the domestic debt repayments will reach a peak next year, following which there is a bunching up of external debt repayments from 2019 onwards, every year for three years. 

These debt repayments put enormous pressure on both the Government and market liquidity, with knock-on effects on interest rates, inflation and the exchange rate. They could also erase the country’s foreign reserves, worsening an already-volatile external front.  

The data shows that as much as $ 5 billion worth of sovereign bond maturities are due from 2019-2022. Moody’s in a statement released on 1 August estimated external debt maturities in 2019-22 to total a staggering $ 13.8 billion. 

In this backdrop, attracting FDI has become critical. Slow reforms, unclear line of command, complicated decision-making processes and environmental considerations are among the key issues the Government will have to tackle over the coming year. Staying the path of fiscal consolidation, especially with elections around the corner, will be another challenge for the Government. As it faces stronger debt repayments, the Government will also have to maintain tightened interest rates that could dampen growth. 

Fostering growth in such a complex set of circumstances would require clear polices and strong political will. The public are waiting to judge the results.