Hope for a new year

Wednesday, 13 April 2016 00:00 - - {{hitsCtrl.values.hits}}

A year ago, Sri Lanka was grappling with unexpected change that a new President and his Government had ushered in. Now the shine has worn off and people are moving through a consolidation period that will mark the future course of the country.

Consolidation is never easy and comes with strong adjustments, especially on the economic front. The International Monetary Fund (IMF), which the Government is negotiating with to bolster flagging reserves, has already outlined tough measures that will have to be made to push the country towards development. Already impacted by a ratings downgrade and over $ 4 billion in debt, Sri Lanka will likely face a second round of tax reforms, which will be introduced two months after the New Year.

The Achilles heel of the economy is revenue and exports and both will require commitment from the Government to kick off. Increasing taxes, introducing capital gains tax and reducing exemptions is positive but it will come with painful adjustment for the public, who will see their expenses increasing. Managing inflation, an overgrown public sector and public disenchantment will be one of the biggest challenges for the Government in the New Year.

Investment in an externally-volatile environment will be hard to attract unless the country showcases its impressive human resource and commitment towards good governance. A people, tired from the excesses of the previous regime, will be looking forward to the Government of President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe implementing its promises. They will want an end to the many, many investigations that have kicked off last year but have not held anyone accountable.

Following the tour by Prime Minister Wickremesinghe to Beijing, stalled old projects along with new ones are expected to kick off, bringing momentum to Sri Lanka’s growth, which is expected to be around 5.5% in 2016. But it will still be a challenging time for the Government as it looks to convert much of its estimated $ 8 billion debt with China to equity and deal with Chinese companies on a different platform than the previous Government of former President Mahinda Rajapaksa.

The economic sphere is of course closely linked to the political. Among the many projects the Government has in the air, reconciliation will continue to take precedence. The mechanism for investigating allegations during the last phase of the war will likely be ironed out in the months immediately after the New Year. Much international attention will also be focused on the efforts of the missing persons’ commission, legal changes and repatriation measures planned by the Government. Winning on this front will be crucial to keeping Sri Lanka’s star shining globally and foster connectivity between ethnic communities at home. It will also have an impact in regaining GSP+ and smoothing the path to recommencing fish exports to Europe.

Balancing these two fronts for the remainder of 2016 will decide how many successes the Yahapalanaya Government can take into the next year. The New Year is not always about new starts, but doing old things in a new way.