Is now the time for growth?

Most would say the question answers itself. An economy that has lost so much plainly needs to grow. But the question is worth asking, because of what the calls for growth now mean. When seasoned voices, among them business leaders and economists, press the Government to deliver growth as if the Middle East were on another planet, they are rarely asking for growth that firms earn. They are asking the Government to engineer it through sweeping fiscal loosening, often invoking the poor and small businesses to make the case. That is a different proposition, and the wrong one for now.

The impact of the ongoing Middle East tensions and US trade policy on Sri Lanka and the world cannot be overstated. Spending fiscal buffers on stimulus now would leave nothing in reserve if the shocks deepen.

Why, then, is this risk so easily overlooked? Part of the answer lies in history. An IMF bailout imposes discipline, discipline delivers recovery, recovery brings growth, and then an external shock exposes the same flaws. Those flaws are rooted in an insatiable expectation that the Government must do everything, from providing welfare for all, to protecting businesses because they create jobs and earn foreign exchange. It was a coddled economy, whose engine of growth was never expected to run on its own fuel.

Nor would sweeping loosening go where it is needed. Economic commentators note that the recovery has yet to reach most households, especially the poor. Consumer surveys and consumer companies suggest that spending by the upper-middle class and above is growing, and for many in that group, the hardship of recent years has amounted to a steeper electricity bill for keeping the air-conditioning on. Broad tax cuts would reward precisely those who need help least.

The problem is not that Sri Lankans are overtaxed, but that too few of them pay. Economist Dr. Roshan Perera told the Sri Lanka Economic and Investment Summit this week that widening the tax base was the only route to a sustainable economy.

There is a time to loosen, but it must be earned, and the Government, which has itself promised tax relief in Budget 2027, should be the first to resist the temptation now. The better course is to push hard on reforms: widening the tax net, pursuing high-income earners who evade tax, and restructuring loss-making State enterprises. Once revenue rests on a broader base, the Government can raise Aswesuma payments to those in genuine need and lower the indirect taxes that weigh most heavily on the poor, in line with its stated direction. That is loosening worth having.

None of this means abandoning the vulnerable. It means being selective and thorough rather than generous to all. Small and medium enterprises battered by the cyclone and the Middle East shock may well deserve concessionary loans, given how many people they employ. But selection must be rigorous. Lenders would do well to examine the books, how much staff are paid and where the owners holiday. A business that cannot pay its workers fairly but can afford a family holiday abroad hardly needs a subsidised loan.

Business, for its part, has a role to play. Frontier Research argues that firms must now compete to thrive because the Government will no longer prop them up. The State is expected to perform regardless of external shocks; business leaders can fairly be held to the same standard, whatever the policy environment. Many already meet it, without special favours, yet they are rarely celebrated. Colombo would benefit from more forums where such entrepreneurs explain how they succeed.

So, is now the time for growth? Always, if it is growth that business earns. Not if it is growth the Government must engineer with sweeping concessions, especially amid global disruption. There is no case for rewarding business for doing what it is supposed to do.