In its World Economic Outlook (WEO) released in October, the International Monetary Fund (IMF) estimated the Lankan economy to contract by 8.7% in 2023 and by 3% in 2023. The World Bank in its forecast estimated a contraction of 9.2% in 2022 and 4.2% this year. In September, the Asian Development Bank (ADB) lowered Sri Lanka’s growth outlook to a negative 8.8% as opposed to a positive 2.4% estimated in April 2022. ADB is also forecasting a 3.3% negative growth for 2023 from a 2.5% growth previously estimated. There is no doubt that the economic woes of the country will continue in the new year and hopes of a quick recovery remain elusive.
2022 will be remembered as the year Sri Lanka recorded a sovereign default for the first time and for all intents and purposes became a bankrupt nation. After such a devastating year, it is but natural to hope for a better year ahead and start the arduous process of rebuilding and recovery. However, in order to do so there should be several prerequisites that must fall in place and from the outset such conditions do not prevail; that gives great hope for an economic turnaround in 2023.
Firstly, to face a national crisis there must be competent and respected leadership. At moments of great calamity, the people look towards their political leaders for inspiration and guidance. In this regard legitimacy, integrity and trust are crucial factors. When the public are called upon to make sacrifices, forgo services and pay more taxes they must have the confidence in the leaders who will be handling their public finances to do so honourably. The current political disposition does not command such confidence since it is an appendage of the previous regime that delivered the economic crisis in the first place.
Secondly, the public must be able to trust their leaders to make the correct decisions for the greater good rather than individual advantage of themselves. With rampant corruption within the ranks of the Government and hardly any action taken to counter such corruption there is no evidence that the general public have such confidence in Sri Lanka’s leaders to make decisions for the greater good.
Thirdly there must be confidence in the competence of the individuals handling the economy. While academic qualifications are not the only measure of such competence a reasonable understanding of how an economy works should naturally be a prerequisite for such a task. The catastrophic economic meltdown of 2022 could have been avoided had the political and bureaucratic leadership listened to sound advice. At the beginning of the year Sri Lanka had a president and the finance minister who had barely passed their ordinary level examinations and a courtier of officials who were either ideologically aligned to long debunked economic policies or were incompetent and corrupt.
If there is any hope of economic recovery the political leadership must address these outstanding issues. The current administration of President Ranil Wickremesinghe sans popular legitimacy. The majority party in parliament has lost credibility and the President has been elevated to high office through political machinations rather than a popular mandate. He continues to govern with a cabinet of ministers devoid of credibility. Among these ministers are convicted fraudsters, those accused of corruption and misappropriation.
2023 will be a year that hard and painful course corrections would have to occur. It is unlikely that the Government which lacks a popular mandate will be in a position to deliver on these much-needed course corrections. What is certain however, is that 2023 will continue to be a year of economic pain for a vast majority of people in Sri Lanka.