ECONOMYNEXT – Sri Lanka is on the right path with improvements seen in a several sectors, and monetary stability returning, President Ranil Wickremesinghe said in an address to a new session of parliament.
Sri Lanka’s economy is estimated to have shrunk 8 percent in 2022 after the worst currency crisis triggered by the island’s flexible inflation targeting central bank which saw the rupee collapsed from 200 to 360 to the US dollar.
External stability has been restored and forex shortages have eased after the agency stopped trying to control interest rates with printed money (inflationary policy) and some food prices have started to fall with the credit system externally anchored at 360/370 to the US dollar.
“Due to the measures taken, we have been successful in reducing this burden gradually,” President Wickremesinghe said.
“Now there is stability in the economy. People are comfortable. We have been able to safely guide Mother Sri Lanka a long way across a challenging course. It was not an easy journey. However, it is not yet over.”
Sri Lanka had to engage in reforms to make the country grow. A deal with the International Monetary Fund is still in abeyance until China gives debt assurances acceptable to the agency. India and Paris Club nations, the other major creditors have already given assurances.
Sri Lanka has also raised taxes to pay the public service which had been bloated with unemployed graduates under a policy articulated by the Janatha Vimukthi Peramuna which was embraced by successive Rajapaksa regimes.
President Wickremesinghe has also tried to control expenditure departing from the IMF’s earlier policy of expanding the state by revenue based fiscal consolidation and abandoning cost cutting.
He said the banking system has to be fixed.
“We committed to securing the financial system that was on the verge of collapse,” he said.
“Government expenditure was controlled. Measures were taken to increase tax revenue.”
He said state workers could be given some money by the end of 2023, if the economy improves.
“We are now moving from a negative economy towards a positive one. By the end of 2023, we can achieve economic growth,” he said.
“When I first addressed this Parliament as the President, the inflation of the country was 70 percent. Due to the measures we have implemented, it was reduced to 54 percent in January 2023. We will strive to make it a single digit by the end of 2023.”
Greece which suffered debt crisis took 13 years to recover, he said.
“During that period, they received aid from the IMF three times,” President Wickremesinghe said.
“However, if we continue according to this plan, we can rise out of bankruptcy by 2026.
“As I have been continuously appealing, if all the parties in this Parliament join the process to build the country, we would be able to extricate from this crisis even earlier.” (Colombo/Feb09/2023)