Sailing through stormy waters

That even when the world economies were reeling under the global financial crisis Sri Lanka managed to come out unscathed is an accepted fact. Sri Lanka's case was even more unique in that we were in the midst of a full-scale war that drained the treasury coffers. Add to this was a global oil price hike which also dealt a body blow to the economy.

There was also a concerted campaign to halt economic aid to Sri Lanka by lobby groups and we were even downgraded in the Fitch rating. But amazingly the country managed to emerge from all these setbacks when economies the world over were falling like a pack of cards.

How was Sri Lanka able to insulate itself from the adverse world economic fallout that even debilitated strong economies of the West throwing thousands out of their jobs and sending once affluent people begging on the streets. Prime Minister Ratnasiri Wickramanayaka put the whole affair in a nutshell. Addressing the Sri Lanka Economic Summit 2009 sponsored by the Ceylon Chamber of Commerce in Colombo on Tuesday the Premier said that the right policies adopted by the Government cushioned the adverse impact of the global financial crisis.

Certainly the Government has to be credited for it's prudent fiscal management that enabled Sri Lanka to sail through the troubled waters of the worst recession to hit the world since the 1930s. The President it must be mentioned here galvanized all sectors into action and appointed various committees and task forces to grapple with the crisis. It will be recalled that Temple Trees and the Presidential Secretariat was converted to a veritable Operations Centre in order to provide remedies to the unfolding developments.

In this respect the national food drive launched by the President stands out as one of most visionary concepts in that it helped stave off a massive food scarcity in the country in the wake of the world food crisis that was sprung on us out of the blues. One also recalls the President taking this further as regional initiative and proposing the creation of a SAARC Food Bank.

It has to be mentioned that the private sector too played a significant role in alleviating the crisis helped by generous concessions offered by the Government particularly to the export sector. Now that the country at last has seen the back of the three decades old war that bled the economy one can only expect things to improve at even faster pace particularly with the opening up of the North whose potential lay dormant during the three decades long conflict.

Therefore it is important that the Government redoubles it's efforts to get all sector working to their maximum capacity so that the economy would further stabilize and be in a position to withstand the vagaries of the global economic crisis. With the ending of the war the President will now be able to turn his full attention to those aspects of administration that escaped attention all these years. The economy no doubt would be the foremost among them.

A prelude to development

According to the Department of Census and Statistics the rate of inflation has dropped to 0.9 per cent in June this year as measured by the Colombo Consumers' Price Index. This means the annual average inflation rate recorded in June was 12.5 percent as against 14.7 percent in May. This trend is indicative of the Government's commitment not to heap hardships on the people even though faced with economic constraints. There was a big hue and cry by the Opposition not very long ago that the Government was resorting to uncontrolled printing of money, leading to runway inflation. But the figures certainly have failed to bear this out. It also accused the Government of resorting to artificial measures to contain inflation. But the peoples' purchasing power still remains intact so much so that there is no more even a whimper by the Opposition on the subject of the COL. This is because the President as Finance Minister has ensured that the people are not burdened whatever the adverse conditions. In fact the country's inflation has been falling steeply since October 2008 due to tight monetary policy of the Central Bank. This is seen by the tight leash by the Government on inflationary spending. Even wage increase that is a populist measure was held back by the Government in this year's budget as a cushioning effect. As Central Bank Governor Ajith Nivard Cabraal points out the favourable inflation ratio would create the ideal environment for economic development since maintaining a low inflation rate would increase investor confidence. The decline in the interest rates too is an added impetus. Hence the time is opportune to make the maximum use of the prevailing favourable conditions that would help uplift the economy which was languishing behind during the war years.