It is vital to introduce a bundle of restructure measures and implement them soon to rebuild the country and this crisis situation is an opportune time to expedite the reform process, Prof Sirimal Abeyratne (pictured) opined delivering a webinar lecture under the title The Need of Economic Reforms to Rebuild the Country aired by the Central Bank recently.
He said there were two major reforms that took place in this country, the introduction of the Open Economic Policy in 1977 and the reforms that took place in 1989-93. However, since the government changes that took place since 1995, and although a few adhoc policy changes had been introduced the reform process came to a halt.
He said that financial crises could occur in any country but there is a difference between the economic crises that happened in countries like the USA because the crisis in Sri Lanka has been created by us. In addition, in the developed Western world there are crises unique to capitalist development but these crises happen time by time to reshape development activities such as the financial crisis in 2009 in the USA. The fact that one needs to understand is that financial crises start slow and take time to build up, but the breakdown of the economy happens suddenly.
He said that there are reasons for both the financial crisis to accumulate and the economy to crash as well.
Most people view the current crisis from a perspective of tax cuts and fertilizer ban and as a result of the global meltdown due to Covid crisis and certain changes that happened in the global economy and the increase in the level of corruption. He said he had no objection to these observations because all those were attributed to the severity of the financial crisis. Prof. Abeyratne said that one can view this crisis from different perspectives but at the end it is the foreign currency crisis that the country faces. The fuel, gas, medicine, goods scarcity, restriction of imports, the breakdown exchange rate for all this the cause is the foreign exchange crisis. Although the fuel and queues have subsided now it is evident this is because of credit lines. He however observed that there is uncertainty in many minds over the availability of fuel, gas in the future, whether the country will be able to maintain an exchange rate of Rs 360 to the dollar and have to impose more import controls.
The reason for that uncertainty is because the nation has not sufficiently addressed the issue so far.
Lankan economy has travelled through a very insecure 3 decades and with the passage of time the economic immunity eroded dramatically. Sri Lanka was able to avert the financial crisis in 2009 because of USD 2.9 bn loan given by the IMF.
In 2015 when Greece went into crisis the Euro Zone, European Central Bank, European Union ant the IMF was there to bail out Greece. But apparently there is no one to bail out Sri Lanka and all parties jointly should be held accountable for the current crisis. Hence the time is opportune to introduce a bundle of restructure measures soon to rebuild the country Prof Abeyratne added.
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