(MENAFN- Colombo Gazette) In July 2022, Sri Lanka witnessed the inauguration of President Ranil Wickremesinghe amidst a severe economic and political turmoil, marking one of the most challenging crises since gaining independence in 1948. Preceding him, former President Gotabaya Rajapakse had been compelled to step down following widespread protests triggered by extended 12-hour power outages and ongoing scarcities of fuel and essential commodities. The nation found itself in a state of financial insolvency.
Having taken office, President Wickremesinghe initiated collaboration with the International Monetary Fund, prioritising the achievement of macroeconomic stability and the implementation of challenging yet crucial structural changes. At present, as Sri Lanka commences its 17th IMF program, a distinctive chance emerges for the restoration of stability and the advancement of enduring growth. President Wickremesinghe's initial steps should encompass the establishment of an autonomcentral bank, the overhaul of state-owned enterprises, the expansion of trade liberalisation, and the enhancement of the business environment.
“Sri Lanka possesses three vital assets to steer through the ongoing economic crisis: our robust human capital, strategically advantagegeographical location, and capacity for international partnerships. These strengths collectively pave the way for a trajectory of sustainable growth and prosperity.” Kamil Kuthubdeen Chairman of Global Business Trust LLC Dubai said.
To begin, a deficiency in economic comprehension among the populace creates an advantagesituation for politicians seeking to fuel dissent and place the government in a defensive position.
Secondly, the potential for political instability poses a threat to the continuity of reforms. The establishment of a stable government is imperative to establish a reform-oriented agenda, yet this objective could be jeopardised by the impending presidential election scheduled for next year. As the election draws near, The current administration may encounter mounting pressure to prioritise populist measures over the pursuit of less popular reforms.
Thirdly, the execution of reforms encounters challenges in Sri Lanka due to its frail institutional framework. The process of implementing policy alterations within a labyrinth of bureaucratic intricacies can prove arduand protracted.
The overarching objective of addressing inherent economic shortcomings is to foster sustained, long-term economic expansion, diminish poverty, and establish a foundation for a stable nation. The stakes are substantial for the country. Since the onset of the economic crisis last year, an additional four million Sri Lankans have slipped beneath the poverty threshold, compounding the preexisting three million, equating to a third of the total population.
A consequence of this situation has been the significant departure of individuals from the country, leading to a notable brain drain. The essential human expertise required for recovery is actively seeking opportunities abroad, a circumstance with implications extending beyond the present generation.
Sri Lanka's economic stability and advancement hold significance not only for the nation itself but also for its creditor countries such as China, Japan, and India, as well as international sovereign bondholders primarily based in Western countries. These stakeholders are eager for the successful execution of the IMF program, which is crucial for the nation's economic recovery.
Sri Lanka faces the need for swift action. Introducing a streamlined investment gateway could serve as a viable remedy. Rather than primarily relying on tax incentives, numerenterprises seeking to invest in Sri Lanka prioritise accelerated approvals and streamlined setup procedures. By neglecting to enhance the business environment, Sri Lanka exposes itself to the prospect of forfeiting potential investments to neighbouring regional competitors.
Despite approximately 70 percent of global trade being interconnected within global value chains, Sri Lanka-among the globe's most sheltered economies-has not managed to harness this potential. Astonishingly, the nation has merely three free trade agreements, despite its exceptional positioning to serve as a pivotal trade centre.
Failing to exploit its advantagegeographical location, Sri Lanka faces the prospect of lagging behind. As several South Asian and Southeast Asian nations progressively unlock their economies, Sri Lanka possesses a brief timeframe within which it must seize the opportunity to capitalise on these developments.
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