Views) :

The year started with severe economic difficulties, the unavailability of essentials and uncertainty as to how these issues would be resolved. Will the coming months be when the acute economic problems are resolved?

Emergency package

The government recognized the plight of the population and proposed a vast relief program costing Rs. 229 billion. The salaries of civil servants and retirees were increased by Rs. 5,000 and Samurdhi beneficiaries would receive an additional one thousand rupees per month. Farmers who have been negatively affected by the fertilizer shortage need to be relieved. These alms would not alleviate the difficulties of the multitude of poor who are deprived of the essential.

Financial implications

The financial implications of additional public spending are a matter of concern. It seems to be based on the disastrous Modern Monetary Theory (MMT) that the government could print money without any negative impact on inflation and increased import spending.

Increased reserves

The good news from the central bank governor is that reserves which had fallen to $ 1.58 billion at the end of November rose to $ 3.1 billion by the end of December and will also remain around that level. reserves, which had fallen to $ 1.6 billion in November, increased. In all likelihood, we secured a currency swap equivalent to US $ 1.5 million to Yuan which could be converted to US dollars if necessary.

Food

The Director General of Agriculture assured us that there would be no shortage of food this year. According to him, the decline in paddy production during the Maha season can be complemented by rice stocks during the Yala season. There is also an assurance that farmers will receive fertilizer.

Gas

The current gas shortage, we are told, will be resolved in three weeks with the arrival of new gas supplies.

India and China

While we hope these improvements materialize, there are lines of credit from India and China that will improve the import situation. Indian lines of credit are likely to ensure an adequate supply of food, pharmaceuticals and petroleum products. Chinese credit would allow the intermediate imports needed by exporting industries. Also, it is believed that the yuan currency swap could be converted to US dollars, if necessary. This needs to be clarified. It is unfortunate that there is no transparency regarding the country’s external financial situation.

Debt repayment

Finance Minister Basil Rajapaksa has assured the country that we will meet all of the country’s debt repayment obligations this year. The minister may be aware that additional foreign aid from friendly countries is likely.

Debates

Although the finance minister ruled out the possibility of an IMF bailout, he indicated there were talks with the IMF. without any conditions attached.

IMF aid

The reluctance of the Government to obtain assistance from the IMF is due to the fact that it sets conditions such as fiscal consolidation, elimination of losses of state enterprises through reforms and restrictions on public spending.

Conditions

These are essential conditions for the country’s economic recovery. However, seeking emergency aid to overcome the current difficulties will not impose such conditions. Hopefully the country will get such assistance and ease the current economic difficulties and reduce concerns.

Emergency assistance

We must first seek emergency assistance from the International Monetary Fund (IMF) under the IMF’s rapid finance instrument. Perhaps negotiations have started with the IMF to obtain emergency aid under its Rapid Financing Instrument (IFR).

Rapid Financing Instrument (IFR)

The Rapid Finance Instrument (IFR) provides rapid financial assistance to all member countries facing an urgent balance of payments need. It can be used in a wide range of circumstances to meet the diverse needs of member countries. It provides support for urgent balance of payments needs. This is our immediate demand.

Other expectations

Everything suggests that the good export performance of last year will accelerate this year. Export earnings of around US $ 15 billion last year are expected to accelerate to bring export earnings to around US $ 20 billion. This could reduce the trade balance deficit which is expected to continue to widen due to an increase in imports this year due to both increased imports and higher international prices.

Threatens

However, there is a serious threat. The European Union (EU) could impose economic sanctions for human rights violations. It would be a serious setback for the economy and in particular for external finances.

Hope and expectations

The hope and expectation at the start of the year is that the severe shortages of basic necessities would diminish and fade away. Hopefully the tough times will ease over the year along with the government’s expectations.

Despite this good news, there is a great deal of skepticism about recovering from the current serious difficulties people face in obtaining the bare essentials, either due to their unavailability or soaring prices. Most vegetables are overpriced to the poor while children are denied milk.

Conclusion

The country could overcome the current difficulties with help from India, China and emergency aid from the IMF. These are essential palliatives. However, these are debts that must be repaid. They do not solve the fundamental weaknesses and imbalances in the economy. A well thought-out medium-term program with a long-term perspective is needed.

Political factors

However, the political structure, the political culture and the social environment are not conducive to such a resolution of the economic issues which now require in-depth surgery. The country can overcome the current crisis with foreign aid. The question is not from whom we will get help to meet our immediate needs, it is about adopting an economic reform program that would address the fundamental weaknesses of the economy and enable stabilization and recovery. growth of the economy. Is this possible in the political context of the country?