“We need to urgently redirect the economy towards strengthening local production, and reverse the direction of trade and financial liberalization. The Government is finally taking measures to restrict imports. The Government also seems to have realised, even at this late stage, that it is the flight of capital to Western financial centres that has hammered the rupee.”
The falling Sri Lankan Rupee is now at the centre of discussions about the economy. Is this problem due to the US Dollar strengthening along with increasing interest rates in the United States? Is it a consequence of flawed trade policies that have maintained much higher levels of imports relative to exports? Or is it an outcome of opening our economy to the inflow and flight of finance capital? These debates, politically charged and partisan as they are, provide an important opening to evaluate the economic trajectory of the country.
The rupee’s depreciation and related balance of payments problems – characterized by lacking foreign exchange to pay for imports and foreign loans – should not come as a surprise to anyone. Such crises have taken place repeatedly across the world, even in Sri Lanka, following liberalisation of trade and finance. The global proportions and the international consequences of such crises have been the subject of economic discussions for decades, particularly after the Asian Economic Crisis of 1997 and the Global Economic Crisis of 2008. Furthermore, developments in the international financial and goods markets, including the higher cost of capital with the trend of rising US interest rates and declining possibilities for exports with increasing protectionist moves by the US, have been known for years. Continue reading the Government must restrict imports and invest more in the local economy – AHILAN KADIRGAMAR
By Umesh Moramudali
Alliance for Economic Democracy (AED) is an organization formed by a group of persons who insists upon the importance of economic justice. Ceylon Today interviewed Ahilan Kadirgamar, a member of the AED, who in the course of the interview insisted how the possible outcomes of the IMF Agreement hurt the ordinary people of the country. Very often, when tax increases are suggested it is the indirect tax such as Value Added Tax (VAT) that increases, which hurts the public. Most importantly, in Sri Lanka 80 per cent of tax revenue come from indirect taxes such as VAT. That means the ordinary people will pay for it. It seems that, it is the ordinary people who pay for the government’s economic mismanagement, of the country. Continue reading “The government is not thinking of any alternative”: An Interview with Ahilan Kadirgamar
It is one year since Sri Lanka witnessed a dramatic regime change and the country has just stepped into a make or break year. How it crafts its political and economic vision now will profoundly impact its future.
Exactly a year after his election, President Maithripala Sirisena has initiated a welcome process to rewrite the country’s constitution. The Government is also moving ahead on transitional justice processes to address the UN Human Rights Council resolution unanimously adopted in September last year. However, progress on both the constitutional and transitional justice fronts, which seem to have the consensus of both the President and Prime Minister RanilWickramasinghe coming from historically opposing parties, depends to a large extent on the country’s economic future. Given the President’s affinity to the rural economy and the Prime Minister’s championing of economic liberalisation, the new economic reform agenda is likely to shape the path of regime consolidation and influence the stability of the Government. Continue reading Sorrows of the Lankan Economy By Ahilan Kadirgamar