100 Days for a 100 Years?
Posted on January 9th, 2025
By Shivanthi ranasinghe Courtesy Ceylon Today
By Shivanthi Ranasinghe
The President’s Media Division had released a video, through social media, titled ‘A 100 days for a 100 years’. This video commemorates the first 100 days since President Anura Kumara Dissanayake assumed Office. It highlights key appointments and discussions held during this period. How these events translate into a long-term foundation is not however included in this video.
Indeed, the first 100 days have passed without any of the pessimistic predictions drawn by the Opposition. A cursory glance would tell that the country continues to function as always. Though the consumer faces a number of shortages and a spike in the price of certain commodities, the dreaded queues had not yet realised.
Is the economy recovering?
Furthermore, the economic crisis continues to be mitigated. The IMF Extended Fund Facility (EFF) programme is intact. This is alleviating the symptoms of bankruptcy.
A sign of the economic recovery might be considered to be the lifting of the temporary suspension on motor vehicle imports. This is to be effective from 01.10.2024 and would be done in stages. By February 2025, it is planned to allow even SUVs to be imported. New vehicle owners will have to comply with seven stringent conditions.
The temporary ban on vehicle imports was one of the first measures taken by the then government of Gotabaya Rajapaksa to protect the weakening economy. In March 2020, when the global pandemic descended on an already ailing economy, a ban on vehicle imports was imposed. This was in an effort to curb the outflow of foreign exchange. However, our country’s economic woes deepened and the ban continued for the next four years.
The incumbent President came to power on 21.09.2024. The present Government with an overwhelming majority was elected on 14.11.2024. The ban began to be incrementally lifted in-between President Anura Kumara Dissanayake assuming Office and NPP forming a new government.
IMF is the watchdog on our finances and is very categorical that State revenue must increase. Presently, IMF’s opinion of how we manage our finances carries a lot of weight. One could thus deduce that Sri Lanka is again able to import vehicles with IMF’s nod of approval. This could lead to the conclusion that our economy is well on its way to recovery.
This Government would like to take credit for this perception. In fact, the current Leader of the House and Cabinet Minister Bimal Rathnayaka is on record for taking credit for the improving ratings from international credit rating agencies.
It is true that the Sri Lankan Rupee (LKR) is strengthening against the USD. By January 1, 2025, the buying rate of the USD was LKR 289.08. Compared to the rate in 2023 during the same period, which was LKR 360.40, this improvement is significant. However, the LKR was recovering even in 2024 and the rate at 01.01.2024 was LKR 319.23.
Unfortunately, this improvement is not because Sri Lanka is doing anything new or different to what we were doing before the economic crisis. The main factors that are contributing to the strengthening LKR is the revenue earned from improvements seen in tourism and remittances from the Sri Lankan expatriates.
Both of these were severely affected by the global pandemic. Worldwide the economy contracted as boarders closed. This costed jobs and in turn a fall in the remittances. As expatriates returned home, the Sri Lankan Government had the additional responsibility of quarantining and vaccinating them. The tourism industry that collapsed with the Easter Sunday attack in 2019 could not recover under these circumstances.
COVID-19 is now receding in our memories and the world is returning from the new normalcy” to the old normalcy”. This has been especially good news for the tourism sector and recently we celebrated the two million-visitor mark. However, the features and facilities we offer our tourists or efforts to reach new segments have not seen a significant change from the days before the crisis.
Both the Gotabaya Rajapaksa and the Ranil Wickremesinghe governments worked hard to create overseas employment opportunities. As the Island’s economy contracted, more people left for these overseas jobs.
The import restrictions that were in place since 2020 further eased the pressure that was on the LKR. The demand for the USD thus reduced and this also helped strengthen the LKR against the USD.
It is in this backdrop that the import restrictions on vehicles are easing. Yet the IMF has not blinked. This is because the vehicle Imports will help bolster government revenues through taxation. The IMF mantra is that the government must increase its revenue to reduce its deficit.
By allowing vehicles to be imported the Government can increase its revenue. This will be especially helpful to meet the 24-50 per cent hike in State sector salaries that will come into effect from January 2025.
Increasing salaries without corresponding increases in productivity will only result in purchasing power losing its value. The Government had stated that through a scientific study services will be restructured and a performance-based system will determine future salary increments. The Government should have undertaken the reforms before increasing the salaries.
Instead, the Government opts to spend the hard earned/saved USD on a depreciating asset and thereby earn the funds needed to meet the salary hike. This is not a progress. Any benefit we may enjoy now either in the form of a new vehicle or a bigger paycheck will be temporary.
100 Days passed, but…
This Government is young. Many of the Government MPs and officials are political novices. Though the President’s Media Division would like to portray that concrete steps have been taken by the incumbent Government, the sad truth is that it has not.
Sri Lanka entered the IMF EFF program under the stewardship of President Wickremesinghe. He took a number of unpopular decisions, which reduced the burden on the Treasury. The increased taxes are squeezing the ordinary citizens dry. While this may have improved State revenues, he did not do much to improve productivity or explore new avenues to improve our forex.
It is this half-baked pie this Government taking credit for and celebrating its outcome as their achievements. Despite the number of discussions this Government held with the IMF officials, we have not seen any relief from the EFF program. Instead, the Government seems to be very happy to agree with everything the IMF proposes.
Even as this Government takes credit for the economic recovery”, this Government has been unable to resolve relatively simpler issues such as the shortages we are currently experiencing in essentials. During these 100 days, the Government was compelled to import rice, eggs and salt and failed to contain the rising prices of coconuts.
A hundred days may have passed. However, we are still floundering without a proper foundation to see a prosperous tomorrow. Perhaps it would be best if the Government could educate us on their specific targets for the next five years and their plans to achieve it than talk of a future where none of us would be alive.