Sri Lanka compels to continue economic policy avoiding another financial crisis

Sri Lanka is on the verge of plunging into another financial crisis with fund raising issues mainly from borrowings commencing by mid this year with political stagnation and periodic economic crisis being the norm as in the past, a confidential report of the finance ministry revealed.

The coming months would be crucial period for the people as they have to be cautious of social unrest, political uncertainty and political instability that would deter economic recovery and growth.

Three was a speculation that Indian Prime Minister Narendra Modi is expected to visit Sri lanka soon after winning the ongoing election and his assumption of high office turning the international community attention on Sri Lanka elections.

The outcome of the election will exert an impact on Sri Lanka political land scape. Millions of Indians are voted Saturday 25in the next-to-last round of a grueling national election with a combined opposition trying to rattle Prime Minister Narendra Modi's campaign for a third-consecutive term for himself and his Hindu nationalist party.

Saturday's voting in 58 constituencies, including seven in New Delhi, will complete polling for 89.5% of 543 seats in the lower house of Parliament.

The voting for the remaining 57 seats on June 1 will wrap up a six-week election. The votes will be counted on June 4.

Widespread strikes and protests could become the order of the coming weeks and months affecting economic recovery measures of the government.

The implementation of the government’s reform programmes especially in respect of the privatisation of state-owned enterprises. is likely to be held up. Already, about 40 percent of IMF conditions are assessed as not implemented.

The Government has gazetted the Economic Transformation Bill early this week which sets ambitious targets for the country’s economy for the next two and a half decades enduring the continuity of the economic policies under any future governments. .

The Bill provides for a National Policy on Economic Transformation and for the establishment of the Economic Commission, Investment Zones Sri Lanka, and Office for International Trade, National Productivity Commission, and Sri Lanka Institute of Economics and International Trade.

The new Bill will repeal the Board of Investment (BOI) of Sri Lanka Law, No. 4 of 1978 and replace the BOI with the Economic Commission of Sri Lanka.

However The All Union Alliance of the Board of Investment of Sri Lanka (BOI) warns that the proposed Investment Transformation Act to be submitted to the Parliament on 22 May will plunge the investment sector into a severe crisis.

With no plans and strategies properly being implemented, the BOI has become a burden to the state as a dormant institution after four decades of poor performance in its role of investment facilitator, the foreign investment report of the Finance Ministry revealed.

Since the establishment of this export promotion entity approximately 40 years ago, the institution has managed to attract over US$20 billion in FDI, it added. It has been observed that the average annual FDI inflow has been merely $ 500 million

This was clear justification of the government decision to scrap the BOI which has become a white elephant and a massive liability for the country.

The finalisation of the foreign debt restructuring by the end of June is expected to enhance the economy.

Apart from the third tranche of the IMF facility of US$337 million , foreign assistance, especially project loans and foreign investments, is expected from the Asian Development Bank, the World Bank, the International Finance Corporation (IFC) of the World Bank, and the Japanese government, among others.

However, the current political uncertainty, strikes, and political unrest could deter these inflows.

The country is confused with speculation on as to whether the presidential or parliamentary elections will be held first. While the presidential election has to be held by October 16, the date of the parliamentary election is not known.

According to informed sources there was amplified speculation that parliament would be dissolved if the President is failed to persuade at least seven MPS from the SJB by early next month.

The UNP is to hold an executive committee meeting by June 02 to kick start their appointments of grass root level leaders and prospective district and electoral leaders. The battle for th presidency is expected to heat up thereafter.

The economy’s performance could also be retarded by a stalemate in the presidential election and no party having a parliamentary majority. It is most likely that no presidential candidate would get over 50 percent of the vote, even after a second count. This could lead to a political crisis.

The three minorities namely the Sri Lankan Tamils, Muslims and Indian Tamils together consist of 25.5% of the population.

These three ethnic groups form the majority in some Sri Lankan districts. In other districts they are a substantive segment of the population.

Since the people of all districts vote together in the Presidential elections, the entire island is transformed into a “single” constituency with a 74.9% Sinhala majority and 25.5 % non – Sinhala minorities.

Although President Ranil Wickremasinghe had much political support among Tamils and Muslims for several decades, the 2020 poll reversed the situation making the UNP breakaway group , the SJB led by Sajith Premadasa, which secured the majority of Tamil and Muslim votes. In fact, one-thirds of the MPs elected from the SJB in 2020 are Muslims and Tamils.

Everything depends on r Ranil Wickremesingh’s ability win back the Tamil and Muslim votes lost by the UNP to the SJB in 2020 and regain the support of Tamil and Muslim parties and voters to help him win the 2024 Presidential Poll