The Stupidity of Rushing to Sign ETCA after Brexit
Posted on June 29th, 2016
The UNP government is on the verge of yet another economically disastrous decision. Obviously, UNP leadership feels the shame of defeat in the Brexit vote as it worked hard to convince as many people to vote “remain”. However, its kneejerk reaction is stupidity. Now it wants to speed up signing ETCA to overcome the economic adverse impact of Brexit. EU accounts for 40% of Sri Lanka’s exports and Brexit surely has an impact. UK is the second largest export destination of Sri Lankan exports. Depreciation of the sterling pound accompanied by the short term effects of Brexit will be felt badly. What is really worrying here is the UK and the EU are net importers of Sri Lankan exports. In other words, Sri Lanka carries a trade surplus against them.
However, India is on the other extreme. Sri Lanka has the worst trade deficit against India! By signing ETCA this trade deficit will worsen. In other words, the reduction in the trade surplus against Europe will be in addition to worsening trade deficit against India. That is a double whammy. It will double the overall trade deficit of the country and worsen the balance of payment crisis.
By rushing to sign ETCA fearing Brexit impact is displaying outright stupidity of the Prime Minister and the UNP government.
During Senanayaka and Jayawardane eras UNP was seen as the better of the two parties in economic management. However, after Jayawardana UNP’s economic credentials fell to nothingness. It is mainly due to the very poor quality people in the treasury, economic policy advisory and very heavy politicisation of the treasury and the central bank.
Credit rating suffered a second lowering within a year despite the IMF loan, which speaks volumes of the disastrous economic management of the UNP regime. It is rumoured that the discredited Central Bank governor will be replaced by a UNP politician! That will be yet another disaster. It must be noted that Mahinda’s choice of governor was also a UNP provincial councillor who also contested to enter parliament from the UNP ticket.
Public protests have broken out throughout the country against draconian VAT imposition on essentials and VAT increase on everything else. Despite borrowing $8 billion so far since January 2015, no new development work has been done by this government. Government ministers are showered with luxury vehicles while advising people to tighten their belts.
Under these circumstances, if ETCA is signed, the economy will be totally ruined resulting in unrest, riots and subversion.