By Sumanasiri Liyanage Courtesy Ceylon Today

In the last two months or so, when the country was edging towards the Presidential Election, Prime Minister, Ranil Wickremesinghe, maybe hoping for United National Party nominations, had begun to talk on the economic performance of his Government. Having followed his speeches in different fora, one may identify the following assertions that he had made on the economy of Sri Lanka: 1. The economy was in a really bad shape when the Yahapalana Government was elected, with him as the Prime Minister; 2. Since 2015, the Sri Lankan economy has moved in the right direction, with the capability to achieve high-income country status by 2025, as a result of the right economic policies adopted by his Government; 3. The debt situation of the country has improved since 2015 so that the country would be able to repay its loan liabilities; 4. The country’s future depends on the growth of tourism and that of the export economy; 5. Although this process was temporarily mitigated by two stochastic shocks that occurred in September 2018 and April 2019, the sound policies adopted by his Government have put the economy back on the right track. 

In all five assertions, the Prime Minister appears to be one hundred percent certain. Although this time, he did not mention about the Volkswagen car assembling plant, his main emphasis is now on two or more new international airports. For sure, not to transform them into paddy stores. In this election time, it would be appropriate to look at carefully the data issued by the Government, in order to see if the Prime Minister’s assertions are validated. 

Economic growth

Of course, the economy in 2014 was not a very healthy one. The growth rate was reasonably high and many macro indicators, like the rate of inflation, the unemployment rate, and the poverty level were a single digit. However, Rajapaksa’s policies did not give necessary emphasis on the production side of the economy. As a result, the dynamism of the economy was maintained by State-led, debt-financed infrastructure projects. It was the merchant and financial capital that was hegemonic. The situation had changed when the economic management was handed over to the Wickremesinghe regime. Figures 1 and 2, that need no explanation, demonstrate the sluggish growth between 2015-2019. The blue line of Figure 1 below shows the behavior of per capita income from 2005 to 2019. While there was a gradual rise between 2005-2014, its increase is negligible after 2015. Ironically, the actual and trend per capita are noticeably lower when those figures compared with the Vision 2025 expected per capita income figures as indicated in the orange line. Although the Finance Minister still talks about the Vision 2025 plan, it would be clear to Economics 101 student that the Vision 2025 document was cremated or buried a long time ago. 

Looking at the past performance, one thing is very clear. When the economic policies deviated at least slightly from its fundamentalist neoliberal approach, the Sri Lankan economy has shown some kind of dynamism. The Yahapalana Regime has killed the economic dynamism between 2005-2015, by being obedient to IMF-WB prescriptions. Figure 2 shows the downturn trend of the economy after 2015. 

So, it appears that the Prime Minister’s first two assertions are not supported by an actual development published by the Central Bank of Sri Lanka.  

Figure 2 Debt trap

The Prime Minister’s third claim is that the Yahapalana Government, under his visionary leadership, was able to release the country from the debt trap created by the Rajapaksa regime. It is true that the Rajapaksa Government’s heavy investment in infrastructure development was based on debt financing. But the question that needs to be asked is if his Government was capable of reducing the mountain of debt. Figure 3 and Figure 4 are extracted from the Annual Report of the Central Bank of Sri Lanka. According to Figure 3, the accumulation of debt under the present government has increased.  

Figure 3

As a result of the accumulation of Central Government debt, its debt-servicing charges have also been increased. What the present Government did and continues to do is to get more loans, to pay its existing debt responsibilities, resulting in an increase in debt: GDP ratio. The debt/GDP ratio exceeded 100 percent during the last Ranil Wickremesinghe regime. Since 2015, as Figure 4 indicates, it has begun to rise once again.

Figure 4

Hence, it is clear that his third assertion is equally false. I will leave his fourth and fifth claims for another article, due to restriction over space. However, it is not clear whether the Prime Minister was deliberately lying, or he was totally misinformed by his staff. Whatever the answer to those two questions, one thing should be made very clear. The continuation of the economic policies of Ranil, Mangala and Malik trio would be a complete disaster to Sri Lanka.

About the writer:

The writer is a retired teacher of Political Economy at the University of Peradeniya.

E-mail: sumane_l@yahoo.com