Light at the end of the tunnel
Posted on January 23rd, 2023

Sugath Kulatunga

The year of the Rabbit has brought Sri Lanka the good news of the two-year moratorium proposed by China on debt repayment. This should be acceptable to all creditors and Sri Lanka. We cannot expect haircuts or of debt cancelation in the present global economic downturn. If SL can achieve the levels of foreign exchange earnings of 7.1 billion US$ from foreign employment in 2018 and Tourist income of 4.3 billion US$ in 2018 and maintain a trade balance deficit of less than US$ 6 to 8 billion US $, and with a modest FDI of 1 billion dollars and an increase in IT/BPO income to 2 billion US$, SL could get a total annual foreign exchange return of 13.4 billion US$. A modest 10 to 12 percent increase of this will make it 15 billion US$. If the trade deficit of 6 to 8 is deducted from this amount there will still be a surplus of 7 billion US$. Even if the net of services and primary income of .5 billion US$ is discounted SL should have an annual balance of 6.5 billion US$. This is a back of an envelope calculation. But the overall picture will not be too different from this. If the government can make an honest effort to get back at least the current amount of foreign exchange kept back abroad by exporters which is estimated at around 3 to 4 billion US $, we need not go begging for funds. Honesty of the authorities is in serious doubt.
This is not a solution to the massive domestic debt which must be resolved before specially the state banks go bust. The huge bad debts of political henchman must be recovered with rapid pareto execution. Hyperinflation has to be controlled, cost of living reduced and a business-friendly climate reintroduced. More than anything else discipline has to be established in both governance and society. There should be no complacency.
But there is no need to sell off the family silver. What is required in State Owned Enterprises (SOEs) is to institute sound management systems. What is revealed is that the Secretary of the Ministry, who is the Chief Accounting Officer is not doing his job of evaluating performance and preventing corruption in the SOEs.

Sugath Kulatunga

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