{"id":100311,"date":"2020-03-24T17:06:20","date_gmt":"2020-03-25T00:06:20","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=100311"},"modified":"2020-03-24T17:07:56","modified_gmt":"2020-03-25T00:07:56","slug":"the-world-economy-in-coronavirus-pandemic-and-policy-options-for-sri-lanka","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2020\/03\/24\/the-world-economy-in-coronavirus-pandemic-and-policy-options-for-sri-lanka\/","title":{"rendered":"THE WORLD ECONOMY IN CORONAVIRUS PANDEMIC AND POLICY OPTIONS FOR SRI LANKA"},"content":{"rendered":"

BY EDWARD THEOPHILUS<\/strong><\/em><\/span><\/h2>\n\n\n

It\nis reported that the world economy has commenced to unexpected backward as a result\nof the corona outbreak and many leaders have commented that this experience\ncould be regarded as the main incident after a century of economic\nhistory.  The major impact would be\nunemployment and lower-income for families. It will impact the aggregate demand\nin all countries and the significant consequence will be declining the\npurchasing power of people forcing to restrict spending. It also encourages us\nto assume that the prices of certain goods and services might get a down turning\ntrend as the demand for goods and services might reduce due to less money in\nhand. In this situation, the economic impact on companies is vital because it\nwill reduce government tax revenue (combined impact of lower profit and\nunemployment) thereby reducing the capacity of governments to spending on\nwelfare and investments.<\/p>\n\n\n\n

Many\ndeveloped countries have introduced incentive packages for individuals and\nbusinesses. Many countries in the world concern about the impact on small\nbusinesses as a result of social distancing which brings into being bad effects\non the fashion industry, hospitality, tourism, and many other related business\nareas.  Some analysts indicate that\nincentive packages are not working as expected and others indicated that\nincentives are not enough to revive the economy. Many countries have problems\nwith how to give incentives continuously when tax revenue has a down turning\ntrend and the only way to governments borrowing for the purpose and it may\nadversely impact the medium term to many countries.  Some countries have limits to borrow.  Australia originally introduced A$ 17.0\nbillion package and later it has increased to $ 100 billion and economists have\npredicted that unemployment would rise to 7% at the end of this year, which is\na similar situation in 2008. Although developed nations introduced large\nincentives (USA $ 1.7 trillion) Sri Lanka has no capacity for such a $ billion\nincentives and the country has limits to borrow. However, the presidential task\nforce has introduced maximum possible reliefs and incentives and controls. <\/p>\n\n\n\n

After\nthe cold war, many developed countries shifted from manufacturing base to\nservices and manufacturing industries were absorbed by China and other Asian\ncountries. Corona epidemic badly hit the Chinese economy for a strong slowdown\nand restricted growth possibilities and it will be a blow to developed and\ndeveloping countries.  Since the early\n1990s, Sri Lanka’s economy also attracted service businesses especially tourism\nand hospitality, education and training, information technology, construction\nservices, medical and dental services, fashion and many other services and they\nbecame areas of employment for the labor force. \nBesides, employment overseas also played a considerable contribution to\nthe country, but the corona crisis seems to limit foreign employment\nopportunities in short and medium terms. Many need to change the field of\nemployment departing from the currently engage in, for example, I had to change\nmy career field from banking and finance to education and training after a deep\nrecession in the early 1990s and similar experience would become of the end of\nthe current crisis. <\/p>\n\n\n\n

According\nto Reuter report Mr. Chen Ulu, Deputy Governor of Peoples’ Bank of China stated\nthat strengthening international cooperation regarding public health policies,\ntrade policies, fiscal and monetary policies are vital policy actions to face\ninternational economic backwardness and Sri Lanka is not immune to this\nsituation and it must go along with international cooperation and policy\nactions.<\/p>\n\n\n\n

It\nis recorded that more than one million population of Sri Lanka are living exile\nand they send $ billions to the country supporting foreign exchange earnings\nand the government of Sri Lanka should have multiple strategies to expand\nforeign exchange reserves.  The Current\nbackward economic environment needs rational thinking intending to maintaining\na reasonable level of stability and providing employment opportunities for\nincreasing the labor force. I believe that economic policymakers need to\nconsider the following areas of rational actions despite politically motivating\nopposition to some rational policy actions.<\/p>\n\n\n\n

  • Policy correction process\nmust be continued directing lower spending for public enterprises and allowing\nprivate investments of Sri Lankan citizens without selling government assets to\nforeigners are, vital actions to strengthen the economy of Sri Lanka.  The country needs to maintain a safety net\nfor the poor and some areas of spending must be limited widely using a user-pay\nsystem.  Many Sri Lankans living in the\ncountry and overseas can contribute to capital management of public enterprises\nand 30% of capital contribution from Sri Lankan will be supported to innovations,\neffective and efficient management, research and development and expanding\nmarket base of public enterprises.<\/li>
  • Implementation of\nproductivity enhancement program in the public and private sectors. The\nattitude of people is normally negative and selfish.  They like to get payments without contributing\nto the workplace.  They like more\nholidays and enjoyment.  Many people\nready to work hard when they go to work overseas but they are not ready to work\nsimilar way in the country.  This\nsituation needs to change and productivity must be the base of payment.   <\/li>
  • Sri Lanka needs\nimprovement in savings.  There is a\nconsiderable gap between savings and investment.  The current price level and inflation don’t\npermit to massively promote individuals from the salary and wages so\nsuperannuation systems should be the strong method of saving.  The superannuation management should be\nindependent of the Central Bank, which is the regulatory authority of the\nfinancial system of the country.  The\nbest option is to establish a sperate organization to manage super funds in the\ncountry combining the government pension, individual pension funds, EPF, ETF,\nand others.  This organization can\nprovide at least 10000 employment opportunities. <\/li>
  • Sri Lanka imports much\nagricultural produce such as rice, onion and many others. All these\nagricultural imports must stop and promoting import substitutions-all possible\nitems should produce domestically.  In\nthis way, Sri Lanka can save a large volume of foreign exchange.<\/li>
  • It is recorded that the\nmonetary unit of the country is badly depreciating and this situation has been\ninfluenced by several factors such as lower level of foreign reserves, lower\nlevel of product and services export, budget deficit, debt services, and many\nother factors. To improve the export economy Sri Lanka needs assistance from\nChina and India.  China can help to\nimprove product quality and there are many strategies such as exporting Sri\nLanka products through China and India. \nIn China and India, many products could be improved and such policy\naction would help to become a nation with export power and strong export\nrevenue flow.<\/li>
  • Sri Lanka needs to\nconsider and investigate possibilities of currency swap agreement with China\nand India for the US $ 50 billion which keeps as foreign reserves to settle\nagreements from exports to both countries. \nThis quite difficult negotiation and foreign policy-related\nmatters.  Sri Lanka needs supports from\nChina and India both and such diplomatic stewardship would be useful to the\nentire Asian region. Taiwan is equivalent to Sri Lanka in population and land\narea but it has more than the US $ 500 billion foreign reserves.  If Sri Lanka can build theUS $ 50 billion\nreserves within the next five years, there is no doubt that the foreign value\nof Sri Lanka Rupee radically increases and many international trade advantages\ncould be gained.<\/li>
  • Sri Lanka needs to\nmaintain market economic policies with strong disciplines. I will generate more\njobs and income to disadvantage people. This will support to reduce welfare\npayments and eliminate disparities in economic status.<\/li>
  • As Sri Lanka is a small\nisland it is easy to maintain a balanced growth, however, during the past 40\nyears, economic growth networked to Colombo and many skilled people pushed to\ngo overseas for working than using knowledge and skills of them for the use of\nthe country.  The government spending on\neducation and training is gained by other countries giving small jobs and this\nsituation could be changed by giving good value to Sri Lanka Rupee.  Before 1970, Sri Lanka’s monetary unit was\ncomparatively strong and very fewer people looked for job opportunities in\noverseas and now all skilled people look jobs overseas.  This could change by improving the value of\nSri Lanka rupee.<\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"

    BY EDWARD THEOPHILUS It is reported that the world economy has commenced to unexpected backward as a result of the corona outbreak and many leaders have commented that this experience could be regarded as the main incident after a century of economic history.  The major impact would be unemployment and lower-income for families. It will […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[124],"tags":[],"class_list":["post-100311","post","type-post","status-publish","format-standard","hentry","category-edward-theophilus"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/100311","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=100311"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/100311\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=100311"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=100311"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=100311"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}