{"id":108897,"date":"2020-11-21T15:46:35","date_gmt":"2020-11-21T22:46:35","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=108897"},"modified":"2020-11-21T15:46:35","modified_gmt":"2020-11-21T22:46:35","slug":"reduction-of-budget-deficit-and-creating-a-production-economy","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2020\/11\/21\/reduction-of-budget-deficit-and-creating-a-production-economy\/","title":{"rendered":"REDUCTION OF BUDGET DEFICIT AND CREATING A PRODUCTION ECONOMY"},"content":{"rendered":"

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

The\nmain focus of the budget speech of the prime minister for 2021 has reported\nthat the reduction of the budget deficit, and creating a production economy in\nthe country.  The idea has been written\nin my articles during the past several years as I observed that macroeconomic\nissues have been less concentrated by the government since the 1990s. The world\nbank had developed and stressed policy correction as a vital policy direction\nfor reviving economies. The world bank advice was practically result-oriented,\nand many developed countries followed the advice and achieved quick results\nduring the last decade of the 19oo century and the first decade of 2000. Sri\nLanka was the country where adapted radical market economic policies in the\nlate 1970s, however, the country achieved less economic outcomes from the\nmarket policies compared to many Asia-Pacific countries as the policies have\nbeen implemented without disciplines and clear targets for achieving the\neconomic strength of the country. <\/p>\n\n\n\n

In\nthis effort, it shouldn\u2019t forget that a successful solution to macroeconomic\nproblems could not be given by ignoring microeconomic issues. For example, if\nit takes a jungle, which has systems of different kinds of plants, the problems\nof plants in the jungle as a whole could solve only if it provides solutions to\nindividual trees or plants in the system. This is the fundamental idea that the\ngovernment should understand when policy directions are made on macroeconomic\nissues. If we look at the world economy after the cold war developed countries\nwere efficiently done was while making microeconomic reforms they concentrated\non macroeconomic problems, and it was successful. For example, many developed\ncountries solved problems of public enterprises by privatizing a large portion\nof enterprises holding the control of firms and saved a significant volume of\nbudget expenditures to retire budget deficits and public debt.  This should be a fundamental step to reduce\nthe budget deficit.  <\/p>\n\n\n\n

Sri\nLanka has tremendous microeconomic problems in various firms, it is not only in\npublic investment programs but also in privately owned firms that are concerned\nabout the many issues such as productivity, excess labor, and various problems.  Reforming public and private enterprises would\nbe the best solution for strengthening the macroeconomy that is involved in\nissues such as government budget deficit, public debt, unemployment, trade-related\nproblems, and many others.  When the\nproblems of individual trees are solved the entire jungle would be quality,\nproductive, and give high value to the economy. However, the initial policy of\nSri Lanka Podujana Peramuna was not supported to sell public assets overseas\nand the same idea expressed by the president expressed addressing the public\nrecently, it is a good policy, and some local investors are willing to invest\nfor gaining the ownership of public enterprises.  If public enterprises are reformed to higher\nreturns to shareholders local people ready to invest in shares of public\nenterprises and prop up the stock market and job opportunities in the country.  <\/p>\n\n\n\n

It\nis an alternative to selling assets overseas and getting the private sector for\nthe better management of enterprises.  In\nthe current dynamic environment, public enterprises need to invest more funds\nfor innovation, technology, and managerial changes, but the owner government\nhas no funds to allocate such purposes and needs to give the responsibility to\nthe private sector to manage public enterprises. It will not harm the policy of\nthe government.    <\/p>\n\n\n\n

Although\nthe budget speech of the prime minister focused on the two major macroeconomic\nproblems, many other issues such as population, unemployment, higher interest\nrate, foreign and local debt, and many other problems are associated with the\nmacroeconomy in the country.  Many\nmacroeconomic issues are associated together with the ideas of the vicious\ncircle of poverty, and investment is the breaker of macroeconomic problems that\nare circled with problems. Mr.Gotabaya Rajapaksa, the president of Sri Lanka\nexpressed while presenting credentials by the new Chinese Ambassador to Sri\nLanka, Mr. Qi Zenhong that Sri Lanka needs investment instead of further\nborrowing in its development drive.  My\npersonal view is China can make a massive investment in Sri Lanka at less risk\nand take back profits or reinvesting profits in other fields.<\/p>\n\n\n\n

Sri\nLanka wants to stop migrating its labor overseas and investing them in the\ncountry to keep happy people.  It will\nhelp to reduce the government\u2019s massive spending on foreign relations and\nintegrating the culture for development purposes.   <\/p>\n\n\n\n

The\nmotives or direction of the prime minister should be treated as excellent\npurposes of the budget, opposition politics may not comprehend the motives of\nthe budget and reported that many irrelevant points raised. They are like\nbeggars with destitute wounds with an entirely single purpose to gain an\nadvantage out of the economic problems. \nI read a news item that Ms. Diana Gamage wants to grow cannabis and\nexport them when there are many opportunities for export developments.  The opposition politics are so stupids and\nSri Lanka is not an immoral country with desperation for engaging in black\neconomic activities.    <\/p>\n\n\n\n

Since\nthe Korean War in the 1950s, Sri Lanka followed the deficit budget system to\nincrease the aggregate demand of the country. \nThere is no doubt that aggregate demand may have increased with the support\nof an increasing population.  The\nnegative impact of the deficit budget was enlarging taxes and borrowing.  Many developed countries used similar types\nof fiscal strategies, the difference between Sri Lanka and developed countries was\nthat developed countries had a clear plan to reduce the budget deficit, Sri\nLanka has been blindly hanged in the budget deficit without considering\neffective methods to reduce the deficit with fiscal strategies.<\/p>\n\n\n\n

The\nmajor strategy to reduce the budget deficit is creating a production economy in\nthe country. It is a very good strategy, however, the negative impact on the\ntourism industry and foreign employment by the COVID 19 crisis directs that the\ncontribution from the agricultural and industrial sectors need to be massively\nincreased then only Sri Lanka can drive to a production economy.  However, the recent statement of the EU on\nthe restriction of imports showed that Europe is against creating a production\neconomy and Sri Lanka doesn\u2019t want to respect such self-centered policies. The\nexperience of Asian countries such as Japan, China, Korea, and India indicate\nthat they did not hesitate to reject the self-centered policies of other\ncountries. <\/p>\n\n\n\n

The\nproduction economy could be achieved only if the country attracts more investment\nfor the agriculture and industrial sectors. \nThere has been a trend in expanding the service sector in developed\ncountries after the cold war, the COVID crisis showed that the economy is\ndepending heavily on services would not be helpful always because a crisis in\nthe world may change the economy quickly affecting the service sector, and\nbalanced growth is the best policy direction. <\/p>\n\n\n\n

Sri\nLanka cannot ignore economic fundamentals and since the 1990s it has been\npersistent with popular trends ignoring fundamental problems.  The message is that the budget always needs\nto focus on reducing the burdens of macroeconomic issues while reforming the\nmicroeconomic problems in individual institutions.  <\/p>\n","protected":false},"excerpt":{"rendered":"

BY EDWARD THEOPHILUS The main focus of the budget speech of the prime minister for 2021 has reported that the reduction of the budget deficit, and creating a production economy in the country.  The idea has been written in my articles during the past several years as I observed that macroeconomic issues have been less […]<\/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-108897","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\/108897","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=108897"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/108897\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=108897"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=108897"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=108897"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}