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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Friday, November 25, 2005

Tragic plight of Sri Lankan Economy

Daily Mirror: 17/11/2005 By Dr. S. M. Ashraff

In, today's, heated period of pre-presidential poll, it is highly appropriate to analyse the highly shocking true economic trend, prevailing in Sri Lanka. This article is mainly based on market statistics of Central Bank (as published on Monday, 31 October 2005)

The total government revenue, for the eight month period, from January to August had been Rs.190.7 billion (Rs. 286.2b) for year 2004, Rs. 236.9 billion (Rs. 350.8b) for year 2005 and the targeted figure for the whole year 2006 is around Rs. 480 billion. The total government expenditure, for the eight month period, from January to August had been Rs. 299.6 billion (Rs. 438.4b) for year 2004, Rs. 355.5 billion (Rs. 533.2b) for year 2005, and the provisional figure for the whole year 2006 is around Rs.670 billion.

This leaves a staggering budget deficit forecast of around Rs.190 billion for year 2006. Provisional figure for external trade deficit for the year 2005 also has skyrocketed to a staggering level of Rs.236.1 billion. The out standing government debt stock has shockingly sky rocketed to the level of about Rs. 2.2 trillion, without the much expected and highly needed productivity and fruitful dividends.

Even though the GDP has grown by 6%, which is mainly due to the strong positive momentum created by the CFA, agriculture has shown a tragic negative growth of -2.7% even with the highly publicised Daha Dahasak weva program, for the second reference quarter of year 2004/2005. Gross coconut production has suffered a massive set back of 8.4% and the industrial output index has tragically declined to -0.5% for the first eight months reference period of 2004/2005.

The unemployment rate has deteriorated from 7.9 in fourth quarter of2003 to 8.2 in the same quarter of 2004. For the same period the total labour force participation rate in economic activities has declined and worsened from 49.6% to 48.8%. Sector wise there has been a marginal increase in participation in agriculture and industry but in service sector and others there had been a decline from 45.3% to 42.6%, for the same reference period. These figures have been drawn excluding the northern province. In this context, promising millions of jobs by the left wing contemplators, is going to be not only a dream but also hallucinations and illusions.

For the reference period of first eight months of 2004/2005 the total number of tourist arrivals has increased by 11.7% but in terms of earning, there is an alarming paradoxical decline by 11.7%. This may be due to the fact that the number has increased because of increase in the arrival of low spenders mainly from Asian countries and paradoxical decrease in high spenders from western countries, because of the anti-west political climate.

Because of the spiralling petroleum price, the state has to incur the cumulative earnings of tea, rubber and coconut, to meet the import cost of present petroleum bill. This situation is going to be worse in the near future because of the escalating trend of petroleum price.

In addition to ever increasing cost of power and energy, the cost of transport and finance have also increased. The cost, risk and vulnerability of investment, both local and foreign, also has increased tremendously, because of the high cost of inefficiency, unfavourable and degenerated political culture, and adverse, incompatible and incomprehensive foreign policies and relations. Consequently foreign investment, grants and loans have been driven away and diverted to other countries and we have lost a gigantic share of our vitally needed and valuable development.

The price indices and inflation rate reveals the grave plight of our consumers because of the totally incompatible policies prevailing today. One year reference period from September 2004 shows that, Greater Colombo Consumer Index (GCPI) has spiralled to 13.2 from 2.9, Sri Lanka Consumer Price Index (SLCPT) has sky rocketed to 14.3 from 3.1 and Whole Sale Price Index (WPI) has heaped up to 18.6 from 3.4.

Nominal wages figures show that, for the same reference period, even though there had been some attractive wage hike for state sector employees, the increase had been marginal for the private sector employees who constitute the majority. Common man has to commit around half of his income to foot even the utility bills and trapped in a tragic plight of spiralling cost of living against meagre increase of the earning.

In this malignant socio-economic scenario, the right thinking Sri Lankan polity, would wonder, weather the present policy planners and administrators are suffering from severe myopic vision and thoughts with pathological illusion, while tragically and seiously discouraging and endangering private sector and vitally needed foreign investment. Effective and successful pro poor and pro growth programs and strategies, ideally in a macro scale, are eagerly waiting, to see the light of the day, even after 11 long years.

The present alarming and crusading trends show that, the strong platform of socioeconomic build up by Ranil Wickramasinghe in 2001 with strongly positive socio economic developmental momentum, is getting eroded and collapsing and we are heading for a socio economic disaster and carnage, with the recurrence of the black era of pre 1977 and pre 2001, if the left wing policies and programs, concentrating only in national economy, and neglecting the open economic system, is going to get on to the track. This imminent socio economic calamity and disaster have to be highlighted to enlighten the Sri Lankan polity.

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