Sri Lanka has still not learnt its lesson since the end of 2013 and is continuing to drive post-war growth by ballooning consumption imports and bringing pressure on the trade deficit which is a highly unsustainable strategy, a top Colombo-based think-tank has warned. According to a recent Insight from Verité Research, the post-war growth story of Sri Lanka remains one of inflating consumption imports or construction and this unsustainable strategy is being pushed to a breaking point, and is still unsustainable.
“Almost all sectors other than import trade and government services performed poorly in the first half of 2015 compared to the same period in 2014. This is because increasing GDP growth in a sustainable manner requires serious administrative and policy reforms involving the public sector, in skill development, in the structure of economic investment, in production and exports, in regulation, through technology improvements and by solving the many bottlenecks to economic functioning in Sri Lanka,” the insight by Verité’s Hasna Munas edited by Economist Nishan de Mel, pointed out.
It noted that instead of learning the lesson and working out how to stimulate growth in other sectors of the economy in 2014 and 2015, government policy makers once again took the lazy way out. Towards the latter part of 2014 and the first half of 2015 policies were reversed yet again to encourage imports, and another growth cycle based on expanding the trade deficit was squeezed out yet again – squeezing that strategy to its pulp.
“Shortcuts are short-lived; and have been already squeezed out, perhaps to the limit, in the post-war years. Both the trade deficit short-cut and the fiscal-deficit shortcut which previously had to be substituted in turn, have now run their course together.
“This leaves the government with facing up to the hard work of finding genuine means of increasing the production and productivity of the economy. Failure to do so will register itself in reduced GDP growth. Attempting to postpone the pain by rolling out more short-cuts will place the economy on an increasingly precarious path to future pain,” the think-tank cautioned. (AR)