Sri Lanka leader proposes plan to rebuild bankrupt economy by 2048

COLOMBO: Sri Lanka’s president announced on Wednesday a national policy to rebuild the bankrupt economy by 2048, at a time when rampant food inflation and chronic shortages are making daily life a battle for millions of the country’s citizens.

The south Asian nation is bankrupt and in April suspended repayments on its $51 billion foreign loans, as the inflation rate continued to soar. It surged to a record 60.8 percent in July, with a 90.9 percent climb in food inflation, according to government data.

President Ranil Wickremesinghe, 73, announced the plan in his first policy statement since taking office last month, after his predecessor, Gotabaya Rajapaksa, fled the country and then quit following mass protests over the worst economic meltdown since the 22 million-populated nation’s independence from Britain 1948.

As he announced his Cabinet’s economic policy, Wickremesinghe said Sri Lanka was facing an “unprecedented situation” unlike anything in recent history and was “in great danger.”

“We have examined this situation in depth. As a remedy, we are preparing a national economic policy for the next 25 years,” he told parliament. “If we build the country, the nation, and the economy through the national economic policy, we would be able to become a fully developed country by the year 2048, when we celebrate the 100th anniversary of independence.”

The economic policy, he said, “lays the foundation for a social market economic system, securing development for the poor and underprivileged groups and encouraging small and medium entrepreneurs.

“Our aim is to create a surplus in the primary budget by the year 2025. Our effort is to raise the economic growth rate to a stable stage, in order to establish a solid economic foundation by the year 2026. Currently, public debt is 140 percent of gross domestic product. Our plan is to bring this down to less than 100 percent by the year 2032.”

The plan did not focus on immediate relief to millions of people who since March have been taking to the streets to protest daily power cuts and shortages of basic commodities such as fuel, food, and medicines, as the country had run out of foreign currency reserves, leaving it unable to pay for imports.

Murtaza Jafferjee, economist and chairman of the Colombo-based think tank Advocata Institute, described the president’s 25-year policy as more of an “aspirational plan.”

“The need of the hour is macro stabilization but what he is implying is that we should not look only for short-term fixes but fundamentally change the way the economy works so that it can catalyze a virtual cycle of growth,” Jafferjee told Arab News.

“He did say that they will try to address the most acute shortages but warned not to expect quick results, for example, the availability of fuel. It will take a few years before we get back to normalcy, but things will slowly improve.”

S.A. Azeez, ACMA chartered accountant and management consultant, told Arab News that he was skeptical as to whether any immediate relief would be seen soon.

“I don’t think that people will get any immediate relief with such plans. In the short-term, implementation of such plans will be painful though long term would be beneficial to the country,” he said, adding that any country should have a long-term economic policy framework.

“Though late, it is good even now to initiate such a policy framework and long-term economic plans. The implementations may be very challenging in the present context since the need of the hour is providing necessities to society and keep the economy running.”

The government has been in bailout talks with the International Monetary Fund but has so far reached no agreement as it is still setting out its debt restructuring plan. Wickremesinghe said the plan would be submitted to the IMF “in the near future” with negotiation scheduled for this month.