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The paramount need of the hour is to revive the economy that has been per-forming far below its capacity and potential. The economic recovery has to be achieved by getting the priority sectors of the economy functioning. This is a challenging task owing to the inability to import adequate raw materials and energy that are essential.

Decline in output

All three sectors of the economy are performing at a low capacity due to power and fuel shortages and shortages of essential raw materials.

The aggregate value of goods and services produced in the country (GDP) shrunk in 2021 and is expected to fall by a further 12 percent this year.

Consequences

Consequently, employment and incomes of people have fallen, prices of essentials are rising rapidly, poverty has increased and hunger, malnourishment and starvation are increasing.

All sectors

All three sectors of the economy—agriculture, manufacturing and services—have been adversely affected. Construction, that is a subsector of manufactur-ing, has had a severe setback and employment has been reduced drastically. This decline in construction is expected to continue in the foreseeable future.

Causes      

The underlying causes for this serious deterioration in the economy have been the unavailability of needed raw materials, their high costs, and diminished demand for many consumer items. Power cuts and fuel shortages have disrupted production in all economic activities.

Raw materials

Most production activities have a dependence on imported raw materials for their production. Imported raw materials could constitute as much as 70 per-cent in some industries. Even local crafts have a need for critical raw materials. For example, ornamental fish exports, that have a robust international de-mand, require imported raw materials.

Electricity

All economic activities have had setbacks owing to the unavailability of diesel, gas, kerosene and petrol. Most economic activities have been disrupted by the unavailability of kerosene, gas and petroleum and power cuts. Shortages of imported raw material have hampered many small and medium industries and services.

Agriculture

Food production was severely disrupted by the government’s ban on chemical fertiliser and agrochemicals in 2020. Agriculture that is considered the back-bone of the economy faced the severest setback with the sudden unavailability of chemical fertilisers, agrochemicals and fuel. Since most agriculture is dependent on chemical fertiliser, agrochemicals and machinery, farmers were de-prived of the essential inputs

Self-sufficiency

One of the island’s post-independent achievements was the attainment of self-sufficiency in the stable food, rice. At independence, the nation of about seven million people that imported half its requirements of rice, achieved self-sufficiency for a population of more than 21 million a few years ago. The country also achieved near self-sufficiency in a wide range of food and poultry. This was shattered by the ban on chemical fertiliser and agrochemicals.

Food imports

In 2021/22, food imports were needed to meet the basic requirements of the country’s food needs owing to the drastic reduction in the rice crop and other food crops. This was primarily due to the unavailability of chemical fertilisers and agrochemicals. The non-availability of chemical fertiliser and agrochemi-cals have halved food production and reduced agricultural output.

Tea

Tea, the country’s main agricultural export has suffered a setback that has reduced tea exports. In the first eight months of this year (January to August) tea production fell to 171 million kilogrammes that was the lowest since 1996.The August crop of 18.27 million kilogrammes is the lowest in 28 years. Consequently, export volumes have decreased and export earnings from tea has decreased though export prices have been high.

Manufacturing

In spite of severe constraints, including disruption of electricity, diesel and oth-er fuel, export industries fared reasonably well. This is clear from the export performance of manufactured exports that increased in the first eight months of this year to US$ 8.8 billion. In August manufactured exports reached US$ 1.2 million.

Construction

Construction has been severely curtailed owing to the shortage of cement, iron and other raw materials and their high prices.

According to the Chairman of the Construction Association, the industry has crashed with 90 per cent of construction work countrywide coming to a stand-still resulting in a possible loss of 75 per cent of the workforce.

This is around 900,000 low income workers out of one million including 600,000 direct jobs in building construction that have already lost their employment. (Business Times September 25th).

The construction industry is in dire straits and its revival is only possible after the country’s financial crisis is resolved.

Causes

The root cause of the economic under performance has been the inability to import essential raw materials and energy shortages due to a severe shortage of foreign currency. Assistance from foreign countries and international organisations are needed to resolve this problem immediately.

Constraints

The resuscitation of agricultural production requires adequate chemical fertiliser and agrochemicals. A wide range of imported raw materials are needed for manufactures and the availability of electricity, petrol and diesel is imperative for all sectors.

Reducing constraints

The achievement of an immediate and short-term recovery requires the removal of shortages of raw materials and fuel essential to get agriculture, manufactur-ing and services functioning at a higher capacity.

Resolving the crisis

These constraints are difficult to resolve as the country faces severe shortages of foreign currency for their import. This implies the prioritisation in the importing of raw materials, exploring avenues of obtaining these resources by international assistance and trade links.

Priority

Priority must be given to making available electricity, petroleum, gas and die-sel. Imported raw materials must be given to those activities that have a greater impact on the economy. Agriculture and export industries are undoubtedly priorities. Some economic activities that have a lesser impact on reviving the economy may have to continue impaired by shortages.

Summary and conclusion

Reviving the productive capacity of the economy is the foremost priority. The government must focus on removing the constraints to production that have been responsible for the reduction in output. It must ensure the availability of fertiliser and agrochemicals for agriculture, essential raw materials for industry, kerosene, diesel and petrol and electricity for energy and transport of all economic activities.

Final word

There is a glimmer of hope that the country may receive further financial assistance from friendly countries and international organisations and agencies. It is imperative that these scarce resources are used economically and effectively for the country’s economic recovery.

It is also imperative that the extremely limited foreign exchange that is available is prudently used for a dollar saved is a dollar earned.