COL war amidst peace talks

Sharply rising prices of essential consumer goods especially after November last year is becoming an embarrassment to the government.

Price hikes in gas, wheat flour and bread are the most significant. The promise to bring down consumer prices has once again proved hollow and despite assurances that the ceasefire and lower defence costs will bring a never-before peace dividend, living costs have soared.

Economists argue that the fundamental weaknesses in the economy, such as dependence on imports, huge debt burden and inadequate savings and investment, have a crucial bearing on price hikes.

The opposition is rubbing its hands with glee and preparing to launch a "pots and pans" campaign on February 18 to protest over rising costs. People are being urged to step out and make a noise with whatever they can. This is to be followed by a general strike. The government is lucky the opposition is ineffective that it cannot mobilise the people and mount the kind of protest that has paralysed Venezuela for instance. But remember the JVP together with Opposition leader Mahinda Rajapakse's doggedness as a street campaigner and his famous "Jana Gosha" campaigns in the late 1980s could make inroads into southern support for the peace process.

If a war breaks out in West Asia there would be serious repercussions on the Sri Lankan economy like rising oil prices and foreign exchange losses if expatriate workers are forced to return home. Jitters over the war has already reduced demand and prices of Arabian-favoured tea varieties from here.

The Central Bank projects an economic growth of over five per cent this year. This will not be an easy task while fundamental weaknesses in the economy and political uncertainties prevail.

It would indeed be tragic if success on the peace front is jeopardised by incompetent economic management for it is unlikely that people in the south would support a peace deal if they feel the government won't tackle the cost of living issue and ensure provision of basic services which are taken for granted elsewhere.

It s not surprising that economic issues are on the backburner when the two key figures driving the peace process are also responsible for economic reforms and raising jobs (and expectations). Ministers G.L. Peiris and Milinda Moragoda are constantly abroad on the peace front, meeting LTTE leaders and the international community.

Their hands-on approach in the peace process is not there when it comes to economic issues. Questions are being raised by the man-on-the-street and even the business community over the need for the peace process to be driven by a ministry and a minister assigned only this responsibility.

The duo may argue that they are effectively tackling their assigned tasks in equal proportion. But the hands-on approach is necessary in both, not only in peace. For example, Minister Peiris spends a lot of time at post-cabinet media briefings talking about peace; less about industry and simple things like job creation, etc. Perceptions are also important. Even the media keeps following the tracks of the two ministers on the peace front, not their other responsibilities.

On the other hand an already bloated Cabinet keeps getting bigger. The instability of our political situation and the still fragile peace process are significant uncertainties that could result in severe setbacks to economic growth. The plain truth is that the economy is still weak. Without remedial action to fix these weaknesses, we cannot expect a significant and sustained economic recovery.



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