The Sunday Times Economic Analysis

The Sunday Times Economic Analysis By the Economist

56 years after Independence:
Economy at the crossroads
Sri Lanka's economy is at the crossroads. There has been perhaps no other time when the future of the economy was as uncertain and confused as at this time of celebrating the 56th anniversary of independence. Whatever economic and social achievements the country can be proud of during its 56 years after regaining independence, the current predicament is one of anxiety.

Anxieties manifest from many different aspects of the current situation. Most notably they stem from the political muddle, the inconsistencies and contradictions in the economic policies of the PA-JVP Alliance, the uncertainty regarding the future of the peace process and the dislocation of vital sectors of the economy by strikes. All these are crippling the economy.

Sri Lanka has been cited as one of the few countries that were able to achieve exemplary social indicators for a poor country. High rates of literacy, curtailment of the death rate, reduction in infant and child mortality and the low rates of maternal mortality are among those proud achievements.

Life expectancy that was around 55 years at independence had risen to 72 years by the end of the 20th Century. Literacy had reached over 90 per cent and the gender differences in both literacy and school enrolment had narrowed, unlike the situation in the neighbouring countries.

The tragedy is that these achievements are being threatened by the persistence of poverty and inferior basic services for the poor. Public health services have been deteriorating and are at the very depths at the present time. Shortages of doctors and medical services and drugs have been compounded by the continuing strikes of medical personnel of one category or another. There are genuine fears that mortality rates may rise with morbidity patterns disclosing effects of malnutrition, poor housing conditions and insufficient health services for the poorer sections of the population.

The incidence of malnutrition among school children is increasing and about 25 per cent of school children are estimated to be chronically malnourished. The improvements in health indicators may well be reversed unless public health services are improved.

Teaching in government schools has deteriorated to such an extent that private tuition has become the vehicle of learning. Consequently free education has lost its relevance for the poor. There are concerns that the tardy progress in literacy in the last few decades may lead to a reversal in literacy levels. Poverty may reduce school enrolment. Transport services are inadequate with buses plying the roads reducing in recent years. Train services are inadequate and sometimes even dangerous. Strikes among bus operators, as well as railway workers, have not merely denied poor people of commuting facilities, but economic actives have been disrupted and labour productivity adversely affected.Several of the key economic indicators too are frightening. At the time of independence, there was hardly any foreign debt and defence costs were a fraction of one per cent of GDP. Today the public debt has increased above the value of GDP. Debt servicing costs are the highest single expenditure of the government absorbing a high proportion of revenue.

Defence expenditure is absorbing a large chunk and exceeding the expenditure for health and education put together. The trade balance continues to be in deficit and the country's reliance on foreign aid and loans is increasing.

Forty-five percent of households are estimated to be below the poverty line of two dollars a day. All these are sad reflections written in the background of the sounds of a 21-gun salute and marching soldiers displaying military hardware. The question pops up. Do we have much to celebrate?

Even though the current conditions are bad there could be reason to be happy, if there are prospects of an improvement. Instead what we are witnessing is confusion in the polity, systemic failure in the economy and uncertainty about the continuity in economic policies.

Political instability and confrontational politics are eroding the capacity to govern and threatening a halt in the vital peace process. In these conditions is there a future for the Sri Lankan economy?

Let us hope that the dark clouds in the political skies would pass off and an understanding is reached to ensure political stability, resumption of the peace process and continuity in economic policies. Let us will that the economy regains its momentum so that at this time next year we could witness political stability, peace, law and order and higher economic growth.

Back to Columns