Perhaps for the first time since taking office of the presidency in November 2019, President Gotabaya Rajapaksa has flexed his muscles to take a strong and bold decision following presidential powers vested in him to invoke the provisions of the Public Security Ordinance.
Until then, the President has, by all possible means, attempted to resolve the matter of distribution of rice and sugar in the country amicably with the suppliers who were allegedly holding back their stocks and sell at unreasonably high prices.
The step was taken to ensure the continuous supply of essential food and the presidential move was hailed by the entire citizenry except for sugar importers and rice millers.
It is no secret that the country is facing the most gruesome economic crisis in recent history with the dispossession of Government revenue that directly affects public welfare.
The Opposition was quick to accuse the Government stating that the real objective of the move is to form a dictatorial administration to destroy Democracy. Nevertheless, in his proclamation, President Rajapksa stated that the provisions were invoked to ensure the maintenance of supplies and services essential to public life.
Staggering health expenditure
The outbreak of Covid-9 has led the country to mass havoc inflicting the biggest economic crisis the country has confronted in recent history. The impact is two-fold: loss of foreign exchange due to the existing global economic depression where international trade is impacted and secondly, the intolerable escalation of domestic expenditure due to the health crisis.
The Government has declared that they were compelled to spend over a staggering 240 billion rupees as Covid-19 expenditure since the outbreak. The funds were said to have been spent on day-to-day health expenditure, PCR testing, purchase of vaccines, medicine, and to provide periodical financial and material relief to masses.
The economy contracted to -7 percent last year; the greatest contraction since independence. Hundreds of thousands of jobs were affected making a substantial loss in household income. The loss for the lower middle and middle-class segments was colossal. Out of the eight million-strong private sector workforce, more than three million, who were self-employed were the worst affected. Less affluent people were pushed into poverty with the loss of income due to lockdowns and other health measures.
Despite the difficult situation, the importers of sugar and the rice millers opted to ignore the constant and intense plea from the Government to be reasonable in the pricing of these essential food items.
The media revealed information about the accumulation of stocks although the traders’ response was lukewarm. The Government was forced to act swiftly to resolve the crisis as the general public was getting agitated day after day. Consumers vehemently accused the Government of inaction in the predicament.
Nevertheless, in his proclamation, President Rajapaksa said that the provisions were invoked to ensure the maintenance of supplies and services essential to public life caused by the prevailing Covid-19 pandemic. The timely act instantly presented results as the market prices of both rice and sugar was swiftly dropped to the gazetted prices.
Controlling economic drawbacks
The Government has a daunting task in controlling the further downswing of the economy. Sri Lanka was downgraded to a lower-middle-income country in the World Bank rankings. The poverty levels have raised considerably during the past 18 months due to the income losses of the less affluent and lower-middle categories of mainly self-employed people.
The Consumer Price Index (CPI) has risen to the highest level recording an all-time high value in the year 2021. This means that the household expenditure escalation by several folds, making the disposable income inadequate. Overall, the buying power of the vast majority of the general public is affected due to the prevailing situation in the country.
No doubt that the Government is providing the optimum possible relief measures to the needy people, particularly during lockdowns. However, the pertinent question is the amounts given as allowances are adequate to survive? It is not enough. Therefore, helping them to carry on with their day-to-day living efforts is more important than imposing lockdowns.
This is not anyway saying that lockdowns are not required if it’s a precautionary measure recommended by the health authorities. It is simply that the people themselves must be aware of the threat of the pandemic and strictly adhere to laid down health guidelines. Inculcating self-discipline is the key solution to the situation.
Currently, however, the public seems to be reacting with a better adaptation to safety measures, compared to all previous occasions, perhaps due to the constant media reports on serious Covid-19 cases and deaths. Fear is a natural, powerful, and primitive emotion and the public seems to be acting on that.
The cash crunch
The Government not only is experiencing a severe shortage of foreign reserves but also a cash crunch to carry on public welfare tasks. They have not been able to achieve the intended revenue for the year 2021. According to the Minister of Finance Basil Rajapaksa, the revenue loss for the Government during the past eighteen months is a staggering 1500 billion.
However, some of the controlling actions by the Government came under fire by the economists. For example tax reduction given on sugar imports to reduce retail prices was not successful as importers never reduced wholesale price even after the tax benefit. Although the intention of the Government was sincere, most of the importers were having profit motives than social responsibility.
In a move to confront the ongoing financial crisis, the Government has initiated actions to reduce non-essential expenditure by all state institutions throughout the next year. The finance ministry has already issued instructions to ministry secretaries to include only essential and productive expenses in their estimates for the next year.
Contradictory statements
The contradictory statements made arbitrarily by politicians and some of the Government officials often cause irreparable damage to the integrity of the Government. Most often, the politicians appear in press briefings do not possess in-depth knowledge on monetary issues or economic matters. Also, the credibility of some of the Ministers and Parliamentarians who constantly appear in print and electronic media is questionable to the general public. The citizenry, in general, trusts officials much more than the politicians. Hence, a better public response can be achieved if the briefings are done through professionals on critical issues.
The recent behaviour of the virus, particularly with the surfacing of the ‘Delta variant’ that has invaded the entire country with a faster spread rate has raised concerns. The ongoing cycle of opening and closing the general activities has created uncertainty among the masses.
Priority of the Government
According to the experts, the immediate priority of the Government is to focus on sustained management of the ongoing pandemic and its effects on society and the economy in general. The Government, up to this point has successfully confronted the challenge with the assistance of the health authorities, military establishment, public service, and the general public. Time and again controversial issues surfaced that are natural when facing a challenge of this magnitude.
Due to the contradictory statements by various health-related trade unions and individuals, the general public was led to a state of confusion frequently. Some of these statements were sincere and genuine whilst some were politically motivated. Regrettably, the response of the Government was either lukewarm or came to light too late.
Vaccination drive
The vaccination program, the best currently available remedy as per health experts, confirmed by the World Health Organization (WHO) is going on extremely successfully. Continuous and constant disruptions by political opponents were ignored. Sri Lanka currently is among the best-vaccinated countries with over ten million to-dose vaccinations that are over 47 percent of the total population. According to predictions and action plans, by mid-October, the entire population between 20 years onwards will be vaccinated.
Despite all challenges posed by the pandemic and the pressure from opposition political parties, the Government is trying to improve the general economic conditions by encouraging the private sector, particularly exporters.
The expectation is that the global demand will stabilise with the vaccinations around the world where export-related activities will continue to improve. The country expects a unified effort by all stakeholders including political parties, private sector, the public sector, and the rest of the country.