Addressing the current account deficit which has been widening must be given top priority if the country is to get out of the economic mess, a senior economist of the Ruhuna University told the Sunday Observer last week.
Senior Lecturer in Economics, Department of Economics, University of Ruhuna, Dr. Nandasiri Keembiyahetti said immediate attention should be paid to reduce the current account deficit in the Balance of Payments (BOP) to address the economic crisis.
He said for this on the one hand promoting tourist arrivals in the forthcoming season, facilitating agriculture and export-oriented SMEs is crucial while on the other, non-essential imports such as private motor vehicles, air conditioners, luxury household furniture and toys must be curtailed. Imports of vegetables, sea fish, liquor (except for tourist hotels), fruits such as oranges and apples must be totally prohibited and home-grown agriculture must be encouraged to minimise food imports such as cereal, potatoes, and big onions.
Local producers must be encouraged to produce import substitutes such as fishery products, dried fish, Maldive fish, vegetable, fruits and cereal. To minimise fuel consumption, encouraging the use of public transport, top roof solar power, using railways to transport goods is recommended, Dr. Keembiyahetti said. While negotiations for international debt restructuring are accelerated, short-term credit facilities, obtained preferably from multilateral agencies, will be necessary to overcome the shortages of essentials, such as medicine, clinical consumables, fuel and LP gas, Dr.Keembiyahetti said.
Imports of electric motor vehicles can be permitte subject to three conditions (1) dollar for the shipment should not be claimed from domestic banks, (2) the import tax must be paid in dollars by the importer, (3) importer must have grid connected solar power system.
The Government fiscal deficit must be reduced by increasing direct tax income, re-introducing PAYE tax and eliminating tax concessions. Loss making state enterprises, except those providing public utilities such as electricity and water must be restructured.
Government subsidies must be rationalised in such a way that only needy people get access to it. For example, free school uniforms for all students are not necessary. While free health for all is continued, it should be made compulsory for every employee to obtain life insurance that includes private hospital care, so that the burden on government hospitals could be minimised. He said universities must be no more limited to local students. Education, health and hospitality services must be improved to cater to foreigners and the tri-forces can be used to provide fee-based training on aviation and naval operations for foreigners.
Sri Lanka must search for unharnessed mineral potentials such as graphite, phosphate, gem, and silica. Instead of exporting such materials in the form of raw materials, they should be converted to value-added products gaining higher prices in the export market. Even for agricultural export, value addition is a must. For example, instead of exporting cinnamon in bundles it could be exported in the form of essential oil, perfume and medicine. Profitability of big plantation companies is declining compared to smallholders. I believe such estates could be made more profitable by giving the ownership of a small plot of land to estate workers and elevating their status to the level of tea/rubber smallholders.
When it comes to fisheries, instead of small boats, fisheries cooperatives must be encouraged to invest in big multi-day boats where value added products, such as tinned fish can be made while fishing in the sea. The efficiency of the distribution channels of food produced within the country must be enhanced and post-harvest waste must be minimised, Dr. Keembiyahetti said.