“SL should combine expenditure reducing by switching policies”
In an economy where anti-tradable bias has underpinned vulnerability to the present crisis by building up a massive debt overhang, it is necessary for Sri Lanka to combine expenditure reducing policies with policies aimed at expenditure switching from non tradable to tradable production in the economy, Professor Premachandra Athukorala (Pictured) said.
Sri Lanka’s incentive structure throughout the post independence period has favored non-tradable such as construction, utilities and all the other services and subsequently that anti tradable bias or pro non-tradable bias intensified during the last three decades, Prof. Athukorala told the Reform Now conference held under the theme ‘Let’s Reset Sri Lanka, hosted by The Advocata Institute in partnership with FNF Sri Lanka, Jetwing Hotels and the Atlas Institute.
Speaking on anti-tradable bias and how it made the country vulnerable to the present crisis, he stressed the need to restructure the economy to redress non-tradable bias just like Thailand did to make the economy resilient to future crises.
Moreover, Prof. Athukorala emphasised the need to compare Sri Lanka’s own experience under the IMF programme with that of other East Asian countries. He noted that it is important to ascertain reasons as to why Sri Lanka has been a repetitive IMF client unlike other East Asia miracle countries like Thailand.
Speaking of IMF and crisis affected countries in Asia , he said none of the countries in East Asia have gone to the IMF after 1998. “India being a South Asian country had a massive reform in 1991 but India has not gone to the IMF after that.
Moreover, Bangladesh too has not gone to the IMF over the last three decades. The countries even helped Sri Lanka to face the crisis. The real issue is why Sri Lanka has been a repetitive IMF client.
“We have gone to the IMF 16 times and now we are getting ready to sign the 17th agreement. In other words, when you look at financial history in the world, even though geographically we are located in Asia, partly we are an African country. All the repetitive borrowers in the world are in Africa. Our issue is we don’t try to learn lessons from history. Let us hope this trip to Washington is going to be our last trip and no more IMF visits thereafter,” Prof. Athukorala added.