16-Nov-2011Guest Column by Dr. Kumar David
Irrespective of whether one agrees or not, programmatically, with a slew of economic signals coming out of Colombo recently, it is not possible to put ones finger on exactly what’s going on and make sense of it. Contradictory moves that confound rational explanation are being played out and since the government is notorious for its lack of transparency, and nothing that Ministers say can be taken at face value, media commentators are reduced to guessing games. Before offering readers a sample of the motives that are being attributed to the government let me summarise the Pandora’s Box of economic moves that the Rajapakse government has opened.
Incompatible policies
- The government made a sharp rightward economic policy turn in close consultation with the IMF starting with the 2010 Budget. The IMF provided a $2.4 billion standby facility released in several tranches in exchange for which the government undertook to reduce the fiscal deficit by raising fuel and electricity prices, phasing out subsidies, raising indirect taxes and better tax collection. A business friendly environment was created, incentives provided and a more market friendly import system put in place. Rajapakse reneged on wage increases he had promised as an election gimmick and wage demands to match inflation were resisted. However the centre piece of the strategy was a focus on foreign investment hopes and pipedreams of making Colombo a regional financial hub. Impetus was given to tourism and plans initiated for numerous overseas hotel chains to set up shop. Ministers spoke of tourist arrivals increasing tenfold within five years. Full Story>>>
