Sri Lanka will adopt policies geared towards a “social market economy”, to achieve high growth, increased export revenue and Foreign Direct Investment, President Ranil Wickremesinghe said on Monday, presenting his first annual Budget since assuming charge in July.
The Sri Lankan economy plunged into its worst ever crisis this year. As the island’s acute Balance of Payments problem rapidly drained its foreign reserves, the government opted to default on its $51-billion debt in April. Through the following months, citizens endured severe shortages of essentials, including food items, fuel, and medicines. Sri Lanka witnessed an unprecedented people’s uprising that ousted former President Gotabaya Rajapaksa and his government.
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In September, Sri Lanka entered into a staff level agreement with the International Monetary Fund (IMF) for a $2.9 billion package, contingent on Sri Lanka successfully restructuring its loans with its diverse creditors. “Negotiations with the International Monetary Fund are currently in progress. We are in dialogue with India and China on debt restructuring. We are confident that these discussions will lead to positive outcomes,” President Wickremesinghe told Parliament in his Budget Speech.
Regardless, Sri Lanka’s path to recovery will prove challenging. The World Bank has estimated that the country’s economy will contract by 9.2% this year, and by a further 4.2 % in 2023. It has also pointed to urban poverty tripling since 2021. A recent survey by the World Food Programme found a third of Sri Lankan households to be food insecure, and 68% of the country’s population resorting to food-coping strategies.
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Acknowledging an “increase in acute malnutrition” among children under 5, Mr. Wickremesinghe announced LKR 500 million (about ₹11 crore) to strengthen nutrition supplement programmes. The government aimed to build a “new economy” going beyond stabilising it, and achieve high economic growth of upto 8%, annual growth of $3 billion from new exports, and over $3 billion in FDIs in the next decade, besides increasing international trade as a percentage of GDP by over 100%, he said.
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Anushka Wijesinha, a Colombo-based economist and co-founder of Centre for a Smart Future, a public policy think tank, said while proposals and overall sentiment directed towards reorienting the economy towards greater international trade and investment was encouraging, timely and effective implementation is key. “Notably, proposals hinting at strengthening public financial management are encouraging, as a runaway Budget, poor fiscal controls, large state sector have continued to be the problem in our economy and contributed to macroeconomic strains,” he told The Hindu.
The Feminist Collective for Economic Justice, an island-wide network of activists and researchers, termed the Budget “incredibly callous and heartless”, reflecting a “serious disconnect from reality”. “There is no acknowledgement of the burden of the crisis on women,” it said, pointing to women workers whose labour brings precious foreign exchange to the country. “The failure to consider universal social protection schemes is a stark gap… The Budget should have prioritised a food distribution system and a universal school meal programme,” the Collective said in a statement.