Political uncertainties serious threat to economic stability and development

Considerable political uncertainties threaten economic stabilisation, recovery, and growth. The run-up to the elections this year would no doubt disrupt economic activities. Then the outcome of the elections could pose serious threats to the implementation of economic reforms and needed directions in policy. Even worse, a stalemate in the results could lead to political chaos.

Political stability and a government that can implement the needed economic policies are imperative for the economy’s recovery and development. The economy could be in crisis without a stable government.

Ides of March

It is not the Ides of March that Sri Lankans must be cautious about, but six or seven months after. In the months ahead, the political outcomes of the presidential and parliamentary elections will determine the nation’s economic future. The newly elected president and parliament will determine the policies and course of economic development.

Worst scenario

The worst scenario is the prospect of both elections being a stalemate, with no presidential candidate obtaining a clear majority and no party obtaining a majority. The latter may be resolved by some sort of coalition that may not be conducive to economic policy implementation.

Uncertainties

Ominous is not only the uncertainty of who gets elected but also the likelihood of no one being elected. The possibility of no presidential candidate obtaining the requisite 50 percent of the votes cast is a likely outcome with three frontrunners. This doubt is reinforced by the likelihood of a second preference not being cast for another candidate.

Parliamentary election

There is a strong possibility that the parliamentary elections will not result in any party obtaining the required 113 seats that would be a majority in parliament to form a government. This could, however, be resolved by a coalition of parties. Such coalition governments make the implementation of economic policies ineffective, as seen in the past political and economic history of the country.

Elections

Another scenario is the prospect of the elections not being held this year. Despite assurances from the president that both elections would be held this year, political commentators have been sceptical about the claim.

The implications of such an eventuality are difficult to imagine. Political instability and confusion are the worst scenarios for economic development. The economic consequences of an ungovernable state are unimaginable.

Severe threat

These political uncertainties are a severe threat to economic stability and the pursuit of policies for economic stabilisation and growth.

It is not only the uncertainty of who will be the president and which party will secure a majority but also whether anyone will get the needed 50 percent of the votes cast and whether any party will get a majority that remains uncertain. These uncertainties would impair the country’s economic policies and implementation and could derail the current economic recovery.

JVP

The recent visits of the JVP leaders to India and earlier to China have also added to much speculation about the outcome of the elections and the JVP’s economic policies.

Coalition

There could be political instability if no party secures a majority. What sort of coalition would be formed and what its policies would be are unknown. There is a likelihood of political instability and economic inaction with such a coalition.

Astrologers

Political scientists and economists find the current situation confusing. Astrologers would no doubt have several differing predictions and after-the-event explanations for why and what happened. Do they have any predictions of the country electing a president and party that would ensure political stability?

Administered best

Are we in a situation where we can parody Alexander Pope’s famous lines and say, for presidential power and parliamentary seats, let fools contest, whatever is best administered is best?

Economic significance

What is of paramount significance for the country’s economy is whether there will be a decisive result or a workable coalition with sound economic policies. The next president and parliament must have an economic programme to ensure the development of the fragile Sri Lankan economy.

At this point, there are no clear winners, though there may be certain losers. More significant for the country’s economy is that leading political parties have not presented definite statements of the economic policies they intend to pursue.

It is, of course, a regular feature for governments to not fulfil the promises they make. However, in this instance, will there be a drastic change in policies or a modification of current policies? Hopefully, the party manifestos will spell out the policies rather than string many unimplementable promises.

Clear policies

President Ranil Wickremesinghe’s policies are clear. His government would follow the current policies of fiscal stabilisation, undertake economic reforms, and continue with the IMF’s Extended Fund Facility (EFF).

Puzzle

A puzzling issue is how he would get parliamentary support for these policies. The current political situation is indeed puzzling. The government has been able to implement its policies with the near two-thirds parliamentary strength of the Rajapakse SLPP, but the party has openly said it is not for the current policies of the President.

Furthermore, the leader of the SLPP has said quite openly that his party is ruling the country, although it is not in agreement with President Wickremesinghe’s policies. A strange paradox indeed.

Recapitulation

Despite repeated assurances that the presidential and parliamentary elections would be held this year, there is scepticism among political commentators and the public as to whether these would be held. Furthermore, there is much uncertainty about whether any presidential candidate would secure more than 50 percent of the required votes. This is especially so, as it is difficult to envisage the preferential vote of any of the frontrunners being cast for another leading candidate. This predicament could get even more complicated if there is a candidate from the minority community from the North and East.

Conclusion

The political and economic future of the country depends very much on the political developments in the next nine months.

The political developments of this year, whatever they are, will determine the economic future of the country. Perhaps the worst scenario would be a stalemate and an unworkable political result.

A failure to elect a president could lead to an unpredictable crisis. In any event, what the country needs at this juncture is a national consensus on economic policies, as a workable coalition is most unlikely in our political configuration.

Indications at present are for an uncertain political future. Political instability will undoubtedly result in an economic crisis.

Hopefully, the political scenario sketched here will not come to pass, and a stable government with sound economic policies will emerge.