Highlights of the SJB’s economic recovery blueprint
Here are some highlights of the Samagi Jana Balavegaya’s (SJB) economic recovery plan revealed last week: 1. Transparency and Accountability
Administration must introduce and implement strong anti-corruption legislation as one of its first actions. This should include reenacting the Independent Commission to Investigate Bribery and Corruption and implementing the United Nations Convention Against Corruption; globally accepted rules and punishments for corrupt practices.
Strengthen the legal framework to expedite the Stolen Asset Recovery Initiative (StAR); Legislate the requirement to make public, the assets and liability declarations of elected representatives and public officials; Create an independent public prosecutor’s office to legally pursue corrupt persons. The independent public prosecution office will have no conflict of interest in pursuing alleged-corrupt personnel, as opposed to the Attorney General.
Stabilise the Economy 2. Debt Crisis Management
Sri Lanka’s urgent priority is to manage the sovereign debt crisis by obtaining critical bridge financing, as well as continuing to engage with the IMF, and expediting the debtrestructuring process with creditor assurances. Concurrently maintaining the stability of the financial system is of utmost importance.
3. Monetary and Exchange Rate Policy
It is essential that the government acts to stabilise the monetary environment, using measures including exchange rate and interest rate adjustment, and monetary policy reforms.
4. Revenue Consolidation
Fiscal sector reform is fundamentally important: the budget deficit must be reduced by both widening the tax base and restraining spending. In determining tax rates, tax slabs, and tax-free allowances, the government needs to account for inflationary impact over the last two years and consider the long-term social implications of tax changes. Furthermore, tax revisions must be accompanied with measures ensuring transparency and accountability regarding how money is spent. Efficiency in tax administration must also be improved via pay-asyou-earn (PAYE) and withholding mechanisms, which were recently reintroduced along with revisions to VAT, corporate and personal income tax, and turnover tax. Unjustifiable tax exemptions should be eliminated, and the tax net widened to bring in millions who are supposed to pay but do not pay taxes. The Fiscal Management (Responsibility) Act of 2003 must be strictly enforced with revised targets and thresholds. Nontax revenue should also be increased systematically.
5. Expenditure Control
The other aspect of fiscal reform is rationalising public expenditure, including SOE (state-owned enterprise) reform. Spending restraint ensures fiscal space for social safety nets and development spending programmes, to facilitate sustainable and inclusive growth.
6. Trade, Industry, Agriculture, and Services Promotion
While we stabilise the economy, it is critical to strengthen it by promoting trade, industry, agriculture, and services. This involves unshackling the markets from unnecessary tariffs, improving competitiveness, promoting exports and investment, integrating with Global Manufacturing Value Chains (GMVC) or Global Production Networks (GPNs), and enhancing productivity. The terms GMVC and GPN are used interchangeably in this document.
7. Public Sector Management and Digitalisation
While we stabilise the economy, it is critical to strengthen it by promoting trade, industry, agriculture, and services.
8. Energy and Utilities Reform
Energy pricing must be revised urgently to avoid damage to the fiscal and banking system. While petrol and diesel prices have been increased, the transparent, automatic cost-reflective pricing mechanism must be reintroduced for fuel and implemented for LP gas. A fuel/LP gas price stabilisation fund should be created to smooth price adjustments for the consumer. Since the current energy crisis is going to be protracted, meaningful demand management is crucial. This requires some form of smart metering and pre-paid metering to be initiated by the government, as this allows more sophisticated cost-reflective pricing mechanisms. Incentives could also be provided for night-time off-peak electricity usage. Connecting Sri Lanka’s grid with South India is another key to demand management. Using excess power to pump water back into reservoirs to increase hydro power. Using solar power is also an innovative option. Beyond this, accelerating renewable energy projects is critical. Private sector investment into solar and wind power is at a standstill due to legal impediments and lack of clarity on tariffs. This must be addressed.
Corruption in energy and utilities procurements (in power purchase agreements for electricity, or bulk procurement for fuel or LP gas) is a major problem that needs urgent and comprehensive attention, as is the inefficiency of these state-owned utilities.
9. Factor Market Reform
The labour force should be prepared through education and training to take advantage of the emerging dynamic economy, rather than being denied opportunities for growth and social mobility. The current Technical and Vocational Education and Training (TVET) framework should be drastically reformed to align the curriculum with GPN-related industry demand, keep up with technological innovation, modernise management practices, and establish private and public partnerships. English language and IT skills should be promoted at all levels of education, recognising their importance to gain quality employment. Using technology can substantially improve the coverage and cost effectiveness of skills development programmes.
Flexible and female-friendly work practices should be promoted to encourage their entry to the workforce.
Labour protection should take the form of unemployment insurance rather than archaic laws.
Ensure Equity 10. Stronger Social Safety Nets
There is an urgent need to eliminate inefficiencies in the social protection system, improve its coverage and targeting, and increase the perfamily benefit. Establishment of a central system under the Welfare Benefits Board (WBB) should be fast tracked to provide cash transfers directly to beneficiaries’ bank accounts, and structured to eliminate selection bias and corruption. To facilitate this, a Unique ID like India’s Aadhaar should be designed and implemented with technical and financial assistance.
While protecting the poor and vulnerable in a shrinking economy, social protection schemes should also provide incentives for recipients to engage in income generation. To facilitate this, the government in collaboration with the private sector should support the recipients of welfare benefits to acquire skills and qualifications that will let them obtain employment. This approach to social protection aims to support people in lifting themselves out of poverty by gaining employment in an economy that is going through organic job creation.