Sri Lanka has fallen into an economic abyss deep enough that not seen the bottom. A humanitarian tragedy has arrived at the doorstep. Businessmen are shocked by this situation.
A group of Sri Lankan businessmen has given a series of proposals to President Ranil regarding the recovery of the country. It was given during the 76th anniversary of the UNP.
The report has been prepared for them by Data2Biz, a well-known consulting company in the region. The summary of their report is as follows
The central bank has taken 2 serious decisions as a solution to Sri Lanka’s economic crisis.
1. Raising interest rates
2. Restriction of imports
Raising interest rates
Through this initiative, the Central bank expects to reduce the demand to buy goods and services and direct that money into bank savings. otherwise, It is planning to increase bank savings by paying more interest. That is discouraging people from buying petrol, milk, electronics, etc., and encourages that money to deposit into bank savings. (The reverse action of printing money.) This theory calls `Cool off the economy”.
But this is not suited for Srilanka. Currently, the interest rate for bank deposits is 17%. But inflation is 58%. That means if you put money in the bank, the profit is 17%, and the loss due to inflation is 58%. In such a situation, people do not deposit money in the bank. (Buying a vehicle, electronics, etc. is profitable .)
Also, Increasing the interest rate will exacerbate the crisis. Currently, banks are giving loans at a high-interest rate of 28%. Businesses are not started by taking loans at high interest. Also, by raising the interest rate, the overdraft (OD) facilities obtained from the bank will have to pay high interest. It is a cause negative impact on business. Lending is the main financial tool by that banks make profits. When interest rates rise, people borrow less. Such a scenario causes a negative impact on the banking system.
Restriction of imports
There are three categories of imports in Sri Lanka. These are consumer goods, intermediate goods, and investment goods. The largest portion is intermediate goods, which is 57%. Textiles and textile accessories, leather, metals, chemicals, and fertilizers are some examples. This category is an input for production. Imposing restrictions on these goods will cause the country’s production to decrease. By imposing restrictions on these goods, a large number of businesses were closed down. On the other hand, the export income decreased
Other fiscal policies
So far, government institutions have defaulted on loans taken from commercial banks. It is a dangerous situation. Millions of foreign exchange have been lost due to the sudden purchase of essential goods from overseas. The inability to maintain the balance between India and China has resulted in lost foreign investment and business opportunities
Fit and proper Person
Therefore, the Ministry of Finance should be handed over to a competent person who is not confined to theories and handles the economy with practical methods.Data2Biz has named 4 people as fit and proper to handle the economy.
4. Abbas Isufuli
Especially when a law is imposed for the development of one sector of the economy, it affects the collapse of another sector. These can only be analyzed through experience. It cannot be done with theories. Hence today’s country needs someone who has a thorough knowledge of both practical and theoretical.