The Sri Lankan government has made bold economic reforms as it tries to fulfill the terms of the IMF for extending assistance to the trouble-torn nation. The government has embarked upon a three-pronged strategy of stabilization, recovery and growth, reports Priti Prakash
What’s the relation between a casino and a nation’s economy? Well, it mirrors the nation’s economic health too! Surprised?!
As I entered the Bally’s casino, Sri Lanka’s largest and most luxurious one located in the heart of Colombo, it had a story to tell. Out of 100 gaming tables it has, almost half had people betting. It’s the place where money pours in anything from 5 to 9 digits, both won and lost, at the blink of an eye. The casino caters all luxury hotels in close proximity and takes care of its visitors by offering a free pick and drop in Mercs & BMWs. It also offers complimentary coupons to high-end travellers entering SL. Bollywood stars are a common sight, not for gaming but as celebrity entertainers, and mind you they don’t come cheap. Interestingly after the economic crisis in 2022, Bally’s Casino owner was tasked with turning the nation’s flailing economy around in his own unique way.
The signs of resurgence are showing. With India extending a lifeline with a $4 billion credit line and a nudge to the IMF, the country managed a loan of $US 2.9 billion and ADB $350 million. Now, the island country seems confident of its resilience. TukTuks are back on the street though with much higher fares as compared to pre-2021 period. Fuel is costly as the government has increased taxes. Malls have opened albeit with much less crowd compared to last time I visited the island country in 2018 when the famous House of Fashion was choc o bloc with people on a weekend. Tourism has started picking up, hotel occupancy is catching up too (remember Sri Lanka is an all-year-round tourist destination), Travel industry wants to make the most of every single traveller. The government says inflation is under control; fuel, food and medicines are easily available. The construction industry is what the government is pinning its hopes on as it waits for it to start booming again, which will spur growth.
As I go into an Ayurveda products selling shop, I find its walls are stacked with oils, spices and herbal medicines but buyers are just trickling in, mostly tourists. Ayurveda is one of SL’s main exports along with tea and textiles.
What people say
People of Sri Lanka seemed more than thankful for the help India has provided when the small country was in the throes of bankruptcy and political unrest. SL Speaker Abeywardhane, at the recently held 67th Travel Agents Association of India (TAAI) Convention said, “If India had not come in, there would have been a bloodbath on the streets of Colombo.”
Common people too are aware of the help rendered by India. Tour guide Nalinda John can’t thank India enough. ‘It is a great solidarity, our big brother India stood by us throughout the crisis. India came forward with infrastructure reconstruction after the catastrophic tsunami in 2004, in 2022 and 2023 up to June the highest numbers of tourists recorded were from India. This is a great gesture of friendship from India.’
The past and the present
It was just last year that people were on the streets and all over the Presidential palace that stands on the banks of the Port City being constructed by China with an estimated construction cost of $392 million. It is said that the Chinese brought prisoners from China to build roads, highways, ports and other infrastructure instead of roping in locals who would have garnered income for them. Instead, they paid the Chinese prisoners who would take the money back home. A typical Chinese model was replicated in Pakistan too. The Port City now stands beautifully made with a grassy bulwark between the harbor and the main arterial road lined up with skyscraping five star hotels standing tall just across. China has funded most of the highways and has invested in a terminal. China accounted for about 10% of Sri Lanka’s US$35 billion foreign debt as of April 2021. It is the largest investor in Sri Lanka today, with funding and investment of nearly $15 billion.
Sri Lankan people endured 13 hrs of power cut even as they stood for 5 days in queue for fuel last year. There was no cooking gas available as people in Colombo in posh apartments cooked with firewood. Food inflation went up to 95% , general inflation touched 80%. ‘Had it gone a little beyond that, we would have gone the path of Lebanon, Venezuela, Argentina or Zimbabwe. That would have destroyed our social fabric. $3.9 billion worth of huge credit line at a time when a country is declared bankrupt, was a huge help,’ acknowledged Foreign Minister of Sri Lanka MUM Ali Sabry.
He further informs, ‘Now, one year down the line, there are no more power cuts, we have plenty of fertilizers, good harvest during the last season, foreigners are coming in, tourism has revived, rupee has depreciated about 19% this year. Inflation is totally under control having come down to 12% and should further come down to 6-7% by the end of this month’.
Pinning hope on tourism
‘Give us 10% of your tourists and we are sorted,’ says Sri Lanka’s Tourism Minister Haren Fernando at the 67th TAAI Convention in Colombo. Tourism being the mainstay of Sri Lanka bringing in the much needed forex, is the government’s main focus sector. India’s travel industry has pledged to handhol Sri Lanka back to its previous place on the tourism map. With just one flight everyday from Chennai and Jaffna other than from New Delhi to Colombo, more connectivity between India and SL will definitely boost tourism. Ferry services and cruise tourism along with privatization of SL Airlines, their national carrier, are being worked out after the visit of SL President Wickremesinghe to New Delhi recently.
With Dr Manmohan Singh, the former Prime Minister of India as the role model of public services and economic reforms in the late 90s, Wickremesinghe government in Sri Lanka has taken some bold steps, pushed by IMF aid terms. Cost Reflective Pricing for electricity, water, fuel, gas, and food has been started for the state so that it does not make losses. A three-pronged strategy of stabilization, recovery and growth has been charted. Investment is invited from countries. Some plans in petroleum, refinery, renewable energy, port development and tourism are already in the pipeline. A few big Indian companies have come in, particularly on Colombo port. Big projects on wind power are also on the anvil. Sri Lanka is in need of FDI as capital is needed to start new projects.
Measures have been taken to improve revenue in terms of taxation, reduce expenses, and decouple business from the government. The government is undertaking reform of state owned enterprises by privatizing them and denying subsidies on popular policies while working on digitalization and direct transfer of money.
Opposition counters govt claim
For Sri Lanka, the main source of foreign revenue is from overseas remittances which is almost $2.3 million. Apparel manufacturers export their products to Europe and North America. Tea industry, which is the third highest income source from foreign countries, has had no big impact on geo-political or internal conditions. Hospitality industry almost collapsed during the pandemic, but gradually it was nursed back to health and is booming now. Share market prices are moving forward slowly.
However, the opposition leader and National Organizer & Member Political Bureau of People’s Liberation Front of Sri Lanka and a 4-times MP Bimal Rathnayake has something different to say. ‘There are many facts to prove that the economy is going in a negative direction. Contraction of the economy in 2023 Q1 was 11.5%. Fuel consumption is around 35%, which means a great reduction of economic activities. 500,000 formal jobs have been lost. Although food inflation shown by the government is 26% but reality is that all poor and middle class families now spend around 50%-60% of their income on food. Fuel prices have gone up by 300% within eight months and electricity tariff has seen 250-300% jump. Transport bus fares have gone through the roof with a 300-400% hike within the last months. Now they are reducing some of them by 10%.’
As Sri Lanka is under an interim government after Rajapakse fled the country with the country slowly straddling towards normalcy, the question of elections is a matter that is on everyones’ mind. According to Foreign Minister Sabry elections will be held on time i.e next year. But the opposition is wary about it. MP Bimal Rathanayake says elections are not a possibility.
