Relief package a flash in the pan

Dr. Harsha de Silva takes on the government’s proposed assistance strategy

In a scathing attack on the government’s economic policy, Economist Dr. Harsha de Silva strongly criticised the relief package and resolutely declared that it did not answer any of the crucial demands of the economy.

Speaking at the CMA International Business Management Seminar, Dr. de Silva launched a tirade against the government and questioned how a relief package that was funded by a 5%-15% reduction in Ministry expenditure and siphoning off of profits from key public institutions such as the Ceylon Petroleum Corporation (CPC) and Ceylon Electricity Board (CEB) would assist the economy. He also stressed that instead of being put into a “revenue plan that had no credibility” the funds should have been streamlined and unnecessary expenditures such as Mihin Lanka scrapped to give more impetus to the relief package.

Calling the revenue plan a “sick joke” he queried as to how availability of dollar liquidity and remittances could be improved, if the rupee was not allowed to depreciate. He also pointed out that the US$ 3 billion target for remittances for 2008 had not been met and with the construction industry suffering in the Middle East, how the prognosis would be any better for this year. Vehemently noting that capital flows to the government would receive the biggest hit due to the global financial crisis, he cited the example of the Central Bank being unable to raise US$ 300 million as part of the second entry into the bond market that was scheduled last year.

“I do not know whether that plan has been scrapped by the government, but it underlines the dangerous path that the government is taking. Not only are they not paying attention to this crisis, they are also being dismissed as irrelevant. The relief package in essence had totally ignored the main problem of the exporters and has completely failed to give them a significant form of relief. The Central Bank is printing money in what is called “sterilised intervention” and that will have an even worse effect on the overall economy,” he said.

De Silva emphasised on the importance of focusing on export let growth and warned that if the Central Bank and the government did not take action soon the global financial crisis would leave Sri Lanka in dire straits.