Where Is The Promised Safety Net For The Poor?

 

Where Is The Promised Safety Net For The Poor?

19 December 2023 Daily Mirror lk

The country is totally relying on the International Monetary Fund (IMF) led programme for recovery from the unprecedented economic crisis that was created by the leaders who for the past several decades promised to the people a paradise on earth. Despite the successful recovery being still in the balance, the economic reforms that are being implemented under the IMF programme have already started to bite especially the poor and the vulnerable.

Those who paid between Rs. 1,000 and Rs. 1,500 monthly for their electricity usage in the early months of last year are now paying an amount between Rs. 6,000 and Rs. 7,000 under the cost recovery pricing formula of the IMF, while the water tariff levied from most of the poor people has risen from about Rs. 600 to Rs. 3,000. Power, water and fuel prices have affected the prices of all other commodities and services, hiking them at least by threefold whereas the income of a majority of the population has been static or dropped drastically during the period, besides the real value of money also having dropped significantly. 

The Value Added Tax (VAT) Amendment Bill which is meant for the increase of tax and the removal of tax exemptions for certain items was passed a few days ago and is expected to have a huge impact on the prices of many essential goods and services. It is expected to affect the electricity tariff and fuel prices as well and would have a spiraling negative effect on the lives of the people, especially the poor. They are destined to further suffer for no fault of their own, but due to the economic mismanagement by those who were elected by them to rule the country. 

From the beginning, the IMF reiterated this situation calling it “brutal” while proposing the need to have what it called a social safety net to protect the poor and the vulnerable from the effects of the reforms that are being implemented under its programme. One can observe this in the statement made by the IMF staff members soon after they inked the initial agreement with the Sri Lankan officials on the programme on September 1 last year. They underscored the need for a protective mechanism for the low income groups in the country who they knew would bear the brunt of the economic reforms on the way to recovery. They say that the objectives of the IMF-supported programme will continue to focus on restoring macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, among others. 

In spite of the IMF officials and the Sri Lankan leaders often offering assurances on the so-called social safety net for the poor and vulnerable, the situation on the ground is a far cry from what the affected communities expected. The only concession that was in place for the people most affected by the economic crisis as well as the reforms under the IMF programme was a cash dole-out for a freshly selected group of people which is also meagre to offset the effects of the crisis and the remedy for it – the reform programme. 

During a press briefing in September on the first review of the progress of the IMF programme in the country, the IMF officials were questioned about the poor by journalists, and Sarwat Jahan, IMF Resident Representative in Colombo said “We can help through multiple ways. First is when there is stabilization in the economy that means that it’s good for all Sri Lankans, including the poor and the vulnerable, because this means that inflation will go down” Isn’t it a long wait for the most affected group of people, since the IMF officials themselves are concerned that “full economic recovery is not yet assured.”

The programme does not seem to realize the grave situation the poorest of the poor have faced with. Both the government and the IMF are concerned about the revenue targets, no matter what happens to whom. Neither party seems to have put more weight on tax evasion especially by big sharks, despite it being under discussion, from the beginning.   

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Economy signals rebound

FT Monday, 18 December 2023 

Agricultural sector up 3%; Industrial by 0.3% and Services by 1.3%

GDP in July-Sept. quarter improves by 1.6% ending six quarters of negative growth

Sri Lanka’s economy has shown signs of rebound with the July-September posting a 1.6% improvement ending six quarters of negative growth.

As per provisional data released by the Department of Census and Statistics (DCS) the year-on-year GDP growth rate for the third quarter of 2023 is estimated at 1.6% of positive growth rate.

The Agricultural, Industrial and Services activities expanded by 3%, 0.3% and 1.3% respectively in the third quarter of 2023, DCS said.

The three major economic activities of the economy; ‘Agriculture’, ‘Industry’ and ‘Services’ contributed their share to the GDP at current prices by 7.8%, 28.1% and 57.5% respectively, while ‘Taxes less subsidies on products’ component has contributed 6.5% of share to the GDP in the third quarter of year 2023.

DCS said the third quarter of the year 2023 began with the favourable change in uncertainties in foreign exchange which were observed in previous quarters and the economy and its expectations about the future having been growing at a lower rate, was transformed into a positive state. 

The input costs declined parallel to the favourable change in exchange rate and the demand for debts which were at a lower level, showed a positive indication in this quarter along with the reduction in interest rate. With the expansion of the tourism sector, a positive impact could be observed in the service exports during this quarter. Accordingly, accommodation, food and beverage service activities have recorded a high positive growth while agricultural activities have also recorded a positive growth rate in the third quarter of 2023. Moreover, some of the manufacturing industries have also recorded expansions in this quarter.

Performance in Agricultural activities;

In the third quarter of the year 2023, the agriculture activities have recorded an expansion of 3% when compared to the 6.7% of negative growth recorded in the same quarter in the year 2022.

The expansion in the agricultural activities were mainly driven by ‘Growing of cereals’ (33.2%), ‘Marine fishing and marine aquaculture’ (27.5%), ‘Growing of rice’ (23.2%), ‘Agricultural supporting activities’ (20.9%), ‘Animal production’ (5.4%), ‘Growing of fruits’ (5.4%), ‘Growing of coffee, cocoa and other beverage crops’ (3.8%), ‘Growing of vegetables’ (3.2%) and ‘Growing of sugarcane’ (3.1%).

However, some agricultural economic activities such as ‘Plant propagation’ (36.8%), ‘Forestry and logging’ (30.7%), ‘Fresh water fishing and freshwater aquaculture’ (10.3%), ‘Growing of oleaginous fruits’ (6.1%), ‘Growing of other perennial crops’ (3.9%), ‘Growing of spices’ (3.6%), ‘Growing of rubber’ (2.8%), and ‘Growing of tea (1.4%) have recorded negative growth rates in this quarter.

Performance in Industrial Activities;

During the third quarter of year 2023, the overall industrial activities have reported an expansion of 0.3% compared to the 21.3% negative growth rate reported in the same quarter in the year 2022.

Among the ‘Industrial activities’, the ‘Construction’ activity has recorded a negative growth rate of 5.5% while ‘Mining and quarrying’ activity has expanded slightly by 0.7% during this quarter. The overall manufacturing industry has grown by 2.1% during this quarter. Some manufacturing activities have reported expansions in this quarter with respect to the same quarter of the year 2022 including ‘Manufacture of coke and refined petroleum products’(168.6%), ‘Manufacture of basic metal and fabricated metal products’ (29.9%), ‘Manufacture of furniture’ (28.7%), ‘Manufacture of other non-metallic mineral products’ (17.5%), ‘Manufacture of food, beverages and tobacco products’ (11.8%) and ‘Manufacture of chemical products and basic pharmaceutical products’ (4.2%).

However, manufacturing activities such as ‘Manufacture of wood and wood products’ (19.0%), ‘Other manufacturing and repair and installation of machinery and equipment’ (18.9%), ‘Manufacture of rubber and plastic products’ (16.5%), ‘Manufacture of textiles, wearing apparel, leather and other related products’ (10.1%), ‘Manufacture of machinery and equipment’ (11.4%) and ‘Manufacture of paper and paper products’ (1.5%) have recorded declines in this quarter compared to the third quarter of the year 2022.

The ‘Electricity, gas, steam and air conditioning supply’ and ‘Water collection, treatment and supply’ activities have recorded expansions by 4.2% and 11.9% respectively in this quarter.

Performance in Services Activities;

In the third quarter of the year 2023, the performance of the service sector has also expanded by 1.3% when compared to 4.2% shrinkage reported in the same quarter of year 2022.

According to the quarterly review of this quarter, ‘Financial service activities’ has reported 0.5% decline while ‘Insurance services’ have reported 29.6% positive growth. Further, ‘Accommodation, food and beverage serving activities’ (34.9%), ‘Programming and broadcasting activities’ (10.9%), ‘Transportation of goods and passengers including warehousing’ (5.7%), ‘Postal and courier services’ (3.3%), ‘Professional services’ (1.9%), ‘Educational services’ (1.8%), ‘Human health services’ (1.0%), ‘Wholesale and retail trade’ (0.9%) and ‘Other personal services’ (0.6%) have reported considerable positive growth rates during this quarter.

Moreover, activities such as ‘IT programming consultancy and related activities’ (20.1%), ‘Real estate activities and ownership of dwelling’ (5.7%) and ‘Telecommunication’ (2.6%) have reported negative growth rates during the third quarter of 2023.

DCS also said the Gross Domestic Product for Sri Lanka for the third quarter of the year 2023 at constant price (2015) has increased up to Rs. 2,946,107 million from Rs. 2,900,654 million which was recorded in the third quarter of the year 2022. In addition, the Gross Domestic Product for Sri Lanka for the third quarter of 2023 at current price has increased up to Rs. 6,906,891 million from Rs. 6,586,602 million which recorded in the same quarter in year 2022 registering 4.9% of positive change in the current price GDP.

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