How the Global Economic Crisis Affects Sri Lanka

By K.R. Pushparanjan
Letter to the Editor

(February 26, Colombo, Sri Lanka Guardian) We too have now begun to feel the heat of ill-effects of the world economic recession despite various optimistic statements made by politicians and the top brass at high echelons in the government. Hundreds of private sector establishments in a number of fields have been shut down and employees are facing challenges they never ever thought could be realities. Even BOI companies with foreign investments are steering in the direction of scaling down operations and retrenching employees.

Naturally and obviously, when the country after country even in the highly developed world have begun to feel the heat of the global meltdown at their doorway, an already ailing economy like ours cannot conceal from the after effects of the chaos in the global financial markets. At a time when the whole world is tumbling in an ocean of economic recession and financial catastrophe there is no chance of survival for a smaller economy like ours. Of course the only possibility is that a direct impact of the global situation might not affect us straight away; but yet its off spins might create a significant brunt. However, such off spins could be quite capable of totally devastating a diminutive economy like ours if the issues are not addressed in the right perspective at the right time.

Around one million expatriate workers distended all over the world mainly in the Middle East, remit increasing amounts of Dollars to inject strength into our ailing economy. This top foreign exchange earner of our country is facing the risk of slamming the brakes on worker remittances as a result of the global financial crisis which would rigorously intensify our economic wretchedness.

Moreover, apart from the uncertain labour market, we have reached the brink of falling world prices and demand on our main exports. Tea, rubber, cinnamon, coconut, garments, gems and a number of other commodities have faced the quandary of loosing demand in the international market thus experiencing sharp falls in prices as well as demand. Gem and jewelry industry can no longer attract overseas buyers for some time. Tourism is operating at grave losses. Also we do not possess adequate foreign assets to brag. Of course extension of GSP+ concession to the garment exporters by a couple of years has given some sigh of relief to that industry. Nevertheless, with the added effect of synthetically held local currency, the situation has dramatically worsened. Needless to say that by artificially holding the local currency in order to lower import costs doesn’t at all compensate for the losses the economy suffers through reduced export income.

Strongest economy on earth with ubiquitous assets and gigantic martial command escorting the economic, political, intellectual and military supremacy over all other nations is where the tribulation set in motion. Financial, trading, service and production sectors in the US market are in ruins; banking institutions, investment companies, insurance and other asset management companies have crashed. Even Europe, Japan and Australia are going through the same fate.

At the rate the financial crisis is swallowing up the world in full bloom and the credit crunch is munching the global markets in style, frail economies such as ours have no chance of standing alone. Most disturbing question is how long can we stand this situation? With all the efforts the world high powers are putting in, recuperation of the global trade and industry is at least a couple of years away. When the global financial crisis hit on the head, our economy was already burning in turmoil.

War, inefficiency, bribery, corruption , extortion, fraud, nepotism, cronyism, terrorism, frittering away public funds by the politicians and high ranking public servants, high energy costs, high inflation, uncontainable exchange rates, attitude problems are some of the factors that made things worse for our country. However, though the recent global crunch only added just one more factor to the hit list, the blow it can turn about could be severe due to its rapid and swift augmentation throughout. In every probability, there is no way Sri Lanka can keep away from the effects of economic recession but certainly the authorities could think and act sensibly towards finding ways of minimizing the impact by adopting proper policies. Most of all, the important thing is to adopt proactive policies.

-Sri Lanka Guardian