The road to economic recovery and growth is a tough and challenging one. A multiplicity of challenges have to be overcome to revive and recover the economy.
Economic growth and social development are challenging tasks in the coming years.
What we are experiencing today is not an economic recovery. It is an easing of the shortages of essential items that gripped the country for some time.
Certainly, essentials are freely available. Even foreign items, though only affordable to the affluent, are available in supermarkets. This is not an indicator of growth. In fact, the economy is contracting.
What the country has experienced in the past few months is an easing of shortages.
The availability of essential and other items has been possible owing to the improvement of the external finances. The improvement was mainly due to increased remittances from abroad and increased earnings from tourism in the first four months of the year.
IMF‘s first tranche
The first tranche of the IMF’s Extended Finance Facility (EFF) of about US$ 300 million and the confidence in the country’s foreign finances have also helped the country’s external finances to rise to about US$ 800 million (excluding the Chinese credit line in Yuan to the value of US$ 1200 million that is not freely useable.)
However, even the current global economic recession could impact adversely on external finances. Inhospitable global conditions that have already impacted adversely on the country’s exports are a serious constraint. This improvement in external finances could be jeopardised by a deterioration in the trade balance.
The demand for manufactured exports has fallen drastically owing to the recession in Western countries that are our main markets. Our exports which had reached one billion US dollars a month last September have fallen to around US$ 600 million a month and orders for manufactured exports have dipped considerably.
Consequently, factories are closing and unemployment is increasing.
Tea exports too are decreasing owing to lower production.
The trade deficit is expanding owing to reduced export earnings and increased imports. This is a setback to the external finances that is likely to continue till the end of the year.
Therefore, an increase in remittances and an upsurge in tourism are vital for an improvement in external finances.
The current global recession is a serious setback to the country’s export manufacturing industries. Factories are being closed and unemployment is rising. It has been estimated that 150,000 have lost jobs.
The political conditions, social upheavals and industrial unrest in the country are a hindrance to the smooth functioning of economic activities. There have been disruptions in many services and industrial activities, leading to a decrease in production. Furthermore, high-interest rates and high costs of production have made some industries uneconomic to operate.
These conditions are not only retarding current economic production but also disincentives for new investment.
Unemployment of skilled workers and increasing costs of living are also resulting in a large exodus of skilled personnel. This is weakening the country’s developmental capacity.
This exodus is certainly a serious setback to the country’s current education and health and future social development. The quality of education and health services, in particular, are being eroded.
The exodus of educated and trained professionals in health and several other fields such as ICT, engineering, and hospitality trade is undermining the development capacity of the nation.
Certainly, the long-term economic and social development of the country is being seriously jeopardised.
The country is not on the road to an economic revival and recovery. In fact, the World Bank and the Asian Development Bank predict an economic contraction of about 3 percent this year. The Department of Census and Statistics, too, estimates a further slide in the economy of around 2.7 percent this year. Indicators such as the Central Bank’s Purchasing Manager’s Index indicate a slowing down of the economy.
The improvement in living conditions in the last six months has been due to an improvement in external finances that has enabled the import of essential items and the disappearance of scarcities.
This is not a take-off to growth. In fact, agriculture and manufacturing are not growing. A few services such as tourism and related activities are, however, growing. It is vital that agriculture that is reviving from the fertiliser fiasco grows substantially next year. Manufacturers are, however, seriously hampered by a fall in export demand that is unlikely to improve for some time.
Despite the visible improvements in the availability of essentials and an improvement in external finances owing to a revival of tourism and increased remittances, the road to economic recovery, growth, and development remains a distant dream.
The elimination of corruption, adoption of drastic economic and social reforms, hard work, and discipline, among other changes, are vital to achieve economic development.
Courtesy Sunday Times
Disclaimer: Tough task of economic revival, recovery and growth - Views expressed by writers in this section are their own and do not necessarily reflect Latheefarook.com point-of-view