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Sri Lanka's Economy is Poised to Take Off

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Sri Lanka's Economy is Poised to Take Off
Economic Fundamentals
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What matter in the coming future of Sri Lanka is not so much of politics but economics. President Mahinda Rajapaksa has given a realistic pledge to lift the per capita income of the people during the next tenure of office from the present $ 2,000 to at least 4,000 and if everything goes well, this might be achieved well before that period.

The guarantee that the people have from the government on this score is the economic performance of the country during the last four years, despite the humanitarian war that it had to wage against the most ruthless terrorist organization in the world, the LTTE. While the per capita level of the people was below $ 1,000 by the end of 2005, when the present President was first elected to that position, it reached to the present level of 100 percent increase not by accident but by conscious macro-economic policies.
Political Leadership

When I asked some officials how this could be the case when some opposition leaders claim that the economy is mismanaged for political and others reasons, they assured me that both the Central Bank and the Treasury experts are given full liberty and respect in taking and proposing policies, with of course necessary political wetting and weighing by the President himself as the Minister of Finance.

This was apparently the same policy when it came to the armed forces during the last three yeas of the humanitarian war against terrorism where the President chaired the Security Council, as the Commander in Chief, and almost all important decisions were taken thereof. The President apparently has given full authority to the respective armed force chiefs and the Defense Secretary while weighing and prudently managing the political factors, both internal and external, which were necessary for the expedient execution of the operations.

Now the presidential election is concluded with a resounding victory for the incumbent with almost 58 percent of votes, and Parliamentary election is scheduled for the 8th April in two weeks time, it is like the pilot asking the people to elect the best crew members for him to take the plane, off the ground, for the second time. At the first time, it was with some difficulties that the plane took off, the governing party (UPFA) even failing to appoint its own Speaker for Parliament.

As the full term of the present Parliament is supposed to conclude by next month, the governing party has grown into the fullest possible extent, many of the former opposition members are now sitting with the government. What the coming parliamentary election would further ensure is more stability to the government which is undoubtedly a necessary precondition for economic progress perhaps with or nearly two thirds majority. It is apparently a rare skill on the part of the President to obtain support from various sections of the political community including a fair portion of the minority communities.


Favorable Conditions

However, the simile about the ‘plane taking off’ referred here is not primarily about politics but about economics. It was the famous economist, WW Rostow, who used this simile to highlight the necessary drive (with the required speed) that an economy should take in order that it is lifted to a higher level, like a plane taking off to the higher skies with necessary speed and control.

Sri Lanka obviously has all the necessary conditions for a take-off that Rostow talked about. Its economic fundamentals are now in good shape. Fortunately, Sri Lanka was not directly affected by the current international economic and financial crisis. While the economy is open to the outside world, the capital account is prudently managed to cushion out any adverse effect from bad weather changes in the international markets.

In terms of external environment, Sri Lanka is located next to the fast growing economy of India with excellent trade and political relations and bound to mutually benefit from each other in the coming future. Sri Lanka’s relations with China is also most beneficial, the latter heavily assisting the country in developing massive infrastructural ventures. China in addition may consider Sri Lanka as its main ‘stopover point’ in navigation as it expands its trade and commerce in Africa, the Middle East and beyond.

A main deficit for Sri Lanka’s development is the lack of natural energy resources (except hydro), and oil in particular. While she would in the near future explore the possibilities of exploiting offshore oil resources, the relations she maintains with countries such as Iran are geared by pragmatic reasons to overcome this deficit, apart from political support for the aspirations that these countries express on international matters.

There was a time when Sri Lanka was highly depressed and followed whatever formulations that came from outside. That period is fairly over except that some reverberations are still to be seen among oppositional politicians and economists alike. The main breakthrough in this respect has come about through politics, a rational strand of patriotism dominating the political scene calling for economic and social change beneficial to the ‘greatest good of the greatest number,’ defeating the economic strategies that catered in the past to a small group of elite.

Sri Lanka has no squabble with any country or particular region when it comes to development or economic relations, except that the country wants to take its own decisions for the best interests of its people. Economic rationalism would be its main guide in dealing with countries or companies without attaching any preconceived judgments or notions.

The President has invited cooperation and assistance from the Western countries without being merely bigoting on partial human rights issues as they do at present. The main focus, however, has been given to neighbors and new friends who are not interfering in Sri Lanka’s internal matters. Sri Lanka strongly believes that development is the only way forward for both human rights and reconciliation issues, while both issues are prudently handled through its existing internal democratic mechanisms.


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