It’s time for urgent economic reforms

Originally appeared on Daily FT, The Morning, Ada derana Biz , Lanka News Web

It’s time for urgent economic reforms 

• Sri Lanka faces one of the worst economic crises in its history.

• COVID-19 pandemic only exacerbated the existing weaknesses in the economy, the roots lie in unsustainable debt, fiscal indiscipline and low rates of growth. 

• To get out of the crisis comprehensive and deep economics reforms that are structured to a clear timeline is needed, says top Economists. 

Sri Lanka should carry out urgent and credible economic reforms to create a stable environment to emerge from one of the worst economic crises in its history triggered by unsustainable spending, debt and stifling controls, a panel of economists said.

“There is no doubt that Sri Lanka is facing a severe economic crisis. Macroeconomic stabilization is the need of the hour ” said Dr. Roshan Perera,  Senior Research Fellow at Advocata Institute, Colombo-based think tank .  She made these comments  at an online event to launch Advocate's latest publication, ‘A Framework for Economic Recovery’.  She provided a breakdown of the economic challenges before the economy. In her presentation, Dr. Perera stressed the need for immediate reforms to tackle unsustainable public debt. 

The report identifies that the macro-economic instability lies in the failure of the state to implement deep structural reforms to the economy for nearly twenty years. The COVID-19 pandemic has exposed Sri Lanka’s fundamental weaknesses that have plagued the economy for a long period of time. The event included comments from experts on Advocata Institute’s board of advisors. 

“None of these policy prescriptions are new. We have talked about them for years. But it's a matter of political will to do them. We have hit a brick wall and we need to come together as a whole and take responsibility,” Advocata’s Academic Chair Dr. Sarath Rajapatirana said.

“We need to think of the external balance not only for today but for tomorrow. We have to grow our way out of debt as opposed to starving ourselves out of debt” said Dr. Nishan de Mel, Executive Director of Verite Research and an advisor to Advocata.  Highlighting the importance of getting the balance right on growth and austerity in dealing with the crisis. 

Prof. Rohan Samarajiva, Chairperson, LIRNEASIA and an advisor of the Advocata, explained the urgency of deep structural reforms by describing the present economic challenge. “We are in a war-like situation”. He said, stressing that what we need is a common minimum program of reform agreed by many.  “Identify the key sectors - utilities and trade which would play a huge role in the economy to build confidence. We would have to bring back parts of the 19th amendment”. He said, highlighting the importance of political reform facilitating better economic outcomes. 

Research shows that Sri Lanka needs structural readjustment. “ Sri Lanka needs some bitter policy doses at this level to get the economy back on track. We haven’t touched policy reforms for over 20 years, for which we are paying now. And we are looking for short term solutions for a long term problem”, said Professor Sirimal Abeyrathne, Senior Professor of Economics, University of Colombo.

Advocata’s report,  A Framework for Economic Recovery, consists of a series of urgent macroeconomic reforms to address the present crisis. This includes the implementation of a macroeconomic stabilization program, prioritising fiscal consolidation and debt restructuring,  public finance management and public sector reforms.  Other reforms include state-owned enterprise reform, enhancing monetary policy effectiveness and maintaining a flexible exchange rate. 

Trade reform to strengthen exchange rate sustainability.  Other structural reforms such as land reform, improving ease of doing business and bridging infrastructure gaps to boost productivity and achieve growth. Advocata Chairs, Mr. Murtaza Jafferjee, Dr Sarath Rajapatirana, Mr. Dhananath Fernando, COO Advocata Institute and key advisors, Prof. Suri Ratnapala,  Professor of Law, University of Queensland, Anarkali Moonesinghe, Board Member Lankan Angel Network, Dr. Sujata Gamage,  Senior Research Fellow, LIRNEASIA, Dr. Nishan De Mel, Executive Director at Verité Research, Prof.Prema-Chandra Athokorala, Emeritus Professor of Economics, ANU, spoke extensively on each of these areas of reform, while expressing concern over the present economic crisis.  

Media coverage on " A Framework for Economic Recovery"

Sri Lanka’s Possibility of Debt Default is Real

Sri Lanka’s possibility of debt default is real, the Colombo-based public policy think tank Advocata Institute said, yesterday. Launching its latest publication, “A framework for Economic Recovery”, Advocata’s Senior Research fellow Dr. Roshan Perera said that the country is facing one of the worst macroeconomic crises in its history and with rapidly depleting foreign reserves position and the Government’s limited options to finance its foreign debt service obligations will adversely affect the nation’s debt sustainability. Therefore, they urged the policy makers to identify, prevent and address macroeconomic imbalances that could adversely affect the economic stability of the country. 

Sri Lanka’s economy has been characterised by twin deficits, i.e., it has run both a fiscal deficit and a deficit in the external current account. This implies that the country has been spending and consuming more than it earns and produces. 

“Priority should be given to correcting the twin deficits, stimulating economic growth and improving competitiveness while building buffers to strengthen the resilience of the economy to shocks”, it stated. According to their observations, fiscal dominance has been the root cause for macroeconomic instability adversely affecting growth, inflation, interest rates and the exchange rate. Fiscal indiscipline has also significantly narrowed the space for monetary policy.

 “Weak public finance management arising from inadequate revenue collection and uncontrolled expenditure has meant the Government has continued to run budget deficits, relying on borrowings to finance the shortfall. This has led to high and unsustainable debt levels,” the report stated. According to the Advocata, completing the Extended Fund Facility (EFF) programme entered into with the International Monetary Fund (IMF) in 2016 would be imperative to restoring macroeconomic stability.

Read the full article here

Top panel sounds alarm, insists it’s time for urgent economic reforms

Sri Lanka should carry out urgent and credible economic reforms to create a stable environment to emerge from one of the worst economic crises in its history triggered by unsustainable spending, debt and stifling controls, a panel of economists said.

“There is no doubt that Sri Lanka is facing a severe economic crisis. Macroeconomic stabilisation is the need of the hour,” said Advocata Institute Senior Research Fellow Dr. Roshan Perera, addressing the online event to launch Advocata’s latest publication, ‘A Framework for Economic Recovery’. Advocata is a Colombo-based think tank.

Providing a breakdown of the economic challenges before the economy, in her presentation Dr. Perera stressed on the need for immediate reforms to tackle unsustainable public debt.

The report identifies that the macro-economic instability lies in the failure of the State to implement deep structural economic reforms for nearly 20 years. The COVID-19 pandemic has exposed fundamental weaknesses that have plagued Sri Lanka’s economy for a long period of time.

The event included comments from experts on Advocata Institute’s Board of Advisors.

“None of these policy prescriptions are new. We have talked about them for years, but it's a matter of political will to implement them. We have hit a brick wall and we need to come together as a whole and take responsibility,” Advocata’s Academic Chair Dr. Sarath Rajapatirana said.

Read the full article here

Economists call for an extensive review of the tax system to improve revenue mobilisation

An improvement in Sri Lanka’s revenue mobilisation effort requires an urgent and extensive review of the tax system, to ensure the government can meet its expenditure commitments, while the country is in the midst of one of the worst macroeconomic crises in its history, economists said.

Pointing out that the national economy is heading towards a “precipice”, Colombo-based economic think-tank Advocata Institute asserted in its latest publication titled ‘A Framework for National Recovery,’ that the “serious erosion” in government revenue and its implications for macroeconomic stability call for a comprehensive review of the tax system.

According to the report, some of the areas that require attention include; reducing the tax threshold and widening the tax base, reintroducing the PAYE and WHT, reducing the excessive reliance on indirect tax as it is currently at about 80 percent, rationalising tax incentives, introducing new taxes, and strengthening the tax administration.

Currently, the income tax threshold in Sri Lanka is four times its per capita GDP, and also higher than the tax threshold in countries with per capita incomes that are several times that are of the island nation. The report recommends bringing down the threshold while also adopting measures to bring in employees into the formal sector so the tax base is widened.

Read the full article here

Key Ways to Boost Revenue

Making tax administration technology driven, instituting land tax and removing tax exemptions are among three ways that Sri Lanka can boost revenue, Advocata Institute, a think tank, in a recent report, said. The think tank in a report titled ‘A Framework for Economic recovery’ dated July said that Government of Sri Lanka (GoSL) revenue which was 21 per cent of GDP in 1990 was averaging 15 per cent during the period 2005-2009. ‘This has plummeted even further to around eight per cent by 2020,’ it added. The key revenue earner for GoSL is taxation. ‘Further, around 80 per cent of tax revenue collected in 2020 was from indirect taxes, increasing the regressivity of the tax system, with lower income earners bearing a higher burden of taxation,’ the report warned. 

There is also a significant concentration of taxes collected from a few commodities such as tobacco, liquor, motor vehicles, and food and beverages, said Advocata. This also increases the regressivity of the tax system as some of these are considered essential items and form a higher proportion of the consumption basket of low income earners, the think tank further warned. In order to broaden the tax base, new taxes such as land taxes should be introduced, the think tank advocated. Meanwhile, despite commissions set up to review the tax system, as well as donor funded programmes initiated to address the weaknesses in tax administration there, has been very little progress on this front, said Advocata.

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Look at options to meet debt obligations - Advocata Report

An independent policy think tank launching its latest publication; “A Framework for Economic Recovery” in Colombo last week called on policymakers to pay serious attention to consider all  options available to meet the country’s debt obligations which is in the tune of around US $25 billion in foreign debt between now and 2026.  The report by the Advocata Institute presents a framework for macroeconomic stabilisation and emphasises the need for urgent economic reforms. The panel comprising well-known economists and heads of think tanks urged policymakers to look at all options to meet the obligations as there could be a possibility of defaulting on debt obligations which would reflect badly on the country.

The urgency to seek ways and means to meet the obligations or restructure debt was underpinned due to the fast depleting  foreign reserves estimated at US $ 2.8 billion as at the end  July this year, foreign inflows affected by the pandemic and negative investor sentiments. 

The author of the report and Senior Research fellow of Advocata, Dr. Roshan Perera said debt restructuring is not an easy task and added that the possibility of resuming a program with the International Monetary Fund should be looked into.

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Defaulting debt repayment can have severe repercussions

Sri Lanka has been running deficits over the decades following the post- independence period when the fiscal deficit was over 10 percent of the GDP.

In 2020 it exceeded 10 percent of the GDP and is likely to deteriorate in 2021. “If the government continues to consume more than it earns or when the domestic private savings are not sufficient to finance the economy it can reflect in our current account deficit. In the absence of domestic saving, the country has to depend on foreign savings to bridge the current deficit,” said Dr. Roshan Perera, Senior Research Fellow of the Advocata Institute at the launch of a publication on “Framework of Sri Lanka’s Economic Recovery at a webinar held this week.

She said in the absence of FDIs coming into the country Sri Lanka had to borrow from abroad. In the 2000 period funds came mostly from bilateral and multilateral sources and concessional financing. But these funds ceased when the country’s rating was elevated to a middle- income country status. When Sri Lanka embarked on infrastructure projects in later years, it had to borrow from private lending agencies and international sovereign bonds with shorter grace periods with higher interest rates. This had an impact on debt service payment which has ballooned over the years. With low foreign inflows coupled with the COVID-19 pandemic, debt servicing has been a challenge, she added.

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Poor economic performance linked to poor economic governance: Experts

Sri Lanka’s poor performance across multiple areas in the economy is linked to the economic governance of the country weakening over the years, despite an ever expanding public sector, according to some leading economists and practitioners of law in the country.

As having the right institutional strength is essential and imperative for an economy to prosper in the medium to long term, top economists and legal practitioners this week attributed the repeated issues faced by the country to the grim economic governance, which remains unaddressed and unacknowledged.

According to Emeritus Professor of Public Law Suri Ratnapala, a starting point for Sri Lanka in this regard would be to initiate the process of rebuilding institutions of the state, judiciary, enforcement agencies and auxiliary organisations that support the legal system.

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Addressing Sri Lanka’s macroeconomic imbalances 

We are 18 months into the pandemic but the policymakers are yet to announce a proper programme to save Sri Lanka from the economic crisis it is currently facing now. Although many policymakers blame the Covid-19 pandemic for the current economic situation, by now many have realised the pandemic just unveiled the curtain behind which all the troubles of Sri Lanka’s economic system were kept hidden. 

Colombo-based think tank Advocata Institute, on 14 September unveiled a Framework it has prepared for Sri Lanka’s Economic Recovery. The report was prepared by Advocata Institute Senior Research Fellow and Central Bank of Sri Lanka (CBSL) former employee Dr. Roshan Perera. 

Presenting the report, she said that for consumers and producers to be able to make long-term decisions there needs to be stability in the economy and highlighted what is really meant by stability. 

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Resolving the economic crisis and facing challenges with reforms

Dr. Rajapatirana pointed out that Sri Lanka’s trade as a percentage of GDP has been low compared to Thailand and Vietnam because we have not exploited our opportunity to trade as we have high tariff rates compared to other developing countries.

Furthermore, although tariffs play a role in protecting domestic infant industries, if tariffs are too high, they can become anti-competitive. Dr. Rajapatirana observed that recent import restrictions, such as banning a wide range of consumer goods from April 2020, have further worsened Sri Lanka’s growth potential and put Sri Lanka at odds with WTO rules.

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Sri Lanka cronies profiting from import controls, SMEs battered: Samarajiva

Sri Lanka’s so-called cronies who benefit from customers trapped under state controls are raking even more profits from current import controls, while smaller firms are getting wiped out, a policy specialist and liberator of poorer consumers said.

Many domestic businesses also needed inputs.

“Import controls are creating a lot of opportunities for permit holders and cronies to make money,” Rohan Samarajiva, founder of LirneAsia, a regional policy advisory group told a forum organized by Advocata Institute, a Colombo-based think tank.

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Is economic recovery possible?

“The economy should grow steadily and sustainably. It should have a sound financial system, be resilient to shocks with inflation under control,” said Dr. Roshan Perera, Senior Research Fellow of the Advocata Institute during a recent webinar on building a framework for economic recovery in Sri Lanka. Explaining that in the economical environment, there are internal and external imbalances to be found, she said internal imbalance consists of issues such as the government spending limitlessly, too much money in the economy and uncertainty. Whereas external balance means a combination of inflation and exchange rates that makes imports more attractive and exports uncompetitive. This includes abrupt changes in the exchange rates that call for financial assistance and in the extreme defaulting on payments to the rest of the world, she explained.

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A Framework for Economic Recovery

The Advocata Institute launched its latest publication on "A Framework for Economic Recovery" on September 14 at 3.30 PM.

This report can be accessed below.

”A Framework for Economic Recovery” Report

The report authored by Advocata’s Senior Research fellow Dr. Roshan Perera and Advocata’s research team proposes key policy recommendations to overcome these challenges. The report presents a  framework for macroeconomic stabilization and emphasizes the need for urgent economic reforms.

The presentation by Dr. Roshan Perera on "A Framework for Economic Recovery" can be accessed below.

"A Framework for Economic Recovery" Presentation

The launch was virtually held with the attendance of the press and was live-streamed on Advocata Institutes social media channels.

Watch the live discussion on Advocata Institutes YouTube channel. 

Key speakers included; Advocata Academic Chair, Dr. Sarath Rajapatirana, Advocata Chair, Murtaza Jafferjee, Dhananath Fernando (COO Advocata Institute) and key advisors, Prof. Rohan Samarajiva ( Chairperson, LIRNEASIA), Prof. Suri Ratnapala ( Professor of Law, University of Queensland), Anarkali Moonesinghe ( Board Member Lankan Angel Network), Dr. Sujata Gamage, ( Senior Research Fellow, LIRNEASIA) and Prof.Prema-Chandra Athokorala (Emeritus Professor of Economics, ANU).

Media coverage on The Role of Trade in Economic Recovery in Sri Lanka

GSP Plus vital for SL to fight competition – EU Ambassador

After 2010 Sri Lanka’s exports to the European Union (EU) have increased by 60% but half of it is through the Generalised Scheme of Preferences (GSP) plus, stated EU Ambassador to Sri Lanka Denis Chaibi, speaking at a virtual conference organised by Colombo-based think-tank Advocata Institute.

Vietnam increased by 400% and Bangladesh by 150% during the period from 2010 to 2019, thus to stay ahead of competition, GSP plus is significant for Sri Lanka, stated Chaibi. Ambassador further noted that retaining GSP Plus would give a positive image for Sri Lanka that it is committed to human rights obligations. “The EU market is competitive as it is a superpower in terms of product quality standards.

For a Sri Lankan exporter to export to the EU would give the exporter recognition in any other market as the EU only accepts products with certain standards. Sri Lanka is already in a forex crisis. Increasing exports is a way out of the current crises. COVID-19 has created a resilient supply chain but without preferential access it is difficult for Sri Lanka to increase its exports to EU markets.

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SL’s economic recovery led by trade

The Covid-19 pandemic has revealed the real weaknesses Sri Lanka had in terms of its economy for the past four decades.

With the foreign exchange shortage worsening day by day, many fear that the country will go back to the pre-1977 era of ration cards to purchase essential food items, as the importation of such goods will be impossible in the near months.

Sri Lanka needs economic reforms that will decide the fate of the country in the next few decades to come, and many experts say that reforms should start with the country’s protectionism trade that has not really evolved over the years.

Productivity for growth

Speaking at a webinar organised by the Advocata institute, its Chair – Academic Programme Dr. Sarath Rajapathirana said that Sri Lanka has failed to make any substantial reform for the economy, particularly on trade-side reforms, for the last 20 years.

He said trade is very important as it exposes the country to competition and among other areas such as the fiscal side, the budget, and having a proper monetary policy that avoids inflation and contributes to a more stable exchange rate, trade too needs a lot of work.

“Our imports are three times the value of exports, so we have been continuing a trade deficit, which is also accompanied by a current account deficit. These have to be addressed when talking about trade reform; we have to have the macroeconomic support for it,” he said.

He said more than the aggregates of imports and exports, the encouragement to productivity from having open trade or non-restricted trade is more important.

“If you don’t have strong growth in productivity, we have to keep on increasing the factors of production. It is difficult because we need to have more savings and less consumption. So the best way to get it done is to really have a system in which our reforms are going to immediately affect the positive side of our productivity growth,” he noted.

Read the full article here

Increased int’l trade participation key to achieving economic recovery, says top economist

As the national economy continues to face new challenges from multiple angles and their implications are being very much felt by businesses and masses, Dr. Rajapatirana called for the government to start by having in place a more streamlined tariff structure.

“First get rid of para tariffs fast. And then look to introduce a single uniform tariff,” asserted Dr. Rajapatirana while addressing a webinar hosted by the Advocata Institute, this week.

For Sri Lanka to embark on any efforts that would assist in the recovery of the national economy, Dr. Rajapatirana stressed it is essential for the relevant authorities to acknowledge the importance of international trade when charting the path for progress. 

He pointed out that Sri Lanka needs to get away from its protectionist mindset and the way to get about it is to first look at lowering the existing tariff.

“The existing para tariff hurts our competitiveness. This is one of the fundamental things we need to do,” said Dr. Rajapatirana.

He added that the government must also explore the option of introducing a uniform tariff of about 15 percent, which can be reduced over a period of time.

Dr. Rajapatirana opined that by bringing about the suggested changes, Sri Lanka would be signalling to the world that it is serious in wanting to achieve economic progress. 

Dr. Rajapatirana also pointed out that the country has not made any substantial economic reforms, especially on the trade side, in the last 20 years or so.

As the country continues to grapple with the COVID-19 pandemic along with the rest of the world, Dr. Rajapatirana warned that neglecting the economy would only further delay the recovery process. 

“We cannot think of economic recovery without really starting trade reforms. We are in a good driving seat to undertake the reforms since the government has two-thirds majority. 

We need to have the macrocosmic reforms that come from the monetary policy and the fiscal policy. Without that you don’t have the sort of dynamic stability that is needed to put in place a good reform programme,” he said.

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Sri Lanka international trade role in Advocata forum as monetary instability drive import controls

Colombo-based think tank Advocata Institute said it is hosting an online forum on ‘The Role of International Trade in Economic Recovery in Sri Lanka’, as the island is mired in the worst import controls since the 1970s after printing money.

Trade controls started during as money was printed to target an ‘output gap’ involving curbs on gold trading and vehicles and other items, escalated into full-scale import substitution, import bans and tightened from 2020.

Sri Lanka’s post-independent economic history is littered with administrations that tried to operate various economic plans without reforming a soft-pegged central bank with activist monetary policy.

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NEWS RELEASE: A Deep Dive on Trade “ The Role of International Trade in Economic Recovery in Sri Lanka”

NEWS RELEASE

Originally appeared in the Economy Next, Ada derana Business

The Advocata Institute event on “ The Role of International Trade in Economic Recovery in Sri Lanka”

COLOMBO, Sri Lanka—  The Advocata Institute launches its second episode of the public policy discussion series ‘DeepDive’, which will be on the Topic “The Role of Trade in the Economic Recovery of Sri Lanka”.  

The  discussion  kickstarted with a primer on trade on the topic International Trade: From Theory to Policy: Sri Lanka in Perspective, presented by  Dr. Sarath Rajapatirana,  Chair, Academic Programme of the Advocata Institute. This Primer has already been released in the lead up to the discussion and is available for viewing on the Advocata Institute Youtube page. 

The Deep Dive Discussion will feature an eminent panel consisting of Professor Prema - Chandra Athukorala (Emeritus Professor of Economics, Arndt-Corden Department of Economics, ANU), Dr. Sarath Rajapatirana ( Chair, Academic Program of the Advocata Institute), HE Denis Chaibi ( Ambassador, Delegation of the European Union to Sri Lanka and the Maldives), and Dr. Dayaratna Silva ( International Trade Economist, Former Sri Lankan Ambassador to the World Trade Organization) . The Panel would be Moderated by Aneetha Warusavitarana (Research Manager, Advocata Institute) and would be LIVE-streamed on the 30th of August from  4.00 PM onwards.  

The Advocata Institute remains committed to finding policy solutions to key challenges holding back Sri Lanka’s road to development. The lack of a competitive trading regime that can compete internationally,  remains a key structural issue impeding Sri Lanka’s Economy. With the emergence of the COVID-19 pandemic, Sri Lanka’s economic position has become precarious. Exploring opportunities in global trade can be a key strategy to drive the Sri Lankan economy out of the present peril it faces and towards consistent high economic growth and prosperity.   The second episode of Advocata DeepDive would discuss policies and strategies that would enable Sri Lanka to expand and promote trade competitively. The discussion will further explore  how our regional neighbours have used trade as a tool for economic growth. 

The Advocata Institute cordially invites members of the public to tune into the LIVE streamed event on ZOOM and Advocata Institute Facebook Page. Questions will be taken online via ZOOM and Facebook. To get a comprehensive understanding of the benefits of trade debt and how it can affect Sri Lanka’s economy and the livelihoods of all citizens you can watch the Primer on trade titled “ International Trade: From Theory to Policy: Sri Lanka in Perspective ” available on https://youtu.be/NYG_RQxrSqQ

Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.    

Aneetha Warusavitarana on the much debated fuel price hike 'Talk of the Town'

Aneetha Warusavitarana (Research Manager at the Advocata Institute) was feautured on the newest episode of 'Talk of the Town' on Yes 101 on June 14 speaking on the much debated fuel price hike.

'We need to face the reality of the situation that Sri Lanka needs to purchase fuel. Then you need to think of how this must be done in a sustainable manner so you don't see intermittent increases that invariably end up hurting the consumer. And the solution to that I believe, is to introduce a price formula.

Aneetha Warusavitarana on Newsline in conversation with Sharlan Benedict 14/06/2021

Aneetha Warusavitarana (Research Manager at the Advocata Institute) speaks about the fuel pricing mechanisms & economy. SHe addresses this on Newsline with Sharlan Benedict. June 14, 2021.

'Ideally the solution that would work best here is a fuel pricing formula. A crucial factor is that this formula is transparent. The way in which it is calculated should be made available to the public, it should be vetted by the relevant authorities and we should be able to understand how this formula works and how it is linked to international changes in fuel prices.'

Click here to watch the full video:

Media coverage on the launch of Advocata's Bath Curry Indicator

Daily Mirror: Sri Lanka gets localised food price tracker - ‘Bath Curry Indicator’

Sri Lanka yesterday saw the launch of its own localised food tracker ‘Bath Curry Indicator’ (BCI), a spin on the popular ‘Big Mac Index’ conceptualised by The Economist in 1986. 

The BCI, designed by Colombo-based free market think-tank Advocata Institute, is aimed at tracking the retail prices of the goods that could be included in a packet of rice and curry. 

The indicator, that is specific to Colombo at present, tracks on a weekly basis the prices of common food items that go into rice packets and provides an insight on the rate of change of the prices over time. 

The Central Bank’s weekly economic indicators publication is used to feed the indicator. The retail prices used are from the Pettah Market, except where data is unavailable, in which case data from the Narahenpita Economic Centre are taken into account.

The items on the BCI are selected from the Household Income and Expenditure Survey (HIES) 2016.  

Pointing out that the food prices are a fairly volatile indicator, Advocata stated the prices are not only dependent on the seasonal and weather patterns but are also affected by policies.

While the BCI is not a measure of inflation, it indicates the manner in which the cost of a specific basket of goods has moved over a short period, thus providing an insight on the impacts of certain policies, as they come into effect.

Furthermore, Advocata noted that although the Colombo Consumer Price Index (CCPI) is a comprehensive method of calculating inflation and is a useful indicator to help assess the country’s macroeconomic conditions, there are some shortcomings in the process. 

The index does not necessarily measure consumer reactions and preferences that change relative to price changes, the think tank noted. 

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News 1st: Prime Time Sinhala News 10 PM | (07-04-2021) රාත්‍රී 10.00 ප්‍රධාන ප්‍රවෘත්ති

News 1st: Prime Time English News - 9 PM | (07-04-2021)

NEWS RELEASE: Advocata Institute launches a novel policy tool to track everyday food price changes

NEWS RELEASE

Originally appeared in the Ada Derana Biz, Daily FT, The Morning, The Businessnews.lk, Daily Mirror, Ada Derana, Lanka Business Online, Economy Next

Advocata’s latest policy product tracks the average retail prices of a basket of goods and provides an indication of how much prices have changed over time.  With the use of such tools, anyone including policymakers and politicians alike has access to track price fluctuations. This could enable anyone to see if policies have a direct or indirect effect on food. Which is an essential item and can have a direct impact on the food consumed by households. The indicator launch was held at the Tulip Hall of the BMICH on the 7th of April 2021 and was live-streamed on Advocata’s Facebook and YouTube. 

The newly launched Bath Curry Indicator tries to provide such a policy direction while highlighting the importance of the affordability of food. Around 35% of household expenditure is on food and drink. Therefore the Indicator is a tool to see how policies coming into effect directly or indirectly impact food prices.  Naqiya Shiraz, a research executive at the Advocata Institute spoke about the rationale behind the Bath Curry Indicator by commenting that the BCI “represents any average Sri Lanka household. The items are Samba rice, beans, pumpkin, tomatoes, brinjals, coconut, green chillies and fish. Therefore it is important to understand the decisions that impact the prices of goods.

According to Economist Deshal De Mel, “The idea behind the BCI is that in Sri Lanka the cost of living is a concern. The inflation in Sri Lanka has been of single-digit levels for the last two years but it is still a concern for the public.  So Advocata’s Bath Curry Indicator is similar to the ‘Big Mac Index’ by The Economist. It is simplistic and real.”  Rehana Thowfeek Zain (Economic Researcher and Blogger) was of a similar opinion when she commented that such indicators can be used to highlight the impact of policies that affect people’s food consumption.  According to her, the BCI will “capture a relatable way to cover the cost of living and also investigate the merit behind politicians when they use the cost of living as a hook in their election manifesto”   She further commented that  “53% of Sri Lanka population can’t afford a healthy diet, That’s a huge number. We are food secure but are we nutrition secure? Kids don’t develop as they should. Trade policies should focus on the overall objective and cater to the health of Sri Lanka’s population.” Thereby highlighting the socioeconomic impact of rising food prices on the general public. 

The panelists for the discussion were Deshal De Mel (Economist), Rehana Thowfeek Zain (Economic Researcher and Blogger) and Naqiya Shiraz (Researcher). The discussion was moderated by Aneetha Warusavitarana (Research Manager, Advocata Institute). 

The BCI Indicator can be accessed at www.bci.advocata.org.

Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.    

Advocata spokespersons are available for live and pre-recorded broadcast interviews via 077 621 6788

CONTACT:

Yasodhara Kariyawasam

Communications Manager, Advocata Institute

Email: yasodhara@advocata.org

NEWS RELEASE: Launch of the “Bath Curry (බත්ක​රි ) Indicator” by the Advocata Institute

Originally appeared in the Daily FT, Lanka Business online, Lanka Talks and The Morning

Live on Advocata YouTube and Facebook pages on the 7th of April, 12pm onwards. 

Food inflation has risen over the last year, although the overall inflation is low. According to the National Consumer Price Index, overall prices rose by 3.7% between January 2020 and January 2021 but food inflation rose by 5.9%.

While this is a matter of concern to the public, items like turmeric and green gram which made the news after rising to dizzying heights tend to steal the spotlight. While Sri Lankans appreciate a good plate of rice and curry, the cost of this essential meal is something that must be discussed.

“Bath Curry'' (බත්ක​රි ) is something that all Sri Lankans can immediately identify with. The “Bath Curry Indicator” (BCI) by the Advocata Institute is a Sri Lankan spin on the infamous “Big Mac Index” by The Economist. It simply tracks prices of a limited basket of goods that are consumed in Sri Lanka, and provides an indication of how much prices have changed over time.

The event for the launch of the BCI will feature a panel discussion that explains the BCI, what it measures and its potential for use in policy analysis.

The expected panelists will be Deshal De Mel (Economist), Rehana Thowfeek Zain (Economic Researcher and Blogger) and Naqiya Shiraz (Researcher). The discussion will be moderated by Aneetha Warusavitarana (Research Manager, Advocata Institute).

In-person seating is limited with strict Covid-19 guidelines. The event will also be live streamed on Advocata’s social media pages.

To register for the event please visit www.advocata.org/events 

New Policy Interventions by Central Bank Could Negatively Impact Exporters

Aneetha Warusivitarana, Research Manager at Advocata Institute was featured on News 1st : Prime Time English News on 20-02-2021. She comments on how the new policy interventions by the Central Bank of Sri Lanka Central Bank of Sri Lanka could negatively impact exporters.

Click here to watch the full video:

NEWS RELEASE: Eminent economists urge decisive action to prevent emerging debt crisis

NEWS RELEASE

Originally appeared in the Daily FT, Ceylon Today, Lanka Business Online and The Morning

The Advocata Institute DeepDive Series on "How can we improve Sri Lanka's Debt Sustainability?"

A panel of eminent economists urged that the Government take credible and decisive action to prevent a painful debt crisis in Sri Lanka. Although immediate debt payments can be met, to build credibility, a medium-term plan is required. This was also emphasised by Dr Nishan De Mel, Executive Director of Verite Research, who made the point that "We think that Sri Lanka does have flexibility, but the price of flexibility is credibility. If you cannot establish credibility, the flexibility erodes very quickly."

 The rating agency Moody's downgraded Sri Lanka's rating to Caa1 from B2 signaling issues with the country's debt sustainability. This year Sri Lanka's foreign debt service forecast is USD 4208.6 million. The central government debt to GDP ratio at present stands at about 86.8% with some estimates expecting the figure to increase.  

Prof Ricardo Hausmann from Harvard University said the more important measure is to look at the interest burden to tax revenue as opposed to the commonly cited debt to GDP ratio. "I think it's unfortunate that people talk about debt to GDP ratio, instead they should be talking about interest burden to tax revenue ratio. Japan has a debt to GDP ratio of 230%, and it's all contracted at zero interest rate. 230% at zero interest rate, you have to raise zero taxes to pay for that. 86% debt at 7% interest rate, you're talking about almost 6% of GDP in interest burden compared to Japan that has to pay zero" Sri Lanka has one of the worst interest burdens to tax revenue measures in the world according to Professor Hausmann. 

Prof Mick Moore, who has done work on Sri Lankan taxation systems explained that the situation has worsened due to a revenue problem and urged the need for a collective realisation of the necessity of higher taxation to meet debt servicing requirements. He mentioned that "If there is going to be a social contract drawn, built up, it's going to have to be a social contract around the crisis. If we do not do something about tax-raising, like Prof Hausmann said, the big bad wolf [of the debt crisis] is going to come."

These views were expressed at the event "Deep Dive", organised by the Advocata Institute that aims to bring focus on Sri Lanka's biggest policy challenges. The event was moderated by Dr Roshan Perera, Former Director Risk Management Department of the Central Bank of Sri Lanka, and Aneetha Warusavitarana, Research Manager, Advocata Institute. As a precursor to the event, Advocata released a primer on debt sustainability with the aim of helping Sri Lankans understand the topic.  

The recording of the discussion can be found at https://www.advocata.org/ to get a comprehensive understanding of debt sustainability and how it affects Sri Lanka's economy and livelihoods of all Sri Lankans.

Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.    

Advocata spokespersons are available for live and pre-recorded broadcast interviews via 077 621 6788

CONTACT:

Yasodhara Kariyawasam

Communications Manager, Advocata Institute

Email: yasodhara@advocata.org

Online Discussion: How Can We Improve Sri Lanka's Debt Sustainability?

ONLINE DISCUSSION by Advocata Institute featuring Prof. Ricardo Hausmann (Director Growth Lab, Harvard University's Center for International Development), Prof. Mick Moore (Political Economist, Founding CEO & Senior Fellow, International Centre for Tax and Development, Professorial Fellow, Institute of Development Studies), Dr. Nishan De Mel, (Economist, Executive Director, Verité Research). The Panel was moderated by Dr.Roshan Perera (Economist, Former Director Risk Management Department of the Central Bank of Sri Lanka and co-moderated by Aneetha Warusavitarana (Research Manager, Advocata Institute).

To watch Murtaza Jaffarjee’s Three-part Primers on Debt Sustainability, Fiscal Performance and Economic Growth.

To watch the video on Youtube

NEWS RELEASE: The Advocata Institute Event Series on “How can we improve Sri Lanka's Debt Sustainability?”

NEWS RELEASE

Originally appeared in the Daily News and Daily Mirror

COLOMBO, Sri Lanka—  The Advocata Institute launches its latest public policy discussion series ‘DeepDive’. The series will commence with several discussions on the topic  “How can we improve Sri Lanka's Debt Sustainability?”. The discussion series will kickstart with a lecture on the same topic, presented by Mr. Murtaza Jafferjee, Chairman of the Advocata Institute. 

This lecture will be released in the lead up to the first discussion, which will feature an eminent panel consisting of Prof. Ricardo Hausmann  (Director Growth Lab, Harvard University's Center for International Development), Prof. Mick Moore (Political Economist | Founding CEO & Senior Fellow, International Centre for Tax and Development| Professorial Fellow, Institute of Development Studies), Dr. Nishan De Mel, (Economist | Executive Director, Verité Research). The Panel would be Moderated by Dr.Roshan Perera (Economist | Former Director Risk Management Department of the Central Bank of Sri Lanka and  Aneetha Warusavitarana (Research Manager, Advocata Institute). The event would be live-streamed on the Advocata Institute Facebook on the 30th of September at  3.45 PM. 

The Advocata Institute remains committed to finding policy solutions to key challenges holding back Sri Lanka’s road to development. Debt sustainability remains a key structural issue affecting Sri Lanka’s Economy. With the emergence of the COVID 19 Pandemic, economies have experienced worsening debt positions.  Sri Lanka’s position has become precarious, with total repayments  (of capital and interest for 2020) amounting to an estimated $ 4.2 billion according to the Ministry of Finance Annual Report. The discussion series would discuss in detail policies and strategies that would enable Sri Lanka to meet all its current and future payment obligations without exceptional financial assistance supported by an analysis of our current position. 

The Advocata Institute cordially invites members of the public to tune into the Live streamed event on Advocata Institute Facebook Page. Questions will be taken online through SLIDO.com Code:#DEEPDIVE. The lecture on "How can we improve Sri Lanka's Debt Sustainability?" would be available on https://www.youtube.com/channel/UCB9AgjGYUTJhpdjAid4Y2Lg/featured, to get a comprehensive understanding of debt sustainability and how it affects Sri Lanka’s economy and livelihoods of all Sri Lankan’s. To keep yourself updated register at https://forms.gle/hUSNVK7QCZdBCyMJ6

Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.

Advocata spokespersons are available for live and pre-recorded broadcast interviews via 077 621 6788

CONTACT:

Yasodara Kariyawasam,

Communications Manager, Advocata Institute

Email: yasodhara@advocata.org

ශ්‍රී ලංකාවේ රජය සතු ව්‍යවසායන් 2019 දී අඛණ්ඩව විශාල පාඩු විඳිමින් සිටී

රජයට අයිති ව්‍යාපාරය ලබන සම්පූර්ණ පාඩුව සෙවීමට  කලින් රජයට ව්‍යාපාර කීයක් අයිතිද කියා සොයා බලා ලයිස්තුවක් සෑදිය යුතුයි. 

නැරඹීමට මෙතන ක්ලික් කරන්න

State-Owned Enterprises in Sri Lanka continue to suffer massive losses in 2019

Aneetha Warusavitarana, Research Manager of the Advocata Institute was featured in the News1st English Prime Time Bulletin that was aired on the 26th of June at 9.00 PM. Discussing the loss-making SOEs Aneetha recommended reforms which include compiling a comprehensive list of all State-Owned entities, an ongoing monitoring setup with a clear framework to track Key Performance Indicators in line with the OECD’s guidelines on corporate governance of state enterprises and strengthening the Parliamentary Committee on public accounts, and the Parliamentary Committee on public enterprises to improve accountability within the system

“In 2019 the total losses sustained by the key 52 state entities amounted to rupees 151 billion, with budgetary support amounting to 49 billion. Of this 49 billion budgetary support, 20 billion was allocated for recurrent expenditures on salaries and overhead costs. The key reason for these losses is the lack of oversight and governance structures in state enterprises” 

Click here to watch

Impact of COVID-19 on small and micro enterprises, unregistered businesses

Aneetha Warusavitarana, Research Manager of the Advocata Institute, was featured in the News1st English Prime Time Bulletin that was aired on the 04th of May at 9.00 PM. Discussing the impact of Covid-19 on small and micro enterprises, Aneetha weighed in on certain stakeholders such as unregistered businesses that remain invisible to policymakers and government officials.

“Even though Sri Lanka is seeing a relaxation of curfew measures, it will be a while before the economy opens fully and returns to a pre-Covid level of activity. Business registration is vitally important within this context as it is a prerequisite to opening a bank account, being eligible for formal assistance and even applying for something like a curfew pass.” 

Click here to watch

Advocata mentioned in article on Price Controls during COVID-19

Excerpt from an article on Roar

Price Controls: Who Will Pay For The Canned Fish And Dhal?

“But as Gunasiri attends to his next customer, a thought weighs heavy on his mind— he has just made a loss of Rs. 60 on that sale. And by the time he exhausts his stock of dhal alone, he would have made a loss of a few thousand rupees. A princely sum, considering the circumstances."

“It is commendable that the government has taken steps towards easing the burden on the poor, especially during a time like this. But, controlled prices can also lead to shortages, as producers lose incentive and ability to stock these products. In addition, when imposed with no prior warning, price controls force smaller businesses to take losses, which can sometimes be inequitable. Despite the good intentions behind this decision, it has the potential to make the situation worse,” Aneetha Warusawitarana, Research Manager, Advocata Institute told Roar Media. 

Read full article here.

Survey reveals that 81% of Sri Lankans claim that state enterprises do not provide enough services to justify losses

Advocata Research Analyst, Aneetha Warusavitarana was featured on News 1st’s Prime Time English News where she explained the findings of Advocata’s latest public opinion poll on State Owned Enterprises.

855 respondents across 8 provinces were asked the question “Do you think the losses sustained by state enterprises are justified given the services they provide?” To which, 81% answered “No”.

Aneetha Warusavitarana on pension reform

Advocata Research Analyst, Aneetha Warusavitarana joined Biz 1st In Focus to discuss the window of opportunity for pension reform, given that new labour reforms are in dicussion.

We all know that the government sector pension is non-contributory – the entire burden of payment is shouldered by the government – and given our fiscal position, this is an area where reform should be seriously considered.

However, with new labour reforms in discussion, there is now a window of opportunity for the government to bring in a much needed contributory pension scheme!