Sri Lanka President calls for steady national policies

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has called for stable national policies which do not change with every new administration in the wake of severe policy reversals that led to a currency crisis and economic collapse.

We should all follow one national policy. we can engage in our daily debates. However, we need to make one national policy.

“If we continue with that national policy, we will never fail,” President Wickremesinghe said addressing the opening of a pharmaceutical laboratory.

“We made the mistake of changing policies with every change of government. Even when the ministers changed within the government, the policies were changed. So how can you expect the country to prosper?”

Though some policies change with every government, others stay unchanged, backed by enabling law, critics say.

A key national policy that is unchanged is to operate a pegged exchange rate regime with a policy rate, leading to forex shortages, currency crises followed by poverty, import substitution and protectionism.

Sri Lanka’s intermediate regime central bank which prints money despite having a reserve collecting peg has mis-targeted interest rates and created forex shortages almost without pause from 1950, leading to severe currency depreciation and economic controls in later years.

There is broad agreement among economists in the country that the ‘impossible trinity’ monetary regime should continue, and that its policy errors or ‘flexible’ policies should be compensated by depreciation and inflation despite its harmful effects including malnutrition of little children.

Politicians have also enacted laws to rob the economic freedoms of the people through the Import and Export Control Law and Exchange Controls, instead of controlling the ability of the central bank to mis-target rates through open market operations.

Wickremesighe when he was Prime Minister in a previous administration relaxed some forex laws, but failed to end flexible or discretionary monetary policies of the central bank through which forex shortages are created.

Wickremesinghe said the pharmaceutical firm that was being opened on October 10 was initiated during the time when he was Prime Minister and Maithripala Sirisena was President.

“This is one result of the initiatives taken by the Good Governance regime,” President Wickremesinghe said.

“We worked in silence. Then the government changed and a new government was elected. After Gotabhaya Rajapaksa came to power this program was not halted.

“Generally, when one government loses power and another one comes to power, the work done by the previous government is halted. However, this project was not stopped and now I am declaring this establishment open as the President.”

The pharmaceutical company also planned to export, he said.

“He is a farsighted individual. He had a good understanding of the drug shortage the country is facing,” President Wickremsinghe said.

“He also understood that the local market is insufficient. Therefore, this company has taken steps to develop our export industry, not only to supply medicines needed domestically but also by producing medicines needed internationally.”