Economists advocate upcoming government to shift fiscal policy

Several leading economists expressed their dismay on the statement made by a high ranking official of the Central Bank who stressed on the need to maintain the present fiscal policy by the new government which will come in to power next year.

In an interview with Reuters news agency, the Central Bank’s senior deputy Governor, Nandalal Weerasinghe warned that Sri Lanka could lose access to global debt markets if a new government shifts away from the country's current fiscal policy.

"How can Nandalal make such a prediction without knowing the global debt market behavior in 2020 and beyond?," an eminent economist who wished to remain anonymous asked adding that in an ever changing world the upcoming government would be able to change fiscal policies accordingly.

Policymakers should start paying more attention to what’s called structural fiscal policies, that is, changes in both public spending and tax collection to aid the expansion of the productive potential of economies, he said.

“First, cyclical weaknesses should have to be overcome. High government debt and limited fiscal space also call for a change of strategy," he said.

The fiscal efforts over the last decade have done little to address the structural impediments to growth and there has been a slowdown in productivity growth since 2015 under the present regime. he added.

The Central Bank's conduct of monetary policy was questionable during the last couple of decades, especially during the previous Rajapaksa regime under a set of senior officials like Ajith Cabraal, P Samarasiri, Dr. Nandalal Weerasinghe and Ananda Silva whose names were mentioned in the Presidential Commission which had examined the bond issue, another well respected economist said.

Third, inequality has been trending up in many countries, despite much progress in raising living standards across the developing world in the last few decades.

Given this background, one cannot help but wonder whether the statement of Dr. Nandalal Werasinghe is anything more than his arrogant behavior along with an attempt to boost his own image which is already tarnished after the bond scam.

His credibility had been challenged in a motion submitted to the Colombo Magistrate's Court several months ago which named the Senior Deputy Governor of the Central Bank, Dr. Nandalal Weerasinghe and the retired Deputy Governor Ananda Silva as suspects in the Central Bank bond scam.