INTRODUCTION OF ECONOMIC POLICY FORMULATION FOR SRI LANKA
Added on 2022-06-07
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ECONOMIC POLICY FORMULATION FOR SRI LANKA
Introduction
A government's economic development policy decides that the country's future is wealthier or
poorer than others. Hence, policymakers need to analyze and prepare sound economic policies
so that the country can enjoy amenities and acquire the development of society. Sri Lanka is
still fighting for economic development with unstable unplanned policies in the last decades.
Therefore, herewith discuss and provide recommendations for proper long-term economic
policies for Sri Lanka relating to non-economic development, proper tax structure, revenue
generation, legal system, geopolitical aspect, foreign exchange reserve and banking system.
Well-developed policies for the long term will accelerate and transform a country into further
development.
Introduction
A government's economic development policy decides that the country's future is wealthier or
poorer than others. Hence, policymakers need to analyze and prepare sound economic policies
so that the country can enjoy amenities and acquire the development of society. Sri Lanka is
still fighting for economic development with unstable unplanned policies in the last decades.
Therefore, herewith discuss and provide recommendations for proper long-term economic
policies for Sri Lanka relating to non-economic development, proper tax structure, revenue
generation, legal system, geopolitical aspect, foreign exchange reserve and banking system.
Well-developed policies for the long term will accelerate and transform a country into further
development.
Importance of Having A Proper Economic Policy
According to The World Bank open data (2019) in 1970 Sri Lanka was a much richer country
than Singapore. Sri Lanka GDP in 1970 was 2.2 bn US dollars and taken 67th place in the world
while Singapore GDP was at 1.9 bn US dollar and ranked 74th in the world. Then the economic
situation was dramatically inverted and at 2019 Singapore GDP reached 372 bn US dollars
while having enormous growth compare to history and Sri Lanka GDP was 84 bn US dollars
and it was less than a one- fourth compared to Singapore. Several studies have demonstrated
that Singapore has achieved its remarkable growth by being commensurate with globalization,
laissez-faire market, education system and adapting to strict practical government policies.
The importance of a sound economic policy is that the government achieves the desired
objectives with rapid and sustainable growth while maintaining economic stability. The main
government objectives for the economy are rapid economic growth, achieving full
employment, balance of payments stability, price stability and redistribution of income.
(Fonseka,2020, p.221). A government can function under different policies to achieve desired
objectives and it will be decided the particular government success or its otherwise.
1
According to The World Bank open data (2019) in 1970 Sri Lanka was a much richer country
than Singapore. Sri Lanka GDP in 1970 was 2.2 bn US dollars and taken 67th place in the world
while Singapore GDP was at 1.9 bn US dollar and ranked 74th in the world. Then the economic
situation was dramatically inverted and at 2019 Singapore GDP reached 372 bn US dollars
while having enormous growth compare to history and Sri Lanka GDP was 84 bn US dollars
and it was less than a one- fourth compared to Singapore. Several studies have demonstrated
that Singapore has achieved its remarkable growth by being commensurate with globalization,
laissez-faire market, education system and adapting to strict practical government policies.
The importance of a sound economic policy is that the government achieves the desired
objectives with rapid and sustainable growth while maintaining economic stability. The main
government objectives for the economy are rapid economic growth, achieving full
employment, balance of payments stability, price stability and redistribution of income.
(Fonseka,2020, p.221). A government can function under different policies to achieve desired
objectives and it will be decided the particular government success or its otherwise.
1
Inclusion of Non-Economic Aspects/ Elements in The Policy
Economic growth is as an increase of the national income / national output and economic
development is not only the growth but also the improvement of living standards of people. As
describe in different studies non-economic elements including social, cultural political and
administrative dimensions are plays significant role not only to the economic growth but also
influencing government decisions on economic policies and its implementation. In social
science perspective the economic growth and government strategies are in debate in different
aspects. However, its mostly emphasize the importance of government expenditure on
planning non-economic aspect and its plays unique role in deciding economic growth. When
consider the economic growth of South Korea and Turkey during past half century they have
achieved remarkable economic growth due to their successful government policies
implemented based on non-economical drivers as cultural planning, dedicated leadership to
implement government planning, citizen having social trust and their positive attitude and
commitment towards the national well-being and the cultural believes. (Onder & Nyadera,
2019).
According to World Bank national accounts data in 1970 per capita of Turkey was 4220 US
dollars and after half century its reached 15125 US dollars of per capita income. And South
Korea had enormous growth of 1793 US dollars to 28675 Us dollars within 1970 to 2019.
Consider the Sri Lanka, in 1970 per capita was 711 US dollars and after half a century its only
rose to 4011 US dollars and several studies showed that the country still struggles to gain
economic prosperity without having proper policies.
According to human development reports of united nation development program the Human
Development Index of Sri Lanka in 2019 is 0.782 and 72nd in the world. In 1990 HDI was
0.629 and increase percentage within the 10 years was 24.3 percent. According to the studies
whether the Sri Lanka gains some increase in HDI the country is not focusing the non-
economical drivers as cultural planning, dedicated leadership, citizens’ social trust and positive
attitude and commitment which were the key drivers of Turkey and South Korea economy. In
organizational terms Sri Lanka is not powerful, not disciplined and uncoordinated, and had not
2
Economic growth is as an increase of the national income / national output and economic
development is not only the growth but also the improvement of living standards of people. As
describe in different studies non-economic elements including social, cultural political and
administrative dimensions are plays significant role not only to the economic growth but also
influencing government decisions on economic policies and its implementation. In social
science perspective the economic growth and government strategies are in debate in different
aspects. However, its mostly emphasize the importance of government expenditure on
planning non-economic aspect and its plays unique role in deciding economic growth. When
consider the economic growth of South Korea and Turkey during past half century they have
achieved remarkable economic growth due to their successful government policies
implemented based on non-economical drivers as cultural planning, dedicated leadership to
implement government planning, citizen having social trust and their positive attitude and
commitment towards the national well-being and the cultural believes. (Onder & Nyadera,
2019).
According to World Bank national accounts data in 1970 per capita of Turkey was 4220 US
dollars and after half century its reached 15125 US dollars of per capita income. And South
Korea had enormous growth of 1793 US dollars to 28675 Us dollars within 1970 to 2019.
Consider the Sri Lanka, in 1970 per capita was 711 US dollars and after half a century its only
rose to 4011 US dollars and several studies showed that the country still struggles to gain
economic prosperity without having proper policies.
According to human development reports of united nation development program the Human
Development Index of Sri Lanka in 2019 is 0.782 and 72nd in the world. In 1990 HDI was
0.629 and increase percentage within the 10 years was 24.3 percent. According to the studies
whether the Sri Lanka gains some increase in HDI the country is not focusing the non-
economical drivers as cultural planning, dedicated leadership, citizens’ social trust and positive
attitude and commitment which were the key drivers of Turkey and South Korea economy. In
organizational terms Sri Lanka is not powerful, not disciplined and uncoordinated, and had not
2
strong political leadership for years. (Dunham & Kelegam,1996). According to the World
Bank Data (2019) Sri Lanka political stability is – 0.23 in 2019 and at 115th place.
Figure 1: Political Stability Index
Source: The World Bank. (2019).
As shown in Figure 1, Sri Lanka political condition is not stable for past 10 years and Singapore
is in stable political condition for years. One of a reason behind the Singapore political stability
is their sound policies for quality of governance including managing a plural society and rule
of law (Hettiarachichi,2010)
According to Transparency International Sri Lanka (2019), Sri Lanka's Corruption Perceptions
Index (CPI) is 38 in 2019 and ranks 93rd in 180 countries. In terms of global content, New
Zealand and Denmark index is 87th and score first among the less corrupt countries. Singapore
index is 85th and rank 4th out of 180 countries. According to the literature review, CPI
countries with comprehensive and systematic regulations have 70 averages and other countries
with similar regulations and poorly managed countries have 34 and 35 respectively.
-1.34
-0.94
-0.72 -0.72 -0.61
-0.33
0.09 0
-0.07 -0.14 -0.23
1.18 1.17 1.19 1.37 1.38
1.19 1.31
1.5 1.62 1.49 1.53
-1.5
-1
-0.5
0
0.5
1
1.5
2
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sri Lanaka Singapore
Bank Data (2019) Sri Lanka political stability is – 0.23 in 2019 and at 115th place.
Figure 1: Political Stability Index
Source: The World Bank. (2019).
As shown in Figure 1, Sri Lanka political condition is not stable for past 10 years and Singapore
is in stable political condition for years. One of a reason behind the Singapore political stability
is their sound policies for quality of governance including managing a plural society and rule
of law (Hettiarachichi,2010)
According to Transparency International Sri Lanka (2019), Sri Lanka's Corruption Perceptions
Index (CPI) is 38 in 2019 and ranks 93rd in 180 countries. In terms of global content, New
Zealand and Denmark index is 87th and score first among the less corrupt countries. Singapore
index is 85th and rank 4th out of 180 countries. According to the literature review, CPI
countries with comprehensive and systematic regulations have 70 averages and other countries
with similar regulations and poorly managed countries have 34 and 35 respectively.
-1.34
-0.94
-0.72 -0.72 -0.61
-0.33
0.09 0
-0.07 -0.14 -0.23
1.18 1.17 1.19 1.37 1.38
1.19 1.31
1.5 1.62 1.49 1.53
-1.5
-1
-0.5
0
0.5
1
1.5
2
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sri Lanaka Singapore
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