In this Research Bulletin, we provide a detailed analysis of Sri Lanka’s trade performance during 2013 and the first quarter of 2014. The review highlights the external and internal driversthat shaped Sri Lanka’s external trade developments. The key challenges the country faces in terms of tweaking trade policy to meet the twin objectives of reducing trade deficit and increasing government revenue is discussed in detail. The analysis shows that reducing the trade deficit by curtailing imports may be feasible in the short run, but it will adversely affect government revenue and economic growth.
Variations in the tobacco excise tax affects Rs. 10s of billions in government revenue. Taxation and pricing has been inconsistent. The lack of a consistent method allows wide discretion to officials in determining the tax. Parliament should adopt a formula to keep taxation in line with national policy, treat stakeholders fairly, and prevent discretion from being abused.
Sri Lanka hopes to increase export revenue to USD 20 bn by 2020. This target is perceived as ambitious; but, compared to the country’s growth targets and the performance of regional peers, it is mediocre. This Insight explains that to be confident of setting and achieving ambitious export targets, Sri Lanka must go beyond symptomatic remedies and address the root causes of underlying problems with its export strategy.
Sri Lanka’s International Trade: Performance and Prognosis analyses Sri Lanka’s international trade with special reference to its trade deficit, apparel sector and tea exports. It also analyses and evaluates the policies and structural issues Sri Lanka’s trade faces.
The working paper was presented at the CEPA Annual Poverty Symposium held in September 2013. The education sector had witnessed an overall decline in terms of budgetary allocations, and was also subject to inequality in distribution of educational opportunities within the country. Education inequality has implications for addressing poverty alleviation and equitable development through education.
Sri Lanka Budget 2013 : Increasing Assistance and Vulnerability presents an analysis of the contradictory nature of the Budget 2013 through increased assistance to the poor, while at the same time increasing their vulnerability. The analysis of Budget 2013, rather than reiterating the general criticisms reported in the press, presents an in-depth analysis of how the Budget 2013 actually represents a retreat from the welfare state and the impact of the ever increasing defense budget. It further addresses the viability of the measures introduced for the assistance of Small and Medium Enterprises (SMEs), the extent of executive domination of the Budget, the inconsistency of the Budget with the Constitution and the feasibility of the macroeconomic targets set in this Budget.
This report provides a detailed analysis of the main reasons attributed to the power crisis prevailing in Sri Lanka during a greater part of the year. It identifies how these reasons; namely, the unexpected high growth in demand, shortage in generation capacity, reduced rainfall in catchment areas and the breakdown of the Chinese-built coal power station, cannot fully explain the crisis. The report also classifies a policy decision which has been implemented to reduce costs but may have been utilized rather aggressively, resulting to have contributed to the power crisis.
The EPF’s management of equity investments are seriously at odds with its mission. It has hugely underperformed the All Share Price Index (ASPI), and earned only one fourth of what it would have earned if the same investment had been placed with the usual no-risk-low-return government securities, where 95% of the EPF funds are placed. Additionally, in 2010, the Employee’s Trust Fund’s (ETF) investments in equity performed 6 times better than the EPF’s investments in equity.
The report summarises Sri Lanka’s macroeconomic environment, analysing the 2012 budget and providing a comparative study of government expenditure. It finds that the focus of government expenditure has shifted from funding welfare activities to funding infrastructure projects. It also considers the amount of government budget allocated under the executive presidency, inconsistencies in taxation policy and a summary of government expenditure and revenue.
The World Bank’s ‘Doing Business Index’ measures the ease with which domestic small and medium sized enterprises to do business. Between 2011 and 2012, Sri Lanka’s rank in the Doing Business Index rose by 9 places, from 98th to 89th. However, an analysis of Sri Lanka’s rise indicates that it was mainly attributed to a jump in the strengthening investor protection category, and that the country’s rank declined or performed poorly in the remaining 9 indicators.