Covid 19 pandemic is a worldwide pandemic. It made so many health problems and economic troubles. Hence during this pandemic, the world economies were faced with many economic crises. Because of this pandemic, more countries are on lockdown and their business fell. After a year of a global economic slowdown that saws stagnation of stock markets and consumer activity, the covid 19 lockdown and other precautions are taken in early 2020 threw the global economy into crisis. Within seven months, every advanced economy had fallen into recession. Not only the world but also Sri Lanka face so many crises in economics.
And also I hope to include this Article.
1. Sri Lankan economic crisis in the current situation
2. Suggestions and solutions for this crisis
And what are the suitable solutions for this situation?
In the present period many countries face food scarcity, poverty is increased by these virus diseases, and also manage inflation is increasing by day today. I think when we talk about the world, many economies face inflation, food scarcity, financial system problems, and unemployment problems it is a bad impact of this economic crisis.
Sri Lankan Economy Crisis in the current situation
Sri Lanka is a developing country. Covid 19 pandemic also break up our economy. Because of covid 19 pandemic, our unemployment, and poverty is increased in services, ports and airports are helping the country’s newfound state as a shipping and aviation hub and also the tourism industry is stayed because of this pandemic.it gave a very bad effect on our gross domestic product. With the onset of the covid 19 pandemic lingering concerns over Sri Lankans’ slowing growth. Money printing and government debit have slipped over into service of the sovereign rating downgrades. Import controls import substitution have intensified after heightened monetary instability coming from debt monetization, Sri Lanka is among the top 10 countries in the world in its handling of the covid 19 pandemic.
Services accounted for 58.2% of Sri Lanka’s Economy in 2019 up from 54.6%in 2010, industry 27.4% up from 24.4% a decade earlier, and agriculture 7.4% though there is a competitive export agricultural sector technological advances have been slow to enter the protected domestic sector. Sri Lanka is the largest solid and industrial tires manufacturing Centre in the world and has an apparel sector that is moving up the value chain. But rising trade protection over the past decade has also caused concern over the resurgence of inward-looking policies.
Goods shortage, goods scarcity, poverty, and inflation are increased with this covid 19 pandemic. And also so many businesses are falling down and so many peoples are losing their jobs. The tourism industry, farmers and so many industries are falling with this pandemic. It is a very bad impact on our gross domestic product and our economic growth.
As well as in these days Sri Lankans face a very difficult period. One side covid 19 pandemics. And another side economic crisis in our country and one of the side fertilizer shortage and inflation scares. And also poverty, limited exports, and increasing unemployment is a very huge bad impact on the economy of our country.
Suggestions and solutions for this crisis
Sri Lanka Central Bank makes the policies and they control the economy. Under the covid 19 situation, we had so many economic crises. We must rearrange our economy well. According to the central bank, they have two main purposes. They are,
1. Maintain the economic and price stability
2. Maintain the financial system stability
According to our monetary policy, its main purpose is economic and price stability. When we talk about monetary policies, it means maintaining the economy and price stability and managing the money supply and interest rate.
According to these monetary policies, we must control our economic crisis. I wrote on the previous page, that inflation is increased in our country. Then we can use this policy to control it. We can use the contractionary monetary policy. They are increasing the interest rate and decreasing the money supply. These days our country's printing of money is one of the reasons for inflation.
We can do the interest rate is increased. Then people do not get the loans. And money supply is decreased and inflation is controlled.
And also we can use a policy to the shortage of dollars. it is a very huge problem. Because without dollars we can’t necessary things. There are foods, gas, cement, and so many necessary things.
But we can earn dollars in some activities. One of the main income was the tourism industry. But covid 19 pandemic is destroyed it, and if we want to earn dollars we can start the tourism industry again with health guidance. And also we can bring the tourists who got the two vaccinations. Then we can earn dollars and we can conduct our economy step by step.
We can do limiting the unnecessary goods. For example, we import potatoes. But potatoes are produced in Sri Lanka. As well as coconut oil, rice is imported from abroad. But they are made in Sri Lanka. It is not a necessary import. We can encourage our local productions. Then we can save the dollars for our necessary things.
we should increase our exports. We can get an idea of it, we must diversify our exports. Government must support it. In we produce the garment items, fishes, pottery and ceramics spices, etc. we can add another local thing to our exports. We can increase our agricultural sector and industrial working sector. Then we can go to economic growth in our country. If we want sustainable development, we should control the price level and inflation. With Maintain economic and price stability we can move to good economic growth.
Because of covid 19 pandemic, our savings and investments are decreased. But we conduct it step by step we can develop our country. Then we must use the good policies and we keep up it very well.
I mentioned that inflation is increasing year by year in Sri Lanka.
According to this table, the Sri Lankan inflation rate increased by 2.63%.it is a very bad impact on the Sri Lankan economy. so the Sri Lankan economy wants to rearrange its policies for controlling inflation. Then we must decrease the money supply.
On the other hand, Sri Lanka has a fertilizer case with organic farming. The government has refused to end its aggressive push for complete farming calming that the short-term pain of going organic will be compensated by its long-term benefits.it has also promised to supply farms with organic fertilizers as an alternative. Using organic fertilizers in agriculture is a good idea for all the healthy and wealthy. But in this period we can’t use it correctly. Because we are planting with hybrid seeds. This is a chain of the economic system. If the farmers are not farming we must face food scarcity. We know about these days vegetable prices are very increased. And in Bandalawela, Badulla, and the middle country vegetables are not found. Then prices are increasing like 500rs per one kilogram. It was a very bad effect of this pandemic and also fertilizers scarcity. Around all information, we come back to only one question. It is inflation. We must increase the interest rate and decrease the money supply.
We talk about the variable reserve ratio, central bank increasing it then the ability to create the debit of the common bank were reduced. Then people default to get loans. It helps to compress the money supply. When compress of the money supply the inflation was reduced then, then although the covid 19 situation the made of production become activate. On the other hand under the inflation interest rate of Sri Lanka would be rearranged. If we want to increase the deposit rate of the banks, then people to save money, and intake consuming goods, and services. And also money circulation becomes reduced. We can reduce inflation and rearrange the mode of production.
And also Central bank gives 150 billion loans to businessmen and a 9% interest rate
Overall we can identify this problem. We want new policies and a new method to develop our country. And also we can use these monetary policies and we must develop a mixed economic system. Private ownership of some goods should give to the government sector. Examples are gas, petroleum oil, sugar, etc. And they can control it well. Some government ownership should give to the private sector and the government can develop the country using this method and policies.