Sri Lanka has woken up to a brand-new year with a promise of better things to come – the storms and crises are hopefully things of the past. During a recent LMDtv interview, the Chairman of Advocata Institute Murtaza Jafferjee said that “Sri Lanka is enjoying positivity after many years of negativity.”

He explained: “Economically, this government and the country are enjoying a spot in the sun. Many macro headwinds such as inflation, high interest rates and falling exchange rates have reversed…”

“We have had deflation, which doesn’t mean that prices have come down but that the rate of price increases is negative – because energy prices and interest rates are down, and tourism is up. Even the weather gods have been very kind to us and we can expect a good harvest.”

“Socially, though the top 50 percent of the population are enjoying feel-good times, the bottom half is still struggling.”

As Jafferjee noted, “the poor are much more vulnerable to crises. Their real savings have been destroyed by inflation; and their real incomes have also been impacted because the cost of living rose. So though they are in a much better place than they were two years ago, they have not fully enjoyed the benefit of the recovery.”

Sri Lanka’s path to sustaining this recovery is growth, he opined: “Inclusive economic growth is extremely critical because it will improve the quality of life of all our people. If you look at the gap between the most advanced countries and nations like ours, it has much to do with wealth inequality.”

In addition to the aspiration towards a better quality of life, growth is also critical for Sri Lanka to manage its debt, he explained: “We are carrying an enormous amount of debt and even though we have come out of a very light debt restructuring, we have a problem of burden sharing.”

Meanwhile, the Chairman of Advocata Institute noted: “During the crisis, the adjustment process of burden sharing was very inequitable. Many wealthy people holding financial assets were let off whereas they should have been subject to haircuts at a much deeper level.”

“Even in terms of taxation, there are plenty of tax concessions and holidays that should have ended since there was no moral or economic justification to continue with them – but they were not touched,” he lamented.

He emphasised that Sri Lanka must grow faster than its debt, which carries very high interest rates. “Our debt is compounding at a faster rate than growth,” he cautioned, adding that Sri Lanka’s growth has to be sustainable at a minimum of five percent: “Otherwise, the country will have to restructure its debt again in four to five years.”

Jafferjee explained: “Growth solves a lot of problems since there will be a trickle-down effect. When an economy accelerates, tax collection will be faster than the rate of economic growth and the government will have more money.”

He continued: “That’s because, when businesses are doing well, they will enjoy bigger bonuses; they will pay out much more profits; and people will buy discretionary items that have a higher [rate of] taxation. So the government will collect more revenue when there’s growth than when there’s no growth.”

Growth requires the efforts of everyone – the government, public and private institutions, businesses and people.

Jafferjee also emphasised the importance of continuous development for all individuals. He noted: “You have to become a lifelong learner and focus on how to improve your own personal productivity. We all have to play a role in bettering ourselves; and through that, we can better our workplaces. It’s the aggregation of 22 million people’s work that adds up to the output of the country.”

In summing up, he observed: “We have been so used to thinking negatively because we’ve been let down so many times and the wrong ideas have been put in our heads. So we have an enormous role to play in resetting our minds and improving ourselves.”