The government’s fiscal stimulus measures are affecting its revenue collection efforts badly amid a slowing down of all economic activities in the country in the wake of the coronavirus crisis, Prof. of Economics, University of Colombo Sirimal Abeyratne said.
“Fiscal stimulus measures such as cutting down taxes, providing subsidies and increasing government spending by providing employment could amount to a major budget deficit in the future. With the outbreak of the Covid 19 epidemic all economic actives have come to a standstill, which amounts to applying major fiscal pressure on the economy, Abeyratne told The Island Financial Review. He said the government has a poor track record in collecting revenue and this factor could impact the economy negatively amid the spreading of the Covid 19 in the country. ‘Amid those developments the Sri Lankan economy will not grow as expected this year, it was explained.
Abeyratne added – ‘The Central Bank reviewed the monetary policy stance/ monetary stimulus measures by reducing the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 25 basis points to 6.25 percent and 7.25 percent, respectively. This decision was taken in consideration of the urgent need to support economic activity with the rapid global spread of the COVID-19 pandemic and its possible further spread in Sri Lanka.
‘The world is trying to contain the spread of the cornonavirus by limiting interaction and transactions, through road blocks and by preventing people from travelling from one country to the other. In turn it would cause some economic slowdown due to limiting of imports and exports between and among countries.
‘Due to the limiting of physical movement of people, fuel prices would also tend to go down. That was quite visible during the recent past where global fuel prices went down with the lesser consumption fuel by major countries like China.’
Courtesy: The Island
