Dr. Indrajit Coomarasamy Highlights the Risks of Subsidies in Sri Lanka’s Economic Recovery

Former Central Bank Governor Dr. Indrajit Coomarasamy has issued a caution against Sri Lanka reverting to previous practices of subsidizing sectors such as fuel, electricity, and fertilizer, highlighting the unsustainability of such actions.

Speaking at an event, Dr. Coomarasamy emphasized that subsidizing these sectors would hinder Sri Lanka’s progress and lead to an unsustainable financial path. “It’s unsustainable. We don’t have the money to do it. To borrow money from abroad and to put it into that kind of activity you just end up in a debt crisis. Because you don’t have the ability to earn the foreign exchange to pay that money back,” he remarked.

Regarding poverty alleviation, the former Governor advocated for the use of cash transfer programs like Samurdhi, now known as Aswasuma, as temporary solutions. He pointed out that the early implementation of the Aswasuma welfare program was advised to aid people in coping with upcoming austerity measures and to garner support for necessary reforms.

“We didn’t do that. And now we seem to be politicising it all over again. It is in a bit of a mess. We need to do that right. Again we have slipped back to the same mistakes” he stated, stressing the importance of rectifying these mistakes.

Dr. Coomarasamy also suggested that Sri Lanka could improve the efficiency and transparency of its welfare schemes through better identification and targeting of beneficiaries.

He underlined the role of technology in enhancing the welfare system, such as the adoption of a unique digital ID, which could significantly reduce fraudulent activities. However, he noted that such technological advancements face resistance due to potential misuse.

Dr. Coomarasamy concluded by expressing optimism that with these strategic measures, Sri Lanka could navigate its way out of the current financial crisis.