State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal says that in spite of pressure mounting on the government to extend the current lockdown further, it should tread cautiously.
State Minister Cabraal, who served as the Governor of the Central Bank, from 2006 to 2015, said that lockdowns caused irreparable damage at a time the national economy was under severe pressure due to COVID-19. The lockdowns could be quite devastating and inflict unbearable losses on the economy, he noted.
Cabraal pointed out that those who relentlessly pushed for lockdowns didn’t take into consideration other vital factors. He said the people should strictly follow health guidelines and get vaccinated, as quickly as possible.
In addition to State Minister Cabraal, Aviation Minister and SLPP strongman in Gampaha, Prasanna Ranatunga, also opposed the lockdown.
Noting that a section of the government, too, had called for the lockdown, State Minister Cabraal urged all stakeholders to examine the situation in its entirety without focusing on selected factors.
The Island: State Minister, you emphasised several times how lockdown undermined the national economy. You also pointed out difficulties caused by it. However, the government not only declared a lockdown on August 20 for ten days, but extended it till September 6. Did you ask/advise the administration against it?
State Minister: Medical authorities have been constantly requesting the lockdown of the country in order to deal with the pandemic. Unfortunately, the counter argument setting out the economic damage that is caused as a result of such closure has not been presented adequately. That is why it’s important that the facts, figures and impact of a lockdown are known and understood, so that more informed decisions can be made in the future.
The Island: In 2018 and 2019 govt collected over Rs. 1,900 as revenue. But, that figure dropped to little over Rs. 1,300 billion in 2020. Can you blame that on Covid because the Opposition says the government lost over Rs. 500 billion by doing away with a spate of taxes in addition to the reduction of duty on sugar to 25 cents from Rs. 50 per kilo?
State Minister: In 2019, the government had estimated to collect about Rs. 2.2 trillion as revenue. However, due to the sharp contraction of the economy following the massive Easter Sunday carnage that sent shock waves across the world and debilitated the country’s vibrant tourism industry, the actual revenue dropped drastically to about Rs. 1.9 trillion only: a decrease of about Rs. 0.3 trillion! Hence, it was clear that the abnormally high rates of income taxes, VAT and other duties were counterproductive and were not yielding the estimated results. That is why the new government reduced the tax rates so that the business sector could be given a boost to grow fast and the economy could revive and recover. In fact, if the government had not reduced taxes at that time, the entire business sector would have collapsed because by that time, businesses were stagnant due to the high interest rates and high taxes. Unfortunately, however, the progressive policy measure of lowering all taxes including customs duties, did not lead to the intended consequence of the expected stimulation of the economy mainly due to the pandemic effect and lockdown. However, it must be said that the economic fallout from the pandemic would have been a lot worse and people driven to severe poverty and despair had the taxes not been reduced by end 2019. In fact, in such a scenario, the entire country may have even come to a grinding halt, with the industries and services sectors collapsing.
(Source: The Island – By Shamindra Ferdinando)