The Central Bank has reported economic growth at 8.3%, inflation at 6.7%, an unemployment rate of 4.2% and a per-capita income of US $ 2849 in 2011, a sharp increase from $ 2400 in 2010 – a success story which we should be proud of. This means the income of the average household in Sri Lanka which is 4 persons according to the Central Bank report has risen by Rs 14,035 per month between 2010 and 2011 - something which is difficult to imagine. This average income is obtained by dividing the national income by the population. The mean household income as determined by the Census and Statistics Department is only about 1/3rd of this income, providing evidence for the growing gap between the rich and the poor in this country. Given the sharp increases in prices consequent to the increase in fuel prices, the inflation rate of 6.7% also appears to be an underestimate. If unemployment figure was as low as 4.2%, we would expect salaries in the private sector to increase sharply due to the difficulties in finding labour, but no such increases are observed. These apparent contradictions have made economists question the accuracy of much of the central bank data.
Since there are no employment exchanges or records on the number joining the labour pool or seeking employment each year, the figures are at best estimates. In drawing up these estimates any form of part employment, for however short a period is considered being employed, making the figures even more unrealistic.
It is not very difficult to manipulate inflation figures. Not only are prices estimates but also the weights attached to the different components like food, clothing, utilities, transport, health and communications can be and have been changed twice in the last ten years. While such changes are necessary to reflect changes in lifestyle, no attempt has been made to justify such changes. Quite arbitrarily, the index removed alcohol and tobacco from the list although expenditure on these items forms an important component of many household expenditures.
Per-capita income given in US Dollars is affected by the exchange rate. By maintaining the exchange rate at an unrealistic level, the government is able to show per-capita income in US dollars higher than what it should be. Since the dollar has been devalued by more than 10% this year, there has to be an increase of 30% in per-capita income in rupees to obtain a 20% increase in per-capita income in US dollars similar to that recorded last year.
Everybody knows that the growth shown by the country is boosted by many unproductive expenditures like defence and by massive increases in government infrastructure projects financed with loans.
The Central Bank expects the growth rate to decrease to 7.2% this year and some economists expect it to decrease even more to just over 6 %. These are some of the signs that our economy is not doing too well. The increase in imports in 2011 meant that we spent $ 9710 million more on imports than our export income. In 2010, this difference was only $ 4810 million. Since we earn only around $ 4000 million from remittances sent by our citizens working abroad, the 2011 gap has led to a serious balance of payments crisis. The rupee was devalued and high duties imposed on consumer items to discourage imports. These measures will result in still higher prices for oil imports, general increases in prices and demands for higher pay.
Although Pakistan recorded several years of high economic growth, the growing differences in income between the rich and the poor resulting from the IMF imposed neo-liberal agenda, corruption and the lack of accountability referred to as the Musharaff syndrome is thought to be the main reason for the fall of Musharaff from power in 2008. Is Sri Lanka moving in a similar direction?
