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Impact of Covid-19 pandemic: Poverty levels to rise

22 May 2020

o Government duty bound to address issue: Economist o Looking into issue through committee: Govt. By Skandha Gunasekara A rise in poverty levels due to the Covid-19 pandemic was inevitable and the Government is duty bound to address poverty levels and those who have fallen victim to abject poverty, opined University of Colombo Professor of Economics Sirimal Abeyratne, speaking to The Morning. Prof. Abeyratne explained that despite a majority of the poor living in rural districts, the pandemic would not affect them by and large. “The majority of our poor are in the rural sector, so we know that they are essentially related to the domestic agriculture sector, because there are too many people producing too little in this sector.” However, he shared: “As far as the impact of Covid-19 is concerned, the groups of people more vulnerable to this are mostly the urban-based poor; daily wage earners and those in the informal sector, and not necessarily the rural poor engaged in agriculture, because they are anyway less dependent on the modern economic activities that have been affected by Covid-19.” He noted that overall, poverty levels in Sri Lanka would increase as a result of the Covid-19 outbreak. “In aggregate terms, there should be an increase in the number of poor as well as the depth of poverty.” He said that with regard to the Government’s steps to alleviate poverty levels, there were two requirements – short term and medium term. “In the short term, governments have to intervene in order to mitigate the Covid-19 impact on poverty, through increased spending. That’s why governments are increasing spending in various ways, and even paying the salaries of the unemployed in most advanced countries. “I don’t know to which extent those actions can be undertaken by our Government; the reason being that we were not doing well, even before Covid-19. So after Covid-19, given the narrow fiscal space and increased debt burden, we don’t have much space to take care of the poor. However, I think the Government has the responsibility of taking care of the poor.” He then noted that over a million employed in the domestic agricultural sector would have to be shifted to the formal sector if poverty levels in the country were to be reduced. “The medium-term scenario would be where the Government takes people out of poverty, which means that it will have to take people out of the agricultural sector. Many people – about 1.5 million people, I believe – should leave the agriculture sector for non- agriculture, modern industry, and service sectors. People should be encouraged to move from the informal to the formal sector, after an expansion in industry and services. These are medium-term development strategies. “In fact, without formal employment and income, there would be no way to reduce poverty levels,” Prof. Abeyratne said. Meanwhile, Government Spokesman and former State Minister of Investment Promotion Keheliya Rambukwella said that a committee had been appointed to look into the matter of uplifting the economy post Covid-19. “Sri Lanka is not singled out in the fight against the economic conditions (as a result of Covid-19). A forum has been appointed with the leadership of the Governor of the Central Bank to find ways and means on how best to handle the economy. Obviously, it will not be the same as before, and there will be certain hardships we will have to face, but this is not unique to Sri Lanka,” he said. He added that a ban on imports could be one measure adopted by the Government. “I cannot tell you offhand, but I think they are concentrating on halting certain unnecessary imports because managing the Balance of Payments (BOP) and the preservation of the rate of exchange are crucial.”

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