Thursday Nov 14, 2024
Thursday Nov 14, 2024
Monday, 25 March 2024 00:20 - - {{hitsCtrl.values.hits}}
UK Foreign, Commonwealth and Development Office (FCDO) Deputy Chief Economist Fergus Cumming
UK Foreign, Commonwealth and Development Office (FCDO) Deputy Chief Economist Fergus Cumming with British High Commissioner Andrew Patrick (fourth from right) and members of the Council for Business with Britain
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United Kingdom’s Foreign, Commonwealth and Development Office (FCDO) Deputy Chief Economist Fergus Cumming was in Sri Lanka recently to reaffirm the UK's commitment to Sri Lanka.
Appointed in October last year, Cumming has a wealth of experience to his role, having started his career at the Bank of England and later contributing significantly to the UK's response to the COVID-19 crisis. He is currently overseeing the FCDO's economics work on the Indo-Pacific region, Europe, and North America.
In an exclusive interview with the Daily FT, Cumming spoke on the potential to enhance UK-Sri Lanka relations, the challenges and opportunities for Sri Lanka from the perspective of FCDO and what role UK will play in the medium to longer term in helping Sri Lanka realise its fuller potential. Here are excerpts.
Q: Can you briefly outline the purpose of your visit to Sri Lanka?
I am here because the UK values its long and deep relationship with Sri Lanka. As Deputy Chief Economist of the Foreign, Commonwealth and Development Office (covering North America, Europe and Asia), a key part of my job is to engage with countries where the economic context is important for ongoing partnerships. That is of course a team effort, and we have a brilliant team based here in Colombo, as well as a full program of visits from other UK Government colleagues. But I was personally excited to come here and learn more about a country that has so much potential despite the near-term challenges.
Q: Can you explain the importance FCDO attaches to Sri Lanka and strengthening UK-SL relations?
The ties between our two countries are rich, historic and run deep. The relationships between our governments, our people and our economies have stood the test of time and we look forward to strengthening these into the future. My visit is just a small part of that. I was disappointed not to be able to join colleagues for the celebration of 75 years of diplomatic relations last year, but I am glad to be here to emphasise that our support extends beyond historic milestones and round numbers. In terms of our people, we have a large Sri Lankan diaspora in the UK from both Sinhala and Tamil communities. I was also delighted to see that there are now over 35 British Universities partnering with Sri Lankan institutions, which will reinforce ties between our citizens and contribute to human capital and economic growth in Sri Lanka going forward. Our economic relationship remains important for both sides. I flew here directly from London on a SriLankan Airlines flight and I know that, every year, thousands of British tourists make a similar trip, spending money here and often visiting friends and family. The UK is Sri Lanka’s second largest export market and there is still potential for those exports to grow. We are now into the second year of the Developing Countries Trading Scheme, which helps countries like Sri Lanka export even more to the UK by reducing tariffs. These are just a few examples that demonstrate FCDO and the UK Government’s commitment to building upon strong foundations in our relationship.
Q: From FCDO’s perspective, what are Sri Lanka’s challenges and opportunities?
I am visiting Sri Lanka at an important time. There was a sense in my meetings that people were beginning to see the results of the hard decisions that have already been taken. Indeed, some of the hard data speak for themselves. Two consecutive quarters of economic growth, inflation close to target and strong tourist numbers all point to an economy on the up. Alongside that, surveys pointing to improving business and construction sentiment paint a picture of broad-based economic progress. Perhaps most importantly, the Government has worked hard to keep the IMF program on track. The wide variety of stakeholders I spoke to pointed to the importance of the IMF program for Sri Lanka’s longer term economic future. That is great to hear.
But there is of course a lot to do. The reform agenda is demanding but achievable. Although we must recognise that some of the reforms are causing hardship for people today, it is important to balance that with the prosperity that the program should bring for these same people in the future. And it is clear that the IMF is approaching the issues of fair burden sharing and appropriate social safety nets very seriously.
Longer term, implementing the various policies might lead to some bumps in the road (for example, the near-term tick up in inflation as a direct result from the VAT tax rise), but these are manageable. In general, it is great to see the conditions being put in place for the structural reforms that will benefit the economy in the longer run, as well as keeping the IMF programme on track in the meantime.
I think the real challenge over the next few months will be maintaining this positive momentum. Some of these reforms have payoffs that may seem like they occur too far in the future. Some of the reforms may also feel difficult or expensive today. Especially in the run-up to an election, it might seem tempting to listen to the siren calls that argue for a path that diverges from the IMF program because it feels easier in the here and now. My assessment is that doing so would be a mistake. The key challenge is therefore to keep eyes on the prize, stay the course, and continue on a journey to finish the IMF program. I believe that gives the best chance of returning to broad-based growth and cementing prosperity for the Sri Lankan people for years to come.
Q: What role will UK play in the medium to longer term in helping Sri Lanka realise its fuller potential
Sri Lanka can trust the UK to be a partner through good times and bad. The UK is a shareholder of the IMF and we are a member of Sri Lanka’s Official Creditor Committee, so there are formal financial relationships between our two countries. But our support runs deeper, in a myriad of ways. By way of example, as I discussed with the State Minister of Finance Shehan Semasinghe during my visit, we are working on arranging discussions with my colleagues from the UK’s tax authority with their Sri Lankan counterparts to talk about revenue reform. In the private sector, we are working with a number of enterprises here on how to make the best of various schemes in place, including the Developing Countries Trading scheme I mentioned before. Ultimately, it is important to recognise that an economically strong Sri Lanka is good for the Sri Lankan people, good for the South Asian region and good for the rest of the world. The UK will continue to play a role in helping Sri Lanka deliver its full potential.
Q: What is FCDO’s outlook for economic growth globally and in the UK in 2024 and 2025?
The next couple of years of global growth can be seen through three distinct but related lenses. First, economies around the world are finding their feet after several years of economic shocks that have buffeted many countries off course. A global pandemic, followed by the illegal invasion of a sovereign nation in Ukraine, has spilled into inflationary pressures and rising interest rates. This has led to challenges for advanced and developing economies, alike. Across the globe, economies are navigating their way through the ripples that these shocks have caused.
The second lens is the extraordinary productivity growth that the US has experienced in recent times, which is important for global trade and financial flows. While positive, it poses something of a puzzle for other advanced economies, including the UK, in terms of how to replicate that productivity success for themselves. For Western Europe in particular, the key for the next few years will be how to unlock the potential of technology in a way that raises living standards. Greater prosperity in Europe is beneficial for trade with countries like Sri Lanka.
The third lens is the role of China for the global economy. In a mechanical sense, China is very important for global growth and so understanding its economic dynamics is a key priority for those of us trying to think about where the global economy might be heading. But China’s role is also very important for a number of other reasons given the breadth and depth of its global economic relationships.
These economic dynamics also need to be seen in the context of 2024 being an important year for elections around the world. There are a lot of moving parts and I for one cannot say with certainty where we will end up. I do know, however, that in a world of uncertainty, sound and consistent policymaking is even more important. This is as true for Sri Lanka as anywhere else.
The Government has worked hard to keep the IMF program on track. The real challenge over the next few months will be maintaining this positive momentum. The reform agenda is demanding but achievable. Some of these reforms have payoffs that may seem like they occur too far in the future. Some of the reforms may also feel difficult or expensive today. Especially in the run-up to an election, it might seem tempting to listen to the siren calls that argue for a path that diverges from the IMF program because it feels easier in the here and now. My assessment is that doing so would be a mistake. The key challenge is therefore to keep eyes on the prize, stay the course, and continue on a journey to finish the IMF program. I believe that gives the best chance of returning to broad-based growth and cementing prosperity for the Sri Lankan people for years to come