What caused worst socio-economic crises in 2022?

Friday, 28 April 2023 00:35 - - {{hitsCtrl.values.hits}}

The Central Bank in its 2022 Annual Report has attempted to summarise the causes for the worst socio-economic crises the country faced.

CBSL said having run an unsustainable macroeconomic model in tandem with the longstanding deficits in the budget balance and the external current account, the economy had fully exhausted its buffers by early 2022 as it was straddled by a myriad of vulnerabilities that emanated from both global and domestic sources. Several inherent weaknesses of the economy, further exacerbated by policy lapses, steered the country towards a multifaceted disaster.

“Ill-timed tax reductions, an ill-equipped attempt to swiftly adopt organic agriculture, the depletion of the country’s official reserves amidst futile attempts to maintain an untarnished debt servicing record, the delay in the exchange rate adjustment, and the failure to pay heed to several early warning signals caused tremendous shockwaves across the economy,” summed up the CBSL in its commentary.

It said the socio-economic crisis in 2022 underlined many lessons that the country failed to grasp, despite the recurrence of such macroeconomic failures throughout its post-independence history.

“This economic episode reiterated the essentiality of data-driven policymaking; devastating implications of ad hoc policy experiments; crippling welfare impacts of myopic populist policies; and the cost of policy delays, disregarding evidence-based policy analysis, well-established economic fundamentals and expert opinions,” the CBSL added.