Insight of economics: Push and pull factors

SRI Lanka is navigating in turbulent waters with uncertainties and risks in the midst of conflicts in the Middle East and Ukraine and changes to US export tariffs in the offing.

- By Eng. J. L. Jayawardena

Introduction

Being under the IMF agreement, the Government has limited leverage in forming acceptable changes to fulfil the key election promise "Rich Country and Healthy Lifestyle". One could view the IMF agreement as so harsh and inhumane for most marginalised communities, however at the same time no other conducible alternatives exist to revive the economy towards stability and growth. As theorists say the economic policy framework should be constructed under three distinct components, Macroeconomy, Microeconomy and Economic modelling.

Economy as a whole

In general terms the economy of a state is built upon the production and consumption of goods and services and the supply of money. The production, and delivery of goods and services basically fall in the space of microeconomy and the growth and prompts economic momentum. In this setting a country's macroeconomy is the top layer of the economic pyramid and microeconomy is construed to the layer below.

To economically succeed, it is imperative to strengthen this layer which constitute of MSME (Micro, Small and Medium Enterprises) sectors, the key drivers of success. On the contrary, it has been recently seen that Sri Lanka's big and largescale enterprises reporting YoY profits despite the macroeconomy is in the crutches and supported on IMF and other loan schemes.

Macroeconomy

As previously mentioned, macroeconomics is the study of the behaviour of the whole economy of a state and compound to the Gross National Product and its relationship to the variations of employment, national income, growth rate and price levels. Other key factors are inflation, interest rate, exchange rate, government debts, primary account balance, the state revenue primarily on taxes, duties, licences direct and indirect. The given picture [1] shows how Sri Lanka manoeuvred the economy over the years since 2018 in respect of the key indices.

Microeconomy