Sound economic analysis for macroeconomic management arising from evidence-based fiscal policies are underway in Sri Lanka, with the support of the education and training provided by Professor Jay Bandaralage and colleagues in the Department of Accounting, Finance and Economics, and the efforts of the participating Fellows.
At the end of last year fourteen Fellows from the Sri Lankan Ministry of Finance (MoF) attended a four-week study at Griffith, that included visits to the Commonwealth Treasury, Finance and Budget offices in Canberra, as part of an Australia Awards Fellowship.
“Our objective was to strengthen the capacity of designing and formulating effective and transparent fiscal policies at the MoF in Sri Lanka, and enhance the ability of research skills of MoF officials in the area of macroeconomic management and fiscal policy to inform policy makers,” said Professor Bandaralage.
“I met the Secretary of MoF in February last year, when he was visiting with the Sri Lankan Prime Minister who had an official meeting with the Australian PM at the Parliament in Canberra,” said Professor Bandaralage.
“During that visit the Secretary of MoF personally requested that I design a program for his officers to strengthen their research capacity for macroeconomic policy analysis and policy making, after being aware of my earlier Australia Awards Fellowships with Sri Lanka.”
This Fellowship is a part of the Australia Awards Fellowships with Sri Lanka and is kindly provided by the Australian Government, Department of Foreign Affairs and Trade (DFAT) to support economic development with Sri Lanka, build capacity and partnerships.
The 2017 Fellowship is the third awarded to Professor Bandaralage and his colleagues in the Economics discipline after completions of the following two Fellowships.
The Australia Awards Fellowship – Round 15, funded by DFAT (Capacity building for in conducting post-war census in Sri Lanka, 01 November – 30 November, 2015) with the Department of Census and Statistics in Sri Lanka.
The Australia Awards Fellowship – Round 16, funded by DFAT (Developing economic research to support priority economic and social goals in Sri Lanka, 4 December – 23 December 2016) with eight universities in Sri Lanka.
“The 2017 Fellowship is capacity building in macroeconomic research and aligned with the four pillars of Australian economic diplomacy, because a sound macroeconomic management and effective governance are necessary to promote trade, encourage growth, attract investment and support Australian business,” said Professor Bandaralage.
A key question being investigated by Professor Bandaralage and his team is how to effectively undertake research in the area of macroeconomic management and use the results for policy analysis and policy making?
A number of factors has caused the Sri Lankan economy to be in a precarious position, but thanks to the support of the Australian Government (DFAT) and the efforts of Professor Jay Bandaralage and colleagues with Fellowships and macroeconomic research, the MoF middle level officials can advance macroeconomic economic research towards better policy analysis and policy making.
A 25 year conflict between the Sri Lankan government and Tamil Tigers, combined with expensive public assets and inadequate economic reform, has caused Sri Lanka’s economy to be operating at more than 75% Debt-to-GDP, according to Trading Economics. This means high interest repayments and little revenue is surplus for economic investment programs.
“According to current official estimates and the 2018 budget documents, Sri Lanka’s Debt-to-GDP ratio is around 78 per cent and the current debt repayment is around 88 per cent of government’s total revenue. Foreign debt management becomes an immediate priority as the economy is facing the largest ever foreign debt servicing requirements, clustered during 2019-2022,” said Professor Bandaralage.
“Low tax revenue as a percentage of GDP is another issue. Tax evasion is a problem. So the current government has introduced some reforms to reverse the trend.”
Professor Bandaralage is well known to some Sri Lankan government departments, universities and a leading think tank, Institute of Policy Studies (IPS). As a visiting research fellow, he has been involved in undertaking a number of research projects with senior researchers at the IPS for two decades. As a recognition of his work in Sri Lanka, the IPS offered him a Distinguished Fellow this year.
“I have also established strong links with prestigious external partners. In recognition of my expertise and research experience, the Asian Development Bank (ADB) requested me in 2013 to assist and provide leadership to the National Planning Division of the MoF, and the Department of Census and Statistics (DCS) in Sri Lanka with respect to two projects,” said Professor Bandaralage.
1. TA 7774-SRI: Supporting for Planning and Policy Formulation, Phase 1: Preparing of National Accounts Considering the Shadow Prices and Developing an Input-Output Model
2. TA 7774-SRI: Supporting for Planning and Policy Formulation, Phase 1: Preparing of National Accounts Considering the Shadow Prices and Developing an Input-Output Model (Impact Analysis)
“My involvement with the ADB continued in 2014, and this work led me to receive funding to implement two previous Fellowship projects with Sri Lankan officials in 2015 and 2016,” said Professor Bandaralage.
Professor Bandaralage advised the main goals of the Fellowship are to enhance analytical and research skills of MoF officials in designing, formulating and implementing effective macroeconomic policy reforms to stabilise the Sri Lankan economy, in order to achieve sustainable inclusive economic growth, through private investment and open economic policies.
“Inclusive growth is very important for long-term stability. Until 2009 Sri Lanka had a conflict with Tamil Tigers in the North and East. Those two provinces were neglected during the conflict, now they are integrating into the economy and the government is trying hard to improve their socioeconomic conditions and continue with the reconciliation process,” said Professor Bandaralage.
“The Fellowship aligned with the key priority of effective governance and the issue of development economics. Cross cutting development issues such as private sector growth, trade and gender equality. These areas will be impacted as macroeconomic policies have a bearing on them.”
Gender equality is important in Sri Lanka and it was a component of the Fellowship. Sri Lanka has a proud record of producing female leaders, since Hon. Sirimavo Bandaranaike became the first female head of government in 1960.
“We ensured the Fellowship involved gender equality with seven males and seven females in the group that included a director, deputy directors and assistant directors, all high-profile leaders within the Ministry,” said Professor Bandaralage.
The Fellowship included a sequence of learning events to help achieve the objectives, starting with a pre-course webinar teaching basic quantitative and macroeconomic concepts, prior to Fellows arriving in Australia.
“During the online delivery we used webinar technology to deliver pre-workshop training that was related to quantitative and statistical techniques. This was the first time we introduced online training, thanks to my senior colleagues in the Business Statistics area, and it was appreciated by Fellows,” said Professor Bandaralage.
The webinar was followed by a 1-day pre-departure workshop in Colombo to collect data and review MoF feedback on proposed research paper topics.
The in-Australia component involved a number of conventional training sessions on quantitative research methods and macroeconomic management for inclusive economic growth. A key learning was how quantitative skills and macro theories can be leveraged for policy analysis and macroeconomic management.
A major component at Griffith University was when Fellows constructed five policy-orientated research papers on topics that could underpin economic growth and reform. They worked in small groups to collect data and draft the interim research papers.
The papers were formulated in stages that involved a major workshop held at the MoF in Colombo early this year in order to obtain feedback from different stakeholders such as government, academics, industry and banking sector, before the final reports are published as Treasury working papers.
The topics included:
Group 1 – Assessment on the Impact of Total Public Expenditure on Economic Growth
Group 2 – Assessment on the Impact of Total Public Debt on Economic Growth
Group 3 – How does the Government Borrowings Affect Corporate Financing and Private Investment
Group 4 – Will the Government Fiscal Consolidation Restrict Economic Growth
Group 5 – The Budgetary Impact of Maintaining Underperforming Public Sector Enterprises
By training MoF officials in quantitative and qualitative research techniques, macroeconomic management, fiscal federalism, creating employment opportunities, and the impact of public expenditure and debt on private investment and the economy, the Fellows had the opportunity to increase their skills and ability in economic management.
“For all the projects they have used data that was scattered around their ministry, some data they have used previously and other data was from public sources,” said Professor Bandaralage.
“In one working paper they didn’t have proper data, and we realised that critical data is not always available in Sri Lanka. It’s an eye opener for them as well. And their priority is to develop better data sources in the future.”
The Fellowship is nearing completion with all of the formal events finished, with the exception of publishing the final Treasury working papers in Colombo, Sri Lanka. A post-workshop was completed in February 2018, where Fellows presented interim papers to seek inputs from policy makers on macroeconomic issues.
“The workshop was popular and included ministry officials, academics, private sector representatives and other government organisations, to encourage debate and record feedback from diverse economic stakeholders,” said Professor Bandaralage.
“They are under review now, that’s why I went to Sri Lanka recently during the Easter break. There is a senior research person at the MoF and he is reviewing the papers, we have feedback and authors are revising papers.”
Plans for publishing the research papers are underway, as the first set of MoF working papers carried out by the Sri Lankan officials who attended the Fellowship in December 2017 on macroeconomic management, are nearing completion.
The Fellowship highlights included a trip to Canberra in November 2017 where MoF delegates attended presentations from policy analysists with Australia’s main finance departments and offices, the Department of Finance, Department of Treasury and Parliamentary Budget Office.
“The visit to Canberra was an eye opener for MoF delegates. The top bureaucrats in three Commonwealth Departments presented what they were doing and delegates were impressed with the knowledge and systems,” said Professor Bandaralage.
“In Australia there is a body called the Parliamentary Budget Office. It improves transparency around fiscal and budget policy issues and provides confidential costing and budget analysis services to all parliamentarians. It is doing a wonderful job and I think Sri Lanka should follow this model to improve transparency and to make the Parliament more responsible for its policy making.”
“That’s why my aim is to get many MoF officials trained under the Fellowships. We have trained fourteen officials last year and we are targeting to train more in the next few years.”
“The approach of this Fellowship is more appropriate and the MoF Secretary believes that his staff need to enhance capacity in an intensive program focusing on macroeconomic theory, practice and research,” said Professor Bandaralage.
“The Secretary believes that our Fellowship is not just a training program, it has created long-term impact on his officials who participated in the program, in terms of enhancing their research skills and ability.”
Australian macroeconomic skills and knowledge are an intangible asset that can stabilise the region and may indirectly assist to increase Australian export income in the areas of services, tourism and agriculture, as the Sri Lankan economy improves.
In Sri Lanka, Australia’s key agenda items for foreign aid include; expanding economic opportunities for the poor, and developing sound ability in macroeconomic policy development to underpin growth.
The priorities of Australia’s foreign aid in Sri Lanka includes the objective: Support government to be more responsive to the needs of citizens and the private sector. As stated by the Australian High Commissioner for Sri Lanka recently, “Australia supports Sri Lanka’s economic reform efforts.”
Further education in macroeconomic management in Sri Lanka is planned in 2018. There is continuing communication with Professor Bandaralage and the Fellows around working papers and planning for applying for another Fellowship this year.
The success of Australia Awards Fellowships projects between DFAT and the Department of Accounting, Finance and Economics were aided by Griffith’s International Business Development Unit, project officer Sharm Aboosally and colleagues.
“Our primary grant funder is DFAT, as is most of the federal funding, that’s pretty normal and we work university wide,” said Ms Aboosally.
“One form of funding we work on is called Australia Awards Fellowships with DFAT. Our unit manages these and we started working on them around 2012. We have since delivered 27 Fellowships in the last 6 years.”
“We have another business stream that looks at Short Courses that are funded directly from our partner governments and universities, non-commercial but rather capacity building and training.”
Professor Bandaralage would like to acknowledge all the contributors to this Fellowship and has expressed his appreciation for their contributions.
“These senior people have the experience and they have contributed to the Fellowships tremendously over the last three years. I had the full support of all these members,” said Professor Bandaralage.
Academic Leader: Professor Jay Bandaralage
Supported by many senior and junior colleagues in my Economics and Business Statistics Discipline.
Professor Selva Selvanathan (former Head EBS discipline)
Professor Tony Makin (Director – APEC Centre)
Professor Fabrizio Carmignani (Dean Academic – GBS)
Professor Christine Smith (Director Research – AFE)
Professor Ross Guest (Dean, Learning and Teaching – GBS)
Professor Saroja Selvanathan (HDR coordinator, EBS)
Dr Jen-Je Su
Dr Athula Naranpanawa
Dr Shyama Ratnasiri
Dr Susantha Liyanaarachchi
Dr Maneka Jayasinghe (Currently at Charles Darwin University)
Adjunct Professor Yan Islam (Griffith Asia Institute)
Dr Paul Burke (ANU)
Ms Sharm Aboosally – Project Officer (Griffith Internal Business Development Unit)
Ben Jagmann – Project Coordinator (Griffith Internal Business Development Unit)
To learn more about macroeconomic management practices and the Treasury working papers in Sri Lanka for macroeconomic management, please contact Professor Jay Bandaralage.