Identifying the Relationships between Budget Deficit and Selected Macroeconomic Variables: A Study of Sri Lanka during the Post-liberalization Era

AbstractA sustained sizeable deficit budget is problematic for Sri Lanka. Since 1980 to 2014, the Sri Lankan government budget deficit averaged 8.75% of GDP, and recorded the highest ratio of 19.2% of GDP in 1980 (Central Bank Annual reports, 1980-2014). This study examines the association with budget deficit and selected macroeconomic variables in Sri Lanka, using annual time series data for post-liberalization period; 1980-2014. The selected explanatory macroeconomic variables are inflation, interest rate, exchange rate, debt, and real GDP growth rate. Specifically, the study seeks to ascertain the relation-ship between selected macroeconomic variables and the budget deficit with a view to making appropriate recommendations to curb its negative effect to economy.The study carried 210 samples, and for examination of long-run relationship ARDL bounds test technique is applied, and short-run dynamic was examined using the ARDL Granger-Causality test. Further, Granger Causality test was carried out to determine the causality between selected variables and budget deficit, whether the impact were uni or bi- directional.The results revealed that there is a long-run relationship between budget deficit, inflation, interest rate, exchange rate, debts and real GDP growth rate in Sri Lanka. Further, in this study uni-directional relationship was confirmed between budget deficit and debts. The budget deficit cause debt. Additionally, a uni-directional relationship was also identified between budget deficit and inflation. The budget deficit cause inflation. Moreover, this study confirmed there were no uni or bi direction causality between other selected variables; Interest rate, Exchange, Real GDP growth rate and Budget deficit.Furthermore, the findings show that budget deficit has a meaningful effect on inflation, and debts. The paper recommended that the Sri Lankan government should take actions to control inflation to maintain price stability and to minimize the debts because the government is maintaining a sizable deficit budget since 1957. This research contributes to the idea that there are dimensional and dynamic factors involved between budget deficit and macroeconomic variables that require comprehensive knowledge to increase productivity, improve living standards, and ensure stability of the economic system.Keyword: Budget Deficit, Macroeconomic Variables, Granger Causality Tes

Examination of Mainstreaming Age, Gender and Diversities for Effectiveness of Sustainable Forestry Management; Case Study of Sri Lanka Community Forestry Programme

Sustainable Forest Management (SFM) is a dynamic and evolving concept, which aims to maintain and enhance the economic, social and environmental values of all types of forests, for the benefit of present and future generations. The CFM generally focuses on community mobilising, improving livelihoods opportunities, and forestry management activities. The forestry management activities consist of forest protection (managing of forest offences and forest fire), forest rehabilitation (nursery management, establishment of enrichment planting, buffer zones and FWLs), and management activities (management of NTFPs, and CBOs). The objective of the study was to examine how factors of age, gender and diversity (AGD) are strategically important in Forestry activities. A mixture of qualitative and quantitative methods were practiced, data were gathered through a structured key informant interviews and focus group discussions, purposely developed two tools; community relationship mapping tool and community importance and influence mapping tool (two sub-tools) were used and tested, and desk review was done with records and reports of the Sri Lanka Community Forestry Programme (SLCFP) which was implemented during 2012-2015. The study revealed that shearing of benefits of forest, irrespective of AGD, with the communities is an effective strategy to improve the sharing of responsibilities of forest conservation. The study identified that community do have different relationship with forest resources that are liked with age, gendered values and roles, and socioeconomic and political needs of people. While the forest community value importance and influence of different AGD groups based on the forest activities, those AGD groups themselves, especially of the women, too have their own assessment of importance and power of influence of women in forestry activities, which determine the engagement of all in forestry management. In CFP, the community does not only limits to the locals living around the forest alone, but also includes the culture of those inhabitants. Diversity is the sum of total of the differences which makes individuals as to who they are, and the collective abilities that they possess to contribute towards the common goals. Age, gender and diversity mainstreaming in CFP is a strategic and coherent approach for the management of CFP’s most valued assets: the community, who individually and collectively contribute towards the achievement of the CFP’s goals.Keywords: Sustainable forestry management, Forestry activities, Improving effectiveness, Age,Gender diversities, Importance and power of influence of wome

Review of ‘Kalpitiya Urban Development Plan 2021-2030’ using TIES Ecotourism Principles

Rapid urbanization-driven economic growth creates opportunities and challenges for inclusive and sustainable urban planning. Kalpitiya, being the only city in Sri Lanka surrounded by both sea and lagoon, with its unique ecosystems, and historical and cultural structures, has become an attractive tourism destination. Kalpitiya, as an emerging tourism destination, contributes 10 percent to the local economy through tourism. It experienced 15,500 visitations in 2017, while the projection for 2030 is 29,770. In 2018, 18 % of residents engaged in ecotourism as an alternative income source while 69 percent expressed their willingness. The Kalpitiya Urban Development Plan 2021-2030 (the Plan) was formulated envisioning, ―Blue Peninsula Emerging from Nature Resort‖-the first goal to make Kalpitiya the most attractive tourism destination. In this context, adopting ecotourism principles in development planning seems prudent for Kalpitiya. The study aimed to assess the extent to which the Plan had incorporated 8 TIES (The International Ecotourism Society) ecotourism principles, which, according to UNEP, have been embraced by a growing constituency of NGOs, private sector businesses, governments, and local communities. Utilizing a qualitative approach, incorporation of 8 TIES principles [P1-minimize impacts, P2-increase awareness, P3- positive experiences, P4-financial benefits for conservation, P5-financial benefits for locals, P6- increase sensitivity to local conditions, P7-low-impact facilities, P8-recognize community rights] into the components of the plan [Introduction-C1, Preliminary studies-C2, Need of the Plan-C3, Framework-C4, Summary and SWOT-C5, the Plan-C6 and Zoning-C7] were assessed. Secondary data were obtained from official sources and reviewed journal articles. Within all components of the Plan, the importance of tourism development was mentioned while addressing P1, P3, and P5. P6 is recognized in C6, while P7 was not mentioned. P8 was recognized in C2, C6 and C7. Although it specifically identified an ecotourism zone, C6 only addressed P2, and P4-through the development of a mangrove garden. The respective project was prioritized as 19 of 25. Rehabilitating and conserving income-earning cultural assets were prioritized as 10 and 11 of 25-without any carrying capacity considerations, despite their importance for the industry. Considering P1, water effluent control measures for shrimp farming-a means of income for many-were not mentioned, despite the pollution of groundwater and estuarine system, on which the ecotourism industry depends. The review reveals that the Plan has not adequately considered or addressed the 8 ecotourism principles, therefore, it is recommended for Kalpitiya Local Government Authority to pass bylaws in line with ecotourism principles, while enforcing a guideline by the Urban Development Authority. Keywords: Urban development planning, Ecotourism principles, Kalpitiya urban development plan, Local economy, Environmental conservatio

Environmentally Sensitive Areas Policy: An Approach for Democratic Land Governance

A public policy is a set of principles to guide decisions and achieve rational outcomes. Nevertheless, several policies are to conserve the environment, in the recent past, the National Policy on Environmentally Sensitive Areas of Sri Lanka was launched to create an enabling environment at all levels for effective conservation and management of Environmentally Sensitive Areas that are outside Protected Areas. This study aimed to analyze the appropriateness of Environmentally Sensitive Areas (ESA) Policy from the perspective of conservation of the environment through land managementrelated problem-solving. A qualitative approach was adopted, the final policy draft was selected as the primary source and analyzed against the remaining problems in the area of environmental conservation that were identified in the IUCN Red List and the Nationally Determined Contributions. The secondary data were obtained from official sources. Nevertheless, a healthy natural environment is key for the social-economic, and environmental wellbeing of people, environmental degradation and pollution increases rapidly due to the behaviour of the State, society, and individuals. Climate change, unsustainable land management, rapid urbanization, and population pressure, and lack of conscience on environmental conservation have been identified as the key causes that accelerate environmental degradation. In addressing such causes, the ESA policy consists of environmental conservation, climate change mitigation and resilience building, and development objectives. The policy is composed of three significant elements; (1) applicability for all environmentally sensitive areas that are outside protected areas and irrespective of the land ownership, (2) carrying environmental conservation, resilience building, and socioeconomic development objectives, and (3) multi-stakeholder engagement in management. While the policy promotes purchasing of development rights for environmental conservation, the policy recognizes the rights to environmental governance in policy-making history in Sri Lanka. The co-management approach of ESAs, which is derived from the policy of common goal, agreed agenda, and shared responsibility creates an enabling environment for all interested parties and mandate holders to pool their interests and resources for environmental and human wellbeing. The new space for all to participate in, contribute to, and enjoy the benefits of the environment directs to a new era of democracy with natural resources governance. Keywords: Environmentally sensitive areas policy, Common goals, Co-management, Right to environment, Democrac

The relationship between macroeconomic variables and budget deficit: A comparative study of Sri Lanka with Malaysia and South Korea

The association between budget deficit and macroeconomic variables and their repercussion on macroeconomic instability has been the most widely debated topic among economists and policymakers. This paper examines the association between budget deficit and selected macroeconomic variables in Sri Lanka, Malaysia and South Korea, 2000-2016. Explanatory macroeconomic variables are inflation, interest rate, exchange rate, debts, and real GDP growth rate. The Granger Causality test was carried out to determine whether the selected variables’ impact on budget deficit were uni- or bi-directional; the comparative study considered panel analysis. Data were sourced from the IMF, World Bank and annual reports of the Central Bank of Sri Lanka. The Sri Lankan finding was that there was uni-directionalcausality between variables. In the Malaysian study, there was no causality between budget deficit and the variables. In South Korea, the study identified uni-directional causality between variables. The panel analysis suggested that debts and real GDP growth rate are significant variables in controlling the budget deficit. A country’s debt level is a significant variable in controlling the size of the deficit. For Sri Lanka, it is important to consider economic policy strategies implement by Malaysia and South Korea to mitigate prevailing economic issues of a sustained sizable budget deficit, significant debt maturities, weaker public finances, higher domestic and foreign currency debt.Keywords: Budget deficit, macroeconomic variables, panel analysis, Granger Causality, Malaysia, South Korea, Sri Lank

Urban Forestry in Urban Development Policy in Sri Lanka: A Case Study of the City of Kandy

Forest cover in Sri Lanka declines rapidly due to rapid urbanization, unsustainable infrastructure developments, and urban expansion. Changes in forest landscapes resulted in increased climate change effects and vulnerability to natural disasters and biodiversity loss. The National Forest Policy and Action Plan aim to increase forest cover, and the National Land Use Policy-2007 set out guidelines to assure integrating forest conservation in sectoral and physical development programs. It has been projected that the proposed infrastructure development projects, especially the road networks and urban development under the National Physical Plan 2017-2050 may cause further deforestation. Urban forestry plays a significant role in urban life; stormwater management, mitigating urban heat island effect, Carbon sequestration, offering habitats, and contribution to biodiversity is significant. The objective of the study was to examine the policy gaps in assuring urban forestry. Considering geospatial, socioeconomic, and environmental factors, Kandy city was selected as a case study. Kandy, the second-largest city in Sri Lanka, is located in a valley, surrounded by approximately 104 ha of forest-covered mountains. Due to the rapid urban population increase, the forest cover declined unprecedently. Simultaneously, natural disasters occur frequently. The vegetation cover of Kandy has decreased 52% by the end of the colonial era and further decline to 35% at the present. Therefore, it is important to conserve and reforestation in the study area for a sustainable future city. Mixed-method was applied, primary data was obtained through 10 key indepth interviews in the urban planning sector, geo-spatial analysis, and secondary data were obtained from official reports. Data reveals that while the urban area of Kandy has increased by 251% from 1972 to 2014, plantation areas have decreased by 34%, and scrub areas declined to 26%. Even of the National Land Use Policy mandates the lands above 1,600 m MSL are to be protected and lands with over 60% slope are to be retained as permanent forest, it was observed that those mandates have not been taken into consideration during the urban expansion and development process of the Kandy city. Currently, there are no strong urban development regulations are in force due to the absence of urban development policy in Sri Lanka. Therefore, the study recommends adopting an urban development policy that ensures conservation and management of urban forestry across the country, and it's an urgent need for hilly regions. Keywords: Urban development, Urban forestry, Human well-being, Urban development policy, Kandy cit

Divisional Administration for Conservation of Environment in Sri Lanka: Opportunities and Challenges

The Transfer of Powers (Divisional Secretaries’) Act No. 58 of 1992 enhanced the powers andfunctions of the divisional administration system, and also merged the central government and provincial governments at the divisional levels, creating a new power center for development planning, regulation, and resourcing. The divisional administration carries functions under several laws including Land Development Ordinance, State Land Ordinance, Land Acquisition Act, State Land Recovery Act, Land Development (Special Provision) Act, Forest Ordinance, Agrarian Development Act, and Irrigation Ordinance. Natural resources are the key to the rural economy in Sri Lanka and natural resource depletion is accelerated by anthropogenic causes such as population pressure, encroachment, and over-extraction of natural resources. Environmental pollution and degradation challenge sustainable development significantly. The objective of this paper is to examine the potentiality of divisional administration in environmental conservation, focusing on the legitimate powers vested. Qualitative methodology was used for the research, a desk review was done with the relevant legal sources; acts, regulations, and judgments, and challenges were examined through ten key informant interviews. The study identifies that the divisional has a three-fold role in environmental conservation; land management, development management, and law enforcement. The divisional administration holds the guardianship of the state land and associated natural resources, with powers of granting or leasing land for settlements or developments, and is also responsible for the land use planning. In the perspective of development management, the divisional administration is more significant as it has opportunities to coordinate the development through various committees, mitigate climate change impact and natural disasters, and provide development assistance and relief. The wider regulation powers vested with the divisional administration is ranging from issuance of permits to enforcing laws against unlawful acts. This function directly relates to controlling deforestation and encroachment and managing over and illegal extraction of natural resources. The significant element of the divisional administration for environmental conservation is the availability of a vertical mechanism connecting the community at a lower level to the respective departments at the higher levels and the horizontal mechanism connecting all public, private, and community organizations. However, the study reveals several challenges such as the nature of political and community priorities that limit divisional administration in environmental conservation. The study recommends that recognition and revaluation of the role of divisional administration in environmental conservation are timely essential. Keywords: Divisional administration, Environmental conservation, Land management, Development management, Law enforcemen

Importance of Ecological Connectivity Establishment as an Effective Approach to Mitigate Human Elephant Conflict in Sri Lanka

Natural habitat distraction for human needs occurring at an alarming rate countrywide. Human Elephant Conflict (HEC) has averagely resulted over 250 elephant deaths, 75 human deaths, 70 human injuries, 1,400 property damages, and considerable crop damages annually. Lack of connectivity among Protected Areas (PAs), forestlands and other environmentally sensitive areas due to forest fragmentation strongly stands as leading causes of HEC. Establishment of ecological connectivity via ecological corridors allows necessary roaming space, fodder and water accessibility for elephants. Simultaneously, it allows in-situ conservation of elephants and improve biodiversity and ecological servicers to the area. Therefore, this study analyzed importance of establishment of ecological connectivity as an effective approach of HEC mitigation in Sri Lanka. Spatial changes of forest cover in seven Divisional Secretariat Divisions (DSD) in Polonnaruwa District was examined. Correlation of ecological connectivity and human, elephant deaths was analyzed in comparison to DSDs with ecological connectivity and without. Vegetation cover changes of the given areas were analyzed by NDVI method based on the satellite images extracted from Landsat 8 and Arc GIS 10.1. KII was conducted with officers of Department of Wildlife Conservation. To eliminate area differences in each DS division, HEC Density was calculated by sq.Km per HEC related human and elephant deaths for each DS Division from 2013-2017. Population of each DSD also taking in to consideration. Severe fragmentation and highest elephant, human deaths and HEC Density were identified in Dimbulagala DSD in each year of the study period and followed by Welikanda DSD. Hingurakgoda DSD had the lowest HEC intensity per sq.Km among all the other DSDs. Sri Lanka’s only ecological corridor/ Elephant corridor establishment present at PAs within Hingurakgoda DSD. Minneriya-Kaudulla National Parks facilitate as a corridor between the Minneriya and Somawathie National Parks, and increases seasonal movement and free roaming among Minneriya-Kudulla National Parks and Hururu Forest Reserve and surrounding wilderness, which brings an evidence for strong positive co-relation between ecological connectivity and HEC. In comprising of Dimbulagala or Walikanda DSDs that no ecological connectivity and situated in between Maduru Oya and Mahaweli Flood Plain protected areas. Indeed, lack of forest connectivity due to land use pattern changes has positive correlation with Human elephant conflict. Therefore, serious attention needs to be given for establishment of Ecological connectivity as an effective HEC mitigation approach in vulnerable areas.Keywords: HEC, Habitat fragmentation, Ecological connectivity, Ecological corridors, Conservatio

Examination of Effectiveness of Environmentally Sensitive Areas in Conservation of Biodiversity outside Protected Areas in Sri Lanka

Sri Lanka exhibits remarkable biological diversity and is considered to be the richest country in the Asian region in terms of species concentration. Management of biodiversity is essential for sustainable development. However, population pressure, increasing demand for natural resources, and environmentally insensitive development planning and implementation have caused biodiversity depletion. While Protected Areas are legally established to conserve biodiversity, there is a significant extent of biodiversity outside of Protected Areas around the country without an effective conservation framework. In this context, the Environmentally Sensitive Areas approach (ESA) had been introduced as an Other Effective Area-based Conservation Measures (OECMs). The objective of the study was to examine the effectiveness of ESA in conserving biodiversity sustainably. Qualitative methodology was adopted, using primary and secondary data, of Gangevadiya ESA in Wanathavilluwa Divisional Secretariat Division, which is located adjoining the lower Kala Oya Basin, Wilpattu National Park, Weerakkodicholai Reserved Forest, Bar Reef Marine Sanctuary, and in Willpattu Ramsar wetland, was assessed against three criteria on sustainability; participation, voluntary commitments, conservation actions. 2,290.47 ha large Gangevadiya ESA is home to unparalleled biodiversity and is rich with both terrestrial, marine, and brackish water flora and fauna. Among the identified 921 species, 6% endemic and 10% endangered are found. Multidimensional stakeholder participation: the government, community, community-based organizations (CBOs), private sector, and academia have participated in identifying biodiversity within diverse ecosystems, available threats, conservation measures, and resources. Different needs and interests of different communities irrespective of age, gender, and diversities are being visible in the planning process for benefits and burden-sharing. The voluntary commitment of all stakeholders has been inbuilt through the rules in the co-management plan, including transforming from harmful practices to resourcing, and monitoring the progress of conservation. The co-management plan indicates that all activities are aimed at the reducing threats and in situ conservation of biodiversity with associated ecosystem functions and services through various approaches. The study reveals that the ESA is an Other Effective Area-based Conservation measure to biodiversity conservation through conscience building for a conservation culture. Keywords: Biodiversity conservation, Environmentally sensitive areas, Sharing responsibilitie

Identifying the Relationships between Budget Deficit and Selected Macroeconomic Variables: A Study of Sri Lanka During the Postliberalization Era

AbstractA sustained sizeable deficit budget is problematic for Sri Lanka. Since 1980 to 2014, the Sri Lankan government budget deficit averaged 8.75% of GDP, and recorded the highest ratio of 19.2% of GDP in 1980 (Central Bank Annual reports, 1980-2014). This study examines the association with budget deficit and selected macroeconomic variables in Sri Lanka, using annual time series data for post-liberalization period; 1980-2014. The selected explanatory macroeconomic variables are inflation, interest rate, exchange rate, debt, and real GDP growth rate. Specifically, the study seeks to ascertain the relation-ship between selected macroeconomic variables and the budget deficit with a view to making appropriate recommendations to curb its negative effect to economy.The study carried 210 samples, and for examination of long-run relationship ARDL bounds test technique is applied, and short-run dynamic was examined using the ARDL Granger-Causality test. Further, Granger Causality test was carried out to determine the causality between selected variables and budget deficit, whether the impact were uni or bi- directional.The results revealed that there is a long-run relationship between budget deficit, inflation, interest rate, exchange rate, debts and real GDP growth rate in Sri Lanka. Further, in this study uni-directional relationship was confirmed between budget deficit and debts. The budget deficit cause debt. Additionally, a uni-directional relationship was also identified between budget deficit and inflation. The budget deficit cause inflation. Moreover, this study confirmed there were no uni or bi direction causality between other selected variables; Interest rate, Exchange, Real GDP growth rate and Budget deficit.Furthermore, the findings show that budget deficit has a meaningful effect on inflation, and debts. The paper recommended that the Sri Lankan government should take actions to control inflation to maintain price stability and to minimize the debts because the government is maintaining a sizable deficit budget since 1957. This research contributes to the idea that there are dimensional and dynamic factors involved between budget deficit and macroeconomic variables that require comprehensive knowledge to increase productivity, improve living standards, and ensure stability of the economic system.Keyword: Budget Deficit, Macroeconomic Variables, Granger Causality Tes