Economy Business

Will Prices of Essentials and VAT Affect the Quality of Education?

“People learn from birth to death; hence it is said that ‘learning’ is a life-long journey.”
(Alawattegama, 2020, p. 2)

As we all know, although education is a lifelong journey, how can we determine whether it is distributed in any country with a high level of quality? Even though we have had a free education system since 1945, a significant percentage, especially in A/L and higher education, relies on private universities or the tuition education system. Nevertheless, the advancement of socioeconomic status is facilitated by quality education at all levels, which helps to end the vicious cycle of poverty. Then, education must be quality; otherwise, the cycle of poverty will happen repeatedly. What is meant by the system of “quality of education”? “More comprehensive views of Education Quality may be based on an institution’s or program’s reputation, the extent to which schooling has influenced change in student knowledge, attitudes, values, and behavior, or a complete theory or ideology of acquisition and application of learning.” (Chapman & Adams, 2002, p. 2).

Now we are concentrating on the current story of the Sri Lankan economy, which is experiencing volatile economic and social indices. Apart from the minimal growth of the 4th quarter of 2021, due to the unprecedented contraction in economic growth between the 3rd quarter of 2021 and the 2nd quarter of 2023, all economic activities have experienced a severe downturn. On June 7, 2023, the LIRNEasia Institute released a report on “Social Safety Nets and the State of Poverty in Sri Lanka based on an island-wide population of 10,000. According to the report, one-third of the total household population of Sri Lanka is currently living in poverty, which is identified as 17% of the population increase since 2019. Under this kind of crucial situation, we have been facing other kinds of difficulties as well, namely: increasing the price of essentials, especially foods; increasing the Value-Added Tax (VAT) from 15% to 18%; and moving 95 products items from the VAT-exempt list to the VAT-applicable list.
Against this backdrop, this article is a quick appraisal of sensitive areas of education quality during the economic crisis in 2023 and future projections of the impact of the VAT situation and the skyrocketing prices of essential goods. From Uva Province, which contains the highest poverty population in Sri Lanka (LIRNEasia, 2023), Monaragala District was selected for this study. The survey was conducted in April 2023 by a simple random sampling of 396 senior secondary students from 21 government schools in the Monaragala Educational Zone. This survey mainly concentrates on the nature of students’ academic mental and physical health, and tuition education background, during the economic crisis.

Nature of Academic Mental and Physical Health of Students

A child’s physical and mental health status is at a minimum, restricting the child’s access to quality education (Carron & Chau, 1996).

Figure 1: Overall nature of Academic Mental and Physical Health of Students

Accordingly, the most prominent four types of proxies have been utilized to determine the academic mental and physical health of students, namely: a sense of the household’s monthly income, the nature of the intake of three meals each day, the nature of seeking medical treatment quickly in case of illness, and the sufficient engagement with private tuition. In line with the above four proxies, a considerable 35% of total respondents (Figure 1) have disagreed or strongly disagreed, under the general state of academic mental, and physical health during the economic circumstances of the year 2023. On the other hand, a significant percentage (29%) of respondents are in the normal category, which would be a serious issue under current economic circumstances in 2024. This is because of the skyrocketing prices due to shortages of food and VAT hikes since the start of 2024, as described further below.

The Impact on Tuition Education Background

“The reduction in adult income makes it harder for the parents to bear the direct costs of education such as tuition, fees, books, supplies, uniforms, and private tutoring.” (Shafiq, 2010, p. 5). Parallel to this, this study has instinctively recognised the influence of tuition education on the economic crisis in 2023.

Figure 2: Tuition education background during the crisis

A considerable number of senior secondary students (34%) have attempted to suspend at least one tuition subject during the course of the economic crisis in 2023. But the majority of 66% of respondents were continuing with their current tuition without any complications.

Figure 3: The reasons for the suspension of tuition

More than half (52%) of respondents have faced the cost unaffordability reason under the reasons for the suspension of tuition during the course of the economic crisis in 2023. Another significant reason is the increase in tuition fees during crisis circumstances, which represents 18% of the total tuition suspended group.

The 3rd majority of respondents (16%) said they had discontinued their tuition because of the rapidly increasing transport costs. Then, considering the overall impact, a strong majority of 68% of respondents have stopped their tuition education (at least in one subject) due to the more heightened side effects of the economic crisis in 2023. According to (Ananat, et al., 2011), the negative changes in household income and expenditure are adversely affected by student achievement and education outcomes.
Shifting to the current storyline, it becomes evident that there are numerous increases in the prices of essentials – such as food, transport, fuel, and gas – that have a direct impact on the seamless educational progression of students as well as on the mental and physical well-being of both students and parents. It is widely acknowledged that the Government of Sri Lanka has put into effect several strategic changes to the entire tax system for the year 2024, including a massive change in the VAT structure under the New Economic Reforms for Sri Lanka with effect from 2024.

Figure 4: Comparing the price hike of selected essential goods (Survey period and After VAT)

Source 4: CBSL-Daily Price List, Ceylon Petroleum Cooperation, and Newswire
Survey Month – 2023, April
(Selected other foods – Red Onion (Imp), Big Onion (Imp), Potato (Local), Coconut, Coconut Oil, Red Dhal, Dried Chili (Imp), Green Chili, Sugar (White), Kekulu Rice (White), Kekulu Rice (Red), Nadu Rice (Local), Sprat (Imp)) – 1Kg/ 1L
(Selected Vegetables – Beans, Carrot, Cabbage, Tomato, Brinjal, Pumpkin)

The graphs above (Figure 5) provide a clear view of all daily domestic consumption expenditures that have notably risen in 2024 (after 18% of VAT) compared to the surveyed period in 2023. Petrol and diesel have increased by 9.4% and 11.7%, respectively, compared with the surveyed period, and this has resulted in further increases in transportation costs. The transport cost probably affects on education cost. The most prominent dilemma is the skyrocketing of food expenditure, which is driven by the increase in the cost of production or transport, an increase in VAT, and new additions to it.

Although one household spent only Rs.1174/- to buy the above vegetable list (1kg of each) during the survey period in 2023, today, that household should spend Rs.4226/- (Figure 5) to buy the same vegetable list (1kg of each). This suggests a definite increase in household essential consumption expenditure, and that probably would have a more powerful effect on the education expenditure and also mental and physical health of students and their parents in 2024 as opposed to 2023. Based on the story presented previously, especially O/L and A/L students, they would probably be mostly involved in joining income generation activities, connecting with the informal job market, increasing their income generation time, and looking for jobs instead of education. “When an economic crisis impacts the education sector negatively, the overall development of a nation worsens leading to illiteracy, unemployment, poverty, restlessness among youth, etc.” (Gunawaradana & Karunarathna, 2022, p. 277). Accordingly, if this sharp price continues, it will probably create more pressure on young students and their parents.

Then, the higher education of especially O/L and A/L students would inherently stop due to high consumption expenditures and low-income situations. As we all know, a significant percentage of O/L education generally depends on the private tuition education system, and a large portion of A/L education systems also depend on the private tuition education system in Sri Lanka. Under this kind of situation, if the skyrocketing of other essential household expenditures (Food, electricity, water, sanitization, etc.) continues, parents will probably stop private tuition for their children due to the unaffordability of the cost. In line with this, the stable quality education system in Sri Lanka would probably miss more necessary steps in 2024 as opposed to 2023.

So, we should pay more attention to protecting the sustained and continuous quality education system under the economic reforms to overcome the current economic crisis. Under this, some policy recommendations have been introduced by the author. 

(1) The most innovative pathway to ensure continuous quality education under these circumstances is to identify the most vulnerable students at the school level and develop a mechanism providing a full or at least partial welfare beneficiary scheme under the “ASWESUMA” program or something similar to protect their school life. 

(2) One of the biggest problems is that senior secondary students and their parents also trust the private tuition system rather than the free education system. Accordingly, a considerable number of students would spend unnecessary money on education during the crisis period also. To answer this practical problem, the government needs to create a mechanism to make school life popular among senior secondary students (mostly among A/L students) with creative learning and teaching activities. 

(3) One more significant policy option is to establish at least one skill-based core subject for O/L students, which will help develop their creative thinking patterns as well as reduce the spread of informal jobs during the economic crisis. 

(4) Another method to ensure continuous quality education is to provide adequate school facilities and teaching and learning materials on time for teachers and students all over the country on school premises, especially during the crisis. 

(5) Finally, urgent policies should be taken to prevent the rise of child labor, to regulate real-time educational institutions, strengthen independent education framework, and accelerate research and development in the education sector.

Conclusion

The final and comprehensive vision of quality education should be to design a competent graduate, professional or technical expert, a person with quality attitudes, and some responsible citizen rich in social and cultural values that will enhance the quality of the workforce of any country. Especially, the students who receive O/L and A/L education in Sri Lanka will help to create a unique human capital in the next 10 years. While this overall senior secondary education framework gives improved access to higher education and overall tertiary education, it also establishes the groundwork for efficient and skilled human resources (Animba & Edeh, 2021).

However, certain current economic circumstances in Sri Lanka, – such as 18% VAT, skyrocketing prices, and shortages of essentials, – put some pressure on the sustainable educational habits of students, which will disrupt the long-term, stable economic development of the entire nation. Consequently, it is important to provide high-level priority to protect educational quality with the positive approach policies outlined above. Otherwise, that would be the upcoming second wave of the economic crisis in the future.

References

Alawattegama, K. K. (2020, March). Free Education Policy and its Emerging Challenges in Sri Lanka. European Journal of Educational Sciences, 7(1), 1-14. doi:10.19044/ejes.v7no1a1
Ananat, E. O., Gassman-Pines, A., & Gibson-Davis, C. M. (2011, January 1). The Effects of Local Employment Losses on Children’s Educational Achievement. 299-313.
Animba, I. E., & Edeh, J. O. (2021, June). Instructional Material: A Pre- Requisite for Effective Teaching and Learning Among Secondary School Students in Enugu Education Zone. International Journal of Management, Social Sciences, Peace and Conflict Studies, 4(2), 131 – 142.
Carron, G., & Chau, T. N. (1996). The Quality of primary schools in different development contexts. Paris: International Institute for Educational Planning, UNESCO.
Cental Bank of Sri Lanka. (2024). Daily Price Report. Retrieved from www.cbsl.gov.lk : https://www.cbsl.gov.lk/en/statistics/economic-indicators/price-report
Ceylon Petroleum Corporation. (2024). ceypetco.gov.lk. Retrieved from Historical Prices: https://ceypetco.gov.lk/historical-prices/
Chapman, D., & Adams, D. (2002). The Quality of Education: Dimensions and Strategies. In M. Bray, Education in Developing Asia (pp. 1-73). Hong Kong & Manila: Asian Development Bank & Comparative Education Research Centre of The University of Hong Kong.
Gunawaradana, A. A., & Karunarathna, J. B. (2022). A Review of The Effect of Economic Crisis on Education. International Research Symposium 2022 (IRS 2022) (pp. 277-284). Dehiwala-Mount Lavinia: University Of Vocational Technology – Sri Lanka. Retrieved from https://www.researchgate.net/publication/365670289
LIRNEasia . (2023). Social Safety Nets and the State of Poverty in Sri Lanka. Colombo: LIRNEasia.
Shafiq, M. N. (2010, November 15). The Effect of an Economic Crisis on Educational Outcomes: An Economic Framework and Review of the Evidence. Current Issues in Comparative Education, 12(02), 5-13. Retrieved from https://ssrn.com/abstract=1709045
Shores, K., & Steinberg, M. (2017). The Impact of the Great Recession on Student Achievement: Evidence from Population Data. Stanford: Center for Education Policy Analysis, CEPA. Retrieved from http://cepa.stanford.edu/wp17-09

By H.K.G. Dilan Janitha
Intern – Economics Intelligence Unit
The Ceylon Chamber of Commerce

Reviewed By : Sanjaya Ariyawansa
Economist 
The Ceylon Chamber of Commerce

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