‘Sri Lanka: State of the Economy 2022’ Report Released
25 October 2022
The IPS hosted a seminar titled ‘Driving Policy Action from Crisis to Recovery’ to mark the release of the Institute’s annual flagship report ‘Sri Lanka: State of the Economy 2022’ at the Dr Saman Kelegama Auditorium, IPS. This year’s report, released amidst a harsh economic downturn, examines key socioeconomic issues through the framework committed to under the Sustainable Development Goals (SDGs) to drive policy action for economic and social stability.
The seminar’s first session focused on the theme ‘Economic Crises and Policy Adjustments for Stabilisation’. In her presentation, IPS’ Executive Director, Dr Dushni Weerakoon noted that while monetary policy aims to restore price stability and anchor inflation expectations, the fiscal policy typically supports growth, but this is not the case in Sri Lanka at present. Due to slow growth in the economy and revenue collection, the fiscal policy is not expected to be growth-friendly over the next two years.
Dr Weerakoon explained that minimising output losses is essential to mitigate the effects of the economic crisis. In this regard, she recommended short-term policies to speedily conclude debt restructuring negotiations and establish credibility by stabilising macroeconomic fundamentals. In the medium term, she proposed more macroeconomic flexibility with a gradual shift to an emphasis on growth, aligned with an appropriate long-term policy framework. On the latter, Dr Weerakoon stated that the IPS is working with the Department of National Planning to develop a National Policy Framework that places the poor and the vulnerable at the forefront of the government’s recovery efforts.
Mr K M Mahinda Siriwardana, Secretary to the Treasury/Ministry of Finance, Economic Stabilisation and National Policies, flagged the importance of evidence-based decision-making at all levels supported by risk assessments, consideration of global impacts, and devoid of any ideological considerations. Commenting on the current challenges faced by the Treasury, Mr Siriwardena stated that the Treasury has LKR 200 billion in outstanding payments to the health and construction sectors, among others. Accordingly, he emphasised the importance of implementing revenue-based fiscal consolidation policies and creating a level playing field through taxation to mitigate the effects of the ongoing economic crisis.
Delivering the keynote address, Dr Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka, noted that the economic crisis had provided a unique opportunity to implement policies targeting long-term economic growth with the support of the public. He said that Sri Lanka’s previous agreements with the IMF have focused on short-term stabilisation efforts without implementing critical reforms. However, Dr Weerasinghe explained that the complexity of the present situation due to the twin crises – the debt crisis and the balance of account crisis – had given space for the government to implement difficult reforms. He added that public support plays a significant role in implementing these difficult reforms.
The second session of the seminar titled ‘Policy Action for Shared Sustainable Growth: A National Policy Framework’ was chaired/moderated by Mr R H W A Kumarasiri, Director-General, Department of National Planning and Mr E A Rathnaseela, Additional Director-General, Department of National Planning. This session included presentations on the National Policy Framework by IPS’ Director of Research, Dr Nisha Arunatilake, IPS’ Research Fellow, Dr Ganga Tilakaratna and IPS’ Research Fellow, Dr Manoj Thibbotuwawa.
Details on the Sri Lanka: State of the Economy 2022’ report can be found HERE.