The Sri Lankan economy is steadily signalling signs of improved macroeconomic stability with the currency regaining some of its value, inflation falling sharply, and output contraction decelerating in successive quarters. With very few policy levers in hand, the biggest challenge is to manage public disaffection of the austerity measures and tackle growth-inhibiting structural impediments present in the economy. The political resolve to advance on these can be weakened as Sri Lanka enters an electoral cycle in 2024.
Creating productive and well-paid jobs, not only to address an accelerated brain drain of Sri Lankans seeking better living standards overseas but also to put the country firmly on the path to sustained recovery, is crucial. The policy options are contested: What is the appropriate trade incentive regime amidst changes that are reshaping the geopolitical order? How can land and labour markets be made more efficient? What kinds of skills development and immigration policies are desirable? Are there public-private financing models for better education and health services delivery? These issues and others are examined in this year’s IPS annual flagship report Sri Lanka: State of the Economy 2023 under the theme of ‘Economic Policy Choices: From Stabilisation to Growth’ to help generate a ‘reform dividend’ that will help Sri Lanka traverse the path to sustained recovery.