Economic Growth

A Lost Development Opportunity: Regional Integration to Empower Sri Lankan Women

Addressing gender inequality is crucial to achieve stronger and more sustainable development. While regional integration is seen as a potential development strategy to promote inclusive and sustainable growth and efforts toward women’s economic empowerment, gender equality tends to be sidelined in such discussions.  Thus, identifying and implementing the right policy mix for meaningful regional integration is vital in creating gender inclusive sustainable growth.

Sri Lanka’s Economic Policy Choices: From Stabilisation to Growth

Sri Lanka has faced a turbulent economic journey in recent years, with 2022 witnessing an unprecedented crisis marked by a staggering 8.7% GDP contraction. The economy slowly but steadily pulled back from the abyss over the course of 2023. These positive developments are a result of the implementation of economic stabilisation measures and groundwork for institutional and regulatory reforms to support future growth. But there are concerns about the impact on the most vulnerable groups. As a country that faces years of weak growth, IPS’ ‘Sri Lanka: State of the Economy 2023’ report, explores the complex policy choices Sri Lanka faces as it navigates the path to economic recovery.

Has Sri Lanka’s Crisis-driven Import Controls Incentivised Import Substitution?

In response to the economic crisis, Sri Lanka implemented import controls that expanded significantly by the end of 2022, accounting for approximately 30% of the country’s total import value. But were they necessary or the easiest option? Were they applied optimally to limit damage on growth? Did they distort incentives, thereby promoting domestic production of substitutable products? To shed light on these questions, a comprehensive analysis was conducted using eight waves of import controls. The government’s objectives varied, ranging from curbing currency outflows to promoting domestic production as import substitutes. It is crucial to assess the long-term impact on incentive structures. In this blog, the authors delve into the complexities of Sri Lanka’s import controls, providing insights into their necessity, optimal application, and unintended consequences.

Overcoming Obstacles: The Economic Case for a Sri Lanka-Thailand FTA

In 2019, only 6% of tea imported by Thailand was from Sri Lanka. This low percentage can be attributed to the difference in preferences and Thailand’s high tariffs of 90% on imported tea, which act as barriers to Sri Lanka’s tea exports. Additionally, Thailand imposes up to 30% tariffs on nearly 120 product lines of wearing apparel. These high tariffs for products with a comparative advantage are not exclusive to Sri Lanka. Thailand also faces higher tariffs for vehicles, rubber, and light-electronics exports which Thailand exports competitively. This tariff structure hampers the bilateral trade of products with a higher comparative advantage for both countries. Despite these challenges, Sri Lanka and Thailand have expedited the process of signing a free trade agreement (FTA) to boost bilateral trade by threefold to USD 1.5 billion. This article discusses the trade effect of an FTA and a way forward to maximise the gains from an FTA.

Sri Lanka’s Human Capital Progress: Still Less than its Full Potential

The World Bank’s Human Capital Index (HCI) summarises the ‘amount of human capital a child born today could expect to attain by age 18’. Sri Lanka’s HCI for 2018, the best in the South Asian region, is 0.58. However, there is room for improvement. A closer examination of the sub-indices of the HCI shows that two of the areas that need attention are education and health.