Priorities in Focus: Will Budget 2025 Address Sri Lanka’s Agricultural Challenges?

The agricultural sector in Sri Lanka has long been a pillar of the nation’s economy, yet its decline reflects a complex interplay of economic shifts, policy decisions, and underutilised potential. Agriculture’s contribution to the overall economy in Sri Lanka has gradually diminished over time, while the agricultural labour force has shrunk at a slower rate. This disparity between a declining sector and a stagnant workforce, coupled with the failure to address structural changes by improving land and labour productivity, has led to poor sector performance, particularly in terms of food security and farm income. Additionally, unproductive public spending in the form of inefficient allocation, short-term concentration, and neglect of crucial areas is an important contributory factor. In this context, it is crucial to assess whether public expenditure allocation in Sri Lanka has undergone significant shifts aimed at unlocking the agriculture sector’s potential while advancing food security and fostering rural development.

Can Debt-for-Climate and Nature Swaps Help Make Sri Lanka’s Debt More Manageable?

Sri Lanka’s economic crisis, fuelled by unsustainable debt and a default in 2022, left the country struggling to stabilise its economy. Its high climate vulnerability that disrupts livelihoods exacerbated the economic challenges. In the face of dual pressures from an economic crisis and climate vulnerability, the need for alternative approaches to financial recovery has never been more urgent. Therefore, debt-for-climate-and-nature (DfCN) swaps could be a possible option to lower the financial burden while addressing climate challenges.

Unlocking Trade Potential: How the Sri Lanka-Thailand FTA Paves the Way for Enhanced Bilateral Trade

Thailand became the second Regional Comprehensive Economic Partnership (RCEP) economy to sign a free trade agreement (FTA) with Sri Lanka, following the FTA signed earlier with Singapore. A major goal of an FTA is to lower trade costs by reducing border tariffs and eliminating behind-the-border barriers for competitively traded products. This article assesses the coverage and potential of the Sri Lanka-Thailand FTA (SLTFTA) tariff liberalisation in increasing bilateral trade.

New Year, New VAT: Can Sri Lanka’s Poor Cope with the Increase?

Ringing in the new year for Sri Lankans was an increase in the value-added tax (VAT) rate to 18% and a withdrawal of tax exemptions on several goods and services. The last day of 2023 witnessed long queues as people rushed to stock up on essentials such as fuel and gas. Although queues are a familiar sight following the onset of the economic crisis, this time around, it was to avoid being hit with the VAT hike.

In light of these developments, this blog aims to shed light on VAT, offering a brief overview and delving into the potential implications of the increase, particularly on the poor and vulnerable.

Sri Lanka’s Debt Restructuring Roadmap: Following the Evidence

Sri Lanka’s recently gazetted domestic debt restructuring (DDR) exercise has drawn expressions of both support and criticism. Overall, negotiations have to be framed within certain desired outcomes to minimise costs to the economy. To this end, Sri Lanka’s negotiating stance dovetails neatly with crucial research evidence.