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.
Over the last few decades, non-communicable diseases (NCDs) have become a critical health challenge in Sri Lanka, accounting for over 80% of total deaths and 38% of health expenditure in 2019. The economic impact is particularly challenging for households affected by chronic NCDs as they bear higher costs of medicines, pharmaceutical products, medical laboratory tests, and other ancillary services. With the current economic downturn, preventing and financing NCDs has become even more challenging for Sri Lanka. An ongoing IPS study delves into the implications of the economic crisis on the country’s health system, with a specific focus on NCD prevention and financing. The study conducted an extensive analysis by gathering perspectives from various stakeholders. This blog is based on the information collected from these stakeholders.
The Institute of Policy Studies of Sri Lanka (IPS) held a seminar on 25 October 2022 to coincide with the release of the Institute’s annual flagship report, Sri Lanka: State of the Economy 2022, on the theme Driving Policy Action from Crisis to Recovery. Dr Nandalal Weerasinghe, Governor, Central Bank of Sri Lanka and Mr K M Mahinda Siriwardana, Secretary to the Treasury/Ministry of Finance, Economic Stabilisation and National Policies, delivered the keynote addresses. Dr Dushni Weerakoon, Executive Director, IPS, made a presentation to mark the release of the Sri Lanka: State of the Economy 2022 report. Mr R H W A Kumarasiri, Director-General, Department of National Planning and Mr E A Rathnaseela, Addl. Director-General, Department of National Planning chaired/moderated a session on ‘Policy Action for Shared Sustainable Growth: A National Policy Framework’. Under this theme, senior IPS researchers Dr Nisha Arunatilake, Director of Research, Dr Ganga Tilakaratna, Research Fellow and Dr Manoj Thibbotuwawa, Research Fellow, made presentations.
Sri Lanka was once considered a development success story. But within the last few decades, this legacy was lost to governance failures and economic mismanagement. In recent years, the country has been characterised by a glaring lack of fiscal discipline reflected in the inability to raise sufficient revenue even to cover current spending. In this context, institutions have a major role to play in ensuring that governments do not fail. Effective institutions can (1) assure the provision of quality services which is essential for eradicating poverty and promote shared prosperity; (2) guarantee high-quality public spending and minimise corruption; and (3) ensure that all citizens benefit from economic growth and that development is not lop-sided. With this understanding, this blog discusses how a Fiscal Council (FC) can help Sri Lanka regain fiscal credibility and improve its overall economic performance.
Despite the pandemic and related difficulties in remitting, inward remittances to Sri Lanka had picked up by December 2020 to record year-over-year growth of 5.8 %, contrary to all expectations. The reasons for such a quick rebound include catching up on postponed remittances, accumulated terminal employment benefits and savings-related remittances of migrant workers laid off due to the pandemic, receipt of counter-cyclical remittances from less frequent remitters and the shift from informal to formal channels. In the current context of the foreign exchange crisis in Sri Lanka, the latter is the most critical factor to focus on.