Fiscal

COVID-19, Fiscal Policy and Public Debt in Emerging Economies

One year into the pandemic, Sri Lanka’s already tight fiscal space has become further constricted, leaving some tough decisions to be made in the pandemic recovery period. A third wave of COVID-19 that the country is currently experiencing will further delay such recovery efforts. Although some fiscal tools have been included in Sri Lanka’s COVID-19 recovery plan, there is consensus that the size and scale of the country’s fiscal stimulus package have been inadequate against the scale of the crisis. Conversely, wealthier countries have been rolling out some of the historically largest fiscal stimulus packages. This blog discusses the global tilt towards fiscal policy reliance in the aftermath of the pandemic and deliberates on how far the developing world can adopt a similar strategy.

How Should Sri Lanka Finance the COVID-19 Vaccination Rollout?

An effective vaccination strategy is a necessity for countries to move beyond COVID-19. However, it also requires careful policymaking to balance the financial cost of purchasing and delivering vaccines while stimulating economic growth. This article, based on a recent IPS analysis, provides an overview of the approximate costs associated with the COVID-19 vaccination rollout in Sri Lanka and evaluates policy options to finance the initiative. The authors argue that the government is best off pursuing a medium-term self-financing option through targetted tax interventions and if required, through external financing.

Sri Lanka’s Health Financing Challenge: Why Smarter Spending is Key

Across the globe, the magnitude of the COVID-19 pandemic has sparked a new urgency around healthcare systems and universal health coverage – the access to high-quality and affordable healthcare services for all, as and when needed. The limited resources available to address multiple challenges facing the health system point to the critical need for policymakers to explore smarter ways of investing existing funds. This blog examines some areas in which health spending can be made more efficient, drawing from information collected for an ongoing IPS study.

Beyond Turmeric: How Import Controls are Impacting Sri Lanka’s Economy

Historically, the Sri Lankan government has resorted to import controls to counter a balance of payment crisis. The current import controls have the same underlying rationale. However, the trade deficit’s temporary shrinkage may not be sustainable if there is no increase in exports. To increase exports, Sri Lanka needs to remove hurdles on input supply, remove distortionary tariffs, exploit market opportunities under the rule-based free trade system, and in the long run, improve the country’s GVC participation.

Fiscal Policy Responses to COVID-19: What Can We Learn from the International Context?

Amidst the severe disruptions triggered by the COVID-19 pandemic, it is important for economies to formulate and implement effective policies to mitigate the negative impacts induced by the crisis. Given the fact that Sri Lanka is an aspiring upper-middle-income country (UMIC), this blog examines fiscal responses by affected countries including Sri Lanka, at different income levels – i.e. high-income countries (HICs), middle-income countries (MICs), and low-income countries (LICs) in line with multilateral financial institutions’ (MFIs) recommendations.

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