2nd April, 2023 Mumbai: Although Sri Lanka has been experiencing economic difficulties for a while, the COVID-19 outbreak has only made things worse. Political unpredictability, high levels of public debt, and outside shocks like the pandemic are just a few of the causes that have been hurting the nation’s economy. It’s obvious that the road to recovery will be long and challenging as the nation looks forward.
The high amount of public debt in Sri Lanka is one of the country’s biggest economic problems. The debt-to-GDP ratio of the nation has been rising over the past several years, approaching 100% in 2021. Large infrastructure developments like the Hambantota port and airport, which were financed with foreign loans, have contributed to this in part. Sri Lanka’s economy has also been significantly impacted by the COVID-19 outbreak, with tourism—one of the key industries for the nation—coming to a near halt.
Sri Lanka will need to make considerable changes to its economic policy in order to solve these issues. Fiscal policy is one important area that must concentrate on lowering public debt and enhancing fiscal sustainability. To do this, steps like lowering government expenditure and raising money through tax changes would be necessary. In order to attract international investment and enhance the ease of doing business, the nation would also need to improve its business climate.
Sri Lanka will also need to deal with problems relating to political unrest and corruption. These problems have hampered the nation’s economic growth and contributed to a lack of confidence among investors. A commitment to openness and accountability as well as political will are necessary to combat corruption and enhance government.
Diversifying Sri Lanka’s economy away from tourism, which has been severely damaged by the epidemic, would be another area of concern. This can entail fostering other businesses, including manufacturing and agriculture, and making infrastructural investments to support them.
Thirdly, Sri Lanka will need to deal with societal problems like inequality and poverty. Although poverty has been reduced significantly in recent years, a large number of Sri Lankans still live in poverty, and economic disparity is still quite high. Policies that encourage inclusive growth and make sure that the advantages of economic progress are spread more widely will be needed to address these concerns.
The route to Sri Lanka’s economic recovery will be protracted and challenging, with considerable changes to fiscal policy, governance, and the business climate. The nation will also need to address social concerns like poverty and inequality and diversify its economy away from tourism. Notwithstanding the substantial hurdles, Sri Lanka has a chance to come out of this crisis stronger and more resilient if it can resolve these problems.