Global shocks and Sri Lanka's road to recovery

Keynote at Economic and Taxation Symposium 2025 of ICASL – Part II

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Sri Lanka's future depends on how far it could create an innovation economy by using its existing resources and drawing on inventions and innovations made elsewhere

This is an important shift in the budgetary policy of the Government, and I do not see any move in the current budgetary policy to attain this goal. In the absence of a surplus in the revenue account, even the consumption is financed out of borrowing, and it is not a prudent fiscal policy in the long run since it worsens the country's indebtedness to foreigners by adding more to its debt obligations.

Factors contributing to real growth

The continued high economic growth of an economy comes from four basic factors as presented by Austrian American economist Joshep Schumpeter nearly a century ago2: invention, innovation, diffusion, and imitation. Inventions are new things created by engineers, scientists, or management Gurus. But these new things should be commercially produced by entrepreneurs through a process which Schumpeter identified as innovation. Both inventions and innovations will help a single firm to prosper. But for the whole economy to move up, the knowledge on inventions and innovations should be spread through diffusion of knowledge and many others should imitate them to produce new things across the economy.

Sri Lanka's low innovation economy