Adverse global shocks and Sri Lanka's road to recovery

Keynote at Economic and Taxation Symposium 2025 of ICASL - Part |

- By W.A. Wijewardena

IN a recent forum in Colombo on Sri Lanka’s road to recovery with special reference to debt and governance participated by the country’s top policy leaders, IMF’s leading managers and select private sector top brass, President Anura Kumara Disanayake is reported to have stressed his Government’s commitment to continue with the ongoing reforms to improve economic conditions and assure lasting stability, while expressing his desire to make the current IMF program the last one in Sri Lanka’s history.

Offering IMF’s response to this, its First Deputy Managing Director Gita Gopinath is said to have appreciated the country’s commitment to reforms, while cautioning against the possibility of reverting to policy errors, a pitfall to which a country falls due to its failure to manage successfully the ailment known as “policy fatigue’.

This forum was timely because it helped the country to assess its gains, identify policy errors, and make the necessary amends to keep the recovery program on track. It also provided an open forum for the three parties to meet and discuss the issues faced by the country when it takes the next step for consolidating the gains so far made to ensure sustained economic growth and stability. However, the wishes expressed will become a tall order in a background of adverse global shocks over which Sri Lanka does not have control.

External shocks

I wish to emphasise on two such external shocks which Sri Lanka should tackle immediately to keep the recovery program on track. One is the unilateral tariff hike by USA which is Sri Lanka’s largest export destination. The other is the sudden breakout of the military conflict between Israel and Tran dragging USA also as an active party to the conflict. Sri Lanka is not a party to either one, but these shocks have far-reaching implications on the country’s road to recovery.

Origin of tariff issue