Sri Lanka must open up and trade its way to recovery: Economist

Arutha Research's Rehana Thowfeek says narrow export focus, protectionism, import substitution trade policies of the past have failed, precipitated economic crisis Urges Sri Lanka must "trade its way to recovery" and adopt open, outward- looking trade policy Warns protectionism has created an anti-export bias, shrinking exports from 30% of GDP at turn of millennium to about 20% today Notes Sri Lanka's high- tech exports only 1.5% of manufactured exports, compared to 46% in Vietnam, calling for diversification and integration into global value chains. Urges tariff simplification, digitised trade facilitation, new trade agreements and re-skilling to prepare for Al-driven global economy Suggests dedicated trade negotiation office to push bi-lateral trade agreements

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ECONOMIST and Arutha Research Director - Civic Education Rehana Thowfeek said Sri Lanka must stop repeating the mistakes of the past and commit to an open, outward-looking trade policy if it wants to escape recurring economic crises.

Speaking at the Annual Conference on Public Sector Reforms for Economic Revival, organised by CA Sri Lanka and the Association of Public Finance Accountants of Sri Lanka, she said the country has no choice but to "trade its way to recovery."

"Trade for Sri Lanka is not just about growth anymore. It is about survival," Thowfeek said. "The fuel queues, gas shortages, and medicine crises of 2022 were all connected to our inability to earn enough foreign exchange through trade."

She noted that Sri Lanka has long suffered from a balance of payments deficit because imports have consistently exceeded exports. "Before the default, we spent 30 to 35% of our export revenues just on debt servicing," she said. "We cannot meaningfully reduce our nominal debt stock, so the only way forward is to grow the denomi-

nator, GDP, by expanding industries, exports, and jobs."

She pointed out that public debt exceeded 100% of GDP before the 2022 default and will still remain around 92% of GDP by 2030, even after debt restructuring.

"While there is some relief from extending debt maturities, the burden is still very high. We must now focus on growing the economy, and that means focusing on exports," she said.

Thowfeek said Sri Lanka's economic history offers clear lessons on what works and what fails.