A national conference comprising all major political parties convened for national consensus and a team of domestic experts tasked with developing a comprehensive structural reform program to stabilise the economy is crucial to lift the country from the economic crisis, said international development expert, policy advisor and researcher, Dr. Ganeshan Wignaraja.
He said the government has ruled out going to the International Monetary Fund (IMF) for assistance, worrying that the IMF demands for austerity policies (for example, a floating exchange rate, higher taxes, public expenditure cuts and removal of food and fuel subsidies) would be politically unpopular.
Instead, it has opted for a raft of home-grown remedies, including easing of monetary policy, import restrictions, exchange controls, leasing of state land to investors and a tourism and export push.
The limits of these policies and the spread of Omicron suggest the need for urgent measures to tackle Sri Lanka’s economic crisis, Dr. Wignaraja said, proposing three concrete steps to tackle the economic crisis in the country.
First, a national conference involving the major political parties should be convened to forge a political consensus on the scale of the economic crisis and the implications of policy choices.
Second, a team of domestic experts should be tasked with developing a comprehensive structural reform program to stabilise the economy, mitigate the hardship on the people, deregulate the economy and green the economy. Drawing on existing work by think tanks can be helpful.
Third, Sri Lanka should start talks with the IMF on a program of debt restructuring and financial assistance, he said, adding that there is a mounting risk that time is running out to deal with these challenges in an orderly manner.
He said rather than entertaining a bilateral approach to rescuing Sri Lanka, China can usefully add its powerful voice to calls for Sri Lanka to seek IMF assistance and channel technical assistance funds through the World Bank to support work on a structural reform program for Sri Lanka.
Sri Lanka’s external debt reached US$49.2 billion (S$66.7 billion) in December 2020, with substantial debt repayments of US$4-5 billion (S$5.4-6.8 billion) a year required between 2022 and 2026, backed by dangerously low foreign exchange reserves, Dr. Wignaraja said.