Sri Lanka, a nation once lauded for its economic strides, is now facing one of its most challenging periods due to a severe economic crisis. The country grapples with a critical shortage of foreign currency, an alarming rise in inflation, and a growing burden of taxes on the population.
The crisis has been further exacerbated by a sharp devaluation of the national currency, demanding urgent measures to mitigate the far-reaching socio-economic consequences. A troubling aspect of this crisis is the increasing trend of the youth seeking opportunities abroad to escape the financial turmoil at home.
Amid this economic maelstrom, a disconcerting aspect of the crisis is the increasing trend of the youth seeking opportunities abroad. Faced with economic uncertainty, limited prospects at home, and a growing tax burden, a significant number of young Sri Lankans are looking beyond their nation’s borders for better opportunities and financial stability. This trend, while indicative of the dire economic situation within the country, also underscores the urgency of addressing the crisis comprehensively.
Retaining the youth within the nation and providing them with a conducive environment for growth and opportunities should be a top priority, ensuring a brighter future for both the individuals and the nation as a whole.
Root causes, taxation and impact
Sri Lanka is standing at a critical crossroads, navigating a severe and enduring economic crisis. The nation confronts an acute shortage of foreign currency, disrupting vital imports and consequently impacting daily necessities.This scarcity has far-reaching effects, severely challenging the country’s financial stability and causing widespread inconvenience, hampering daily life.
Adding to the economic distress is an alarming and relentless rise in inflation, significantly impacting the cost of living for citizens. Food inflation surged to an alarming level, further exacerbating the challenges faced by the public. The sharp devaluation of the national currency, the Sri Lankan rupee, has further deepened the crisis, affecting both the domestic economy and trade relations.
In the current taxing economic environment, the burden on the population has increased due to rising taxes imposed by the Government. This places an additional strain on already struggling households and businesses, reducing their purchasing power and ability to invest or spend on essential needs. Urgent and decisive action is essential to stabilise the currency, curb inflation, and implement sound economic policies that consider the tax burden on the population.
The crisis calls for a comprehensive approach, including strategic reforms, prudent fiscal management, and a reconsideration of the tax structure to rejuvenate key sectors of the economy and restore public and investor confidence.
Youth outmigration
Amid the prevailing economic crisis and the growing tax burden, a disconcerting pattern has come to light—the escalating outmigration of Sri Lanka’s youth. Historically, Sri Lanka has witnessed waves of emigration since gaining independence in 1948, often linked to seeking better prospects and improved livelihoods abroad.
However, the current surge in emigration, especially among both skilled and unskilled youth, is particularly alarming and indicative of the pressing challenges faced by the younger population. According to the Sri Lanka Opinion Tracker Survey (SLOTS) conducted in 2021 by the Institute for Health Policy, 27 percent of Sri Lankans, predominantly the young and well-educated segments of society, have expressed a strong desire to emigrate in pursuit of enhanced opportunities.
The migration trend currently unfolding in Sri Lanka presents a worrisome scenario. A significant portion of those choosing to migrate or expressing an intention to do so is those with higher levels of education, particularly possessing skills in technology and science-related domains. These persons represent a valuable segment of the population, constituting the potential workforce that could significantly contribute to the nation’s growth and development. However, the allure of better opportunities abroad, driven by the economic crisis, limited prospects at home, and the burden of increased taxes, has prompted their departure.
Consequently, there is a genuine concern about the composition of the remaining population within the country. The likely scenario is that a larger proportion of the population left behind could consist of individuals who may not possess the same level of education, skills, or good health.
This demographic shift could translate into a less productive workforce, posing a serious threat to the overall economy. An economy dependent on an unproductive workforce could face challenges in sustaining growth, innovation, and development, further exacerbating the economic crisis.
Addressing this issue necessitates urgent measures to create an environment that encourages skilled individuals to stay within the nation, invest in their homeland, and contribute to the recovery and growth of Sri Lanka’s economy, while considering the tax burden on the population.
An often overlooked yet critical aspect that Sri Lanka must consider amid its economic crisis and the growing tax burden is the deteriorating health of its population across various age groups. This decline can be primarily attributed to several intertwined factors that create a daunting healthcare scenario.
The first major concern is the scarcity of essential drugs, a consequence of the strained financial resources within the country. As the economic crisis persists, the healthcare system grapples with inadequate funding, affecting the availability and accessibility of vital medications for various ailments.
The outmigration of healthcare professionals exacerbates this health crisis. Skilled and experienced healthcare workers, including doctors, nurses and specialists, seek better opportunities abroad due to economic uncertainties, the burden of increased taxes, and the allure of improved living standards. This brain drain leaves the local healthcare system understaffed and struggling to meet the burgeoning health needs of the population.
Concurrently, the lack of funds hampers efforts to improve healthcare infrastructure, including upgrading hospitals and medical facilities, thus limiting the overall capacity and quality of healthcare services available to the public.
Addressing this healthcare crisis necessitates a multi-faceted approach, including strategies to retain healthcare professionals, secure funding for essential drugs, and invest in healthcare infrastructure to ensure the well-being of the nation’s populace.
A thorough analysis of current international migration trends reveals a significant shift in the patterns of migration, particularly concerning foreign employment opportunities, with a notable concentration towards Middle Eastern nations. The latest data showcases a considerable number of Sri Lankans, exceeding an impressive 200,000 individuals, primarily those categorised as low-skilled, actively pursuing foreign employment prospects.
A significant majority of this demographic expresses a strong preference for the Middle East as their chosen destination. Recent reports have shed light on a conspicuous trend among Sri Lankan youth migrating to Middle Eastern countries, prominently including Dubai, initially facilitated by visit visas. The driving force behind this migration surge is the aspiration to secure employment opportunities, even though realising these ambitions might prove challenging due to a significant skill mismatch in the job market.
However, the harsh realities often diverge from the migrants’ initial expectations. A substantial portion of these individuals, embarking on their journey with visit visas, often lack advanced skills or qualifications, presenting a considerable hurdle in securing suitable employment. The job market’s competitive nature, coupled with the need to navigate unfamiliar systems and regulations, amplifies the difficulties encountered by these migrants. Consequently, a significant number of individuals find themselves in precarious situations, struggling to attain stable employment or contending with unfavorable working conditions.
This alteration in migration dynamics underscores the profound impact that external factors can exert on international labour movements. The economic crisis-induced disruptions have not only affected the numbers and destinations of migrants but have also triggered a rethinking of migration choices due to the associated risks and uncertainties.
As Sri Lanka grapples with the economic fallout of the crisis and endeavours to regain stability, understanding these shifts in migration patterns is pivotal for policymakers to formulate strategies that facilitate a balanced approach towards international labour mobility, considering the aspirations of individuals seeking employment abroad and the nation’s economic interests.
Cultural perception driving youth migration
Irrespective of the destination or legality of the means, youth across various societies are increasingly driven to migrate due to a deeply ingrained cultural perception that migration holds the promise of a better future, a pathway to fortune. This perception has been woven into the societal fabric, often fuelled by historical narratives of migration leading to success. The allure of improved economic opportunities, higher living standards, and the potential for a prosperous life has created an aspirational outlook, making migration an appealing prospect for young persons.
In many cultures, the idea that migration can substantially improve one’s economic circumstances has become a pervasive norm. Whether legal or not, the cultural notion that migration brings fortune persists, compelling young people to embark on these journeys.
The success stories of those who have migrated, combined with the visible impact of remittances on local communities, reinforce this perception. As a result, migration is perceived as a viable means to break free from economic constraints and realise personal and familial dreams, further perpetuating the cycle of migration as a cultural aspiration.
Strategic policy measures
As previously emphasized, Sri Lanka stands at a critical crossroads, grappling with a severe economic crisis compounded by a troubling trend of its youth seeking opportunities beyond its borders. Effectively addressing this dual challenge requires urgent and well-considered policy measures aimed at retaining the youth, reinvigorating the economy, and alleviating the weight of economic hardships.
The proposed policy recommendations span essential domains, encompassing economic reforms, education and skills enhancement, healthcare system strengthening, taxation reforms, encouragement of returnee entrepreneurship, labour market strategies, and the advancement of financial inclusivity.
Regarding economic reforms, diversifying the economy assumes paramount importance. Sri Lanka must endeavour to move beyond traditional sectors such as tourism and agriculture by fostering innovation, technology, and sustainable industries, thus creating fresh revenue streams and employment opportunities.
Additionally, encouraging investment is crucial—both foreign and domestic investments should be incentivised through tax breaks, streamlined regulations, and improved business environments, thereby fueling economic growth and job creation.
The education system necessitates reform to align educational curricula with market needs and underscore skills demanded by emerging sectors. Close collaboration between academia and industry is vital to develop skill development programs.
Moreover, promoting vocational training is critical to equip the youth with practical skills, preparing them for diverse job opportunities both locally and abroad. Strengthening the healthcare system is indispensable, requiring ample funding to modernise healthcare facilities, ensuring improved healthcare services, and reducing the outmigration of healthcare professionals.
Policies aimed at retaining healthcare professionals through better pay, professional development opportunities, and enhanced working conditions are equally vital. Taxation reforms should introduce a progressive tax system, easing the burden on low-income persons while ensuring higher contributions from those with higher incomes, although what is meant by the present tax system. Implementing a progressive tax system as part of taxation reforms is pivotal for promoting a fair distribution of the tax burden.
In a progressive tax system, the tax rate increases with higher income brackets, meaning those who earn more contribute a larger percentage of their income to taxes. This approach helps in ensuring that individuals with lower incomes, who are often more financially vulnerable, are not unduly burdened by taxes. They can allocate a larger portion of their earnings towards meeting essential needs, promoting a higher quality of life and potentially facilitating savings or investment for their future.
Conversely, a current tax system that does not follow a progressive approach tends to affect the middle class disproportionately. The middle class often falls in a tax bracket where they are neither low-income nor high-income earners. The burden of taxes can be relatively heavy for them, impacting their disposable income and ability to maintain a certain lifestyle.
This segment of the population faces the challenge of striking a balance between meeting their tax obligations and covering their day-to-day expenses, which can include mortgage or rent payments, education costs, healthcare, and savings for the future. This imbalance in the taxation structure calls for reforms that cater to the diverse income levels and lifestyles within a society, ultimately fostering a more equitable tax system.
Tax breaks and incentives
Tax breaks and incentives for businesses, especially startups and SMEs, can ignite growth, innovation, and job creation. Encouraging returnee entrepreneurship presents a promising solution. Programs supporting Sri Lankan expatriates who intend to return and establish businesses, coupled with the promotion of investment opportunities, can attract expatriates to contribute to the nation’s economic development.
Labour market policies should concentrate on job creation initiatives and flexible labour laws striking a balance between workers’ rights and employers’ flexibility, fostering a conducive environment for businesses and job creation.
Financial inclusion can play a vital role. Facilitating access to credit and financial services for micro, small, and medium enterprises (MSMEs) through targeted financial inclusion programs, along with promoting financial literacy and education, can enhance understanding of financial management, investment and entrepreneurship.
