Sri Lanka’s 2022 economy has been discussed widely in Sri Lanka and internationally, however a few say that Sri Lanka’s predicament lies in global patterns that shape much of the developing world. As speakers at a recent conference titled ‘70 years after Bandung: Challenges and Struggles on the Road to Self -Determination and South – South Solidarity,’ at the Bandaranaike Centre for International Studies (BCIS), made it clear that Sri Lanka’s struggle is not an isolated case but part of a wider crisis affecting over half the developing world, one marked by debt distress, neoliberal reforms, and the systematic dismantling of institutions once designed for national development.
Debt, deindustrialisation and the price of neoliberal policy
Three years ago, Sri Lanka defaulted on its debt for the first time. Since then, the unravelling of the global order and the crisis of neoliberalism have exposed the limits of conventional economic policy that the country had been following loyally. Over decades, structures that could have cushioned such shocks, national planning, industrial policy, development banks, were systematically dismantled by successive Governments
A senior researcher at the Bandaranaike Centre for International Studies, Dr. Amali Wedagedera laid out the stark consequences. She said that “60 years of engagement with the IMF and 75 years with the World Bank has structurally transformed Sri Lanka as a low-value, low-skilled and vulnerable peripheral economy in the global division of labour.” Deindustrialisation, the erosion of State-owned enterprises, and the prioritisation of low-value services and industries like tourism and ready-made garments have left the economy fragile. She said that a telling example was the paper shortage of 2022 and the impact of US tariff hikes, both reminders of how dependent Sri Lanka is on global supply chains and the vulnerabilities of its economic structure.
Financial subordination to international financial institutions and private capital markets has created what Wedagedera called “a vicious interdependent cycle of low-value production and debt constituting a debtor’s prison.” According to Sri Lanka’s latest Budget, 60 percent of national revenue is spent on debt servicing, one of the highest in the world.
IMF conditionality and policy autonomy
Wedagedera described the current IMF program as “arm-twisting” the Government to introduce reforms that make it easier to privatise profitable sectors and move public enterprises towards private business models. This includes splitting the electricity board into several companies and pushing for “automatic market pricing” in essential services. The result, she said, is not genuine reform, but the deepening of Sri Lanka’s peripheral status: “The new Government elected to bring about change shows signs of a peripheral State that accommodates and preserves the conditions of dependence than our expectations.”
The theory and politics of delinking
Against these developments, interest in the idea of “delinking,” a theory introduced by Samir Amin has grown among academics in the Global South in recent years. Delinking is not autarky but a strategic effort to break from international relations that impose a division of labour on peripheral economies, “as destinations of cheap labour, cheap raw material and low value production that perpetuate underdevelopment.”
For Wedagedera, delinking is “a precondition to industrialise an economy.” She described key elements as self-sufficiency in food, employment creation, capital controls, local ownership of the financial market, nurturing a domestic market, and sourcing productive technologies.
She said “establishing a development bank is a vital step in owning local financial markets, catering towards development.” But she was also clear that financial reforms must be paired with debt relief for “microfinance-affected women and small and medium enterprises” to correct the current imbalance, where “the bloated financial sector thrives at the cost of productive sectors.”
The limits of received wisdom
The Sri Lankan experience is not unique, panellists drew frequent comparisons to African experiences. Dr. Nimrod Zalk, Chief Research Officer: Climate and Economic Development at the University of Cape Town’s Nelson Mandela School of Public Governance (NMSPG), said the dangers of both “excessive and uncritical pessimism” and of “sweeping generalisations” about economic prospects. He said that reliance on “received wisdom” or a focus solely on external constraints can obscure internal policy mistakes. Zalk, talking about the experience of African countries, preferred for an approach inspired by Albert Hirschman’s “possibilism”, a realistic, evidence-based view that emphasises action and variation rather than fatalism.
At the same time, Dr. N’dongo Samba Sylla, a Senegalese Development Economist, said many mainstream economists refuse to acknowledge the power imbalances in the international system. He said that the IMF’s and World Bank’s voting structures are not democratic, and that repeated efforts by the Global South to change the system have been thwarted. Sylla said that “structural adjustment policies by the International Monetary Fund and the World Bank resulted in the lost decades.” As for delinking, he stressed the need for “national control over labour, economic surplus, domestic markets, natural resources, and technology,” but acknowledged that such strategies may be risky for smaller countries acting alone.
Obstacles to change and the question of autonomy
Wedagedera said countries in the Global South face political obstacles if they attempt to regain “monetary and fiscal autonomy.” Sri Lanka would have to consider “exit from the IMF program, reverse the independence of the Central Bank Act and abolish the Economic Transformation Act, which serves the interest of Capital and preserves Sri Lanka’s location as a peripheral State.”
Sylla and Zalk acknowledged the complexities. Sylla said that “delinking is not synonymous with autarky,” and that it could be less risky “in the context of a new regionalism through alliances.” If many countries in the Global South stand together, it would be difficult for institutions like the IMF or bilateral or private creditors to push smaller countries around, he said. Zalk, meanwhile, reminded the audience that National Policy must avoid both “excessive focus on external forces” and neglect of “internal agency.”
Facing hard choices
Sri Lanka is at a crossroad, the discussions at the conference underscored the urgency of new thinking. The default and ongoing debt crisis have exposed the limits of a model based on integration without autonomy, and reform without resilience. There are no easy answers to issues that plague countries like Sri Lanka, but for policy imagination rooted in local realities, historical lessons, and solidarity across the Global South. Reclaiming economic sovereignty and rebalancing development will require both courage and a willingness to look beyond business as usual.
