Crisis as an Opportunity for a Paradigm Shift (Keynot II)

Abstract

Sri Lanka, once considered a promising emerging and developing economy of Asia, has to tread through rough waters over the past several years resulting in poor macroeconomic performance, particularly in terms of subpar growth and rising external and fiscal sector vulnerabilities. In the year 2022, Sri Lanka experienced its worst-ever economic crisis, a crisis that was in the making for many years, triggered by policy errors and exacerbated by other exogenous factors. Failure to build fiscal and external buffers over time made the nation vulnerable to domestic and external shocks, and the COVID-19 pandemic and the related shocks unearthed the vulnerabilities in the Sri Lankan economy, bringing about the worst economic crisis in Sri Lanka’s history. The resultant economic hardship led to both public anxiety and political upheaval. The absence of national economic policies, delayed implementation of the required structural reforms and the inability to build sufficient policy spaces are considered as the key impediments that hampered the progression of Sri Lanka, leading the country towards an unimaginable economic crisis.