By: Staff Writer
February 02, Colombo (LNW): Sri Lanka must move beyond cautious, piecemeal policy changes and embrace sweeping economic reforms if it hopes to turn its fragile post-crisis recovery into sustained, investment-driven growth, ODI Senior Fellow Dr. Ganeshan Wignaraja said this week.
Delivering the keynote address at the Asia Securities Investor Conference 2026, Dr. Wignaraja cautioned that while the country has stabilised since its 2022 sovereign default, the recovery remains vulnerable to both domestic and external shocks.
He argued that Sri Lanka’s traditional approach of gradual reform has repeatedly failed to deliver lasting results. “Incremental change has been our default setting, but it often means moving backwards before making limited progress,” he said, calling instead for a “big bang” reform agenda that tackles structural weaknesses head-on.
Placing Sri Lanka’s experience in a broader global context, Dr. Wignaraja noted that debt crises in developing economies often leave long-lasting economic scars. He warned that climate-related disasters could deepen those impacts, making recovery more difficult and prolonging social and economic hardship.
Reflecting on the recent stabilisation phase, he credited the IMF-supported programme launched in March 2023, emergency financing from development partners, and firm monetary policy actions by the Central Bank for preventing a deeper financial collapse. According to him, investors are less concerned about how crises originate and more focused on how governments respond under pressure.
Dr. Wignaraja also highlighted the lessons from Cyclone Ditwah, which caused widespread destruction across the island. Unlike past natural disasters that were geographically limited, the cyclone affected large parts of the country, with damages estimated at around $4.1 billion, or nearly 4% of gross domestic product.
The disaster, he said, once again exposed gaps in disaster preparedness, coordination, and response capacity. He stressed that recovery efforts must be closely linked with reform, rather than treated as short-term relief exercises.
Drawing on joint research by ODI and the Centre for Poverty Analysis, Dr. Wignaraja outlined key priorities for post-disaster recovery. These include developing a credible reconstruction plan, improving domestic revenue mobilisation to complement foreign assistance, and engaging with the IMF to allow some fiscal flexibility to address rising poverty levels.
Beyond recovery, he argued that Sri Lanka urgently needs to dismantle bureaucratic obstacles, reduce high energy costs, raise labour productivity, and integrate more effectively into global supply chains. Long-standing issues such as excessive regulation, skills shortages, and high input costs continue to deter both domestic and foreign investors.
Without decisive reforms, Dr. Wignaraja warned, Sri Lanka risks slipping back into familiar cycles of debt distress. The durability of the current recovery, he concluded, depends on political resolve and a broad-based consensus that signals long-term policy stability to investors and markets.
