By: Staff Writer
May 12, LNW (Colombo): Sri Lanka’s fragile economic recovery is entering a more dangerous phase as global instability, tighter financial conditions, and repeated external shocks threaten to undo hard-won gains, policymakers and development experts warned at a major policy conference this week.
At the opening of the international conference on poverty and development hosted by the Centre for Poverty Analysis (CEPA), officials cautioned that while key macroeconomic indicators have stabilised since the country’s 2022 economic collapse, the foundations of recovery remain vulnerable to both domestic policy missteps and worsening global conditions.
Delivering the keynote address, Dr. Chandranath Amarasekara said emerging economies such as Sri Lanka now operate in a far less forgiving international environment marked by geopolitical fragmentation, monetary tightening, and increasingly frequent global disruptions.
According to the Deputy Governor, smaller economies no longer have the luxury of absorbing economic mistakes gradually. Instead, policy failures are exposed rapidly, leaving governments with limited room for experimentation or politically motivated stimulus measures.
He warned against treating current economic stabilisation as evidence that the country had fully recovered from crisis conditions. Rather, he argued, the absence of immediate turmoil should be viewed as only a temporary reprieve in an uncertain global climate.
Amarasekara stressed that long-term growth cannot rely on short-term fiscal expansion or aggressive monetary intervention. Instead, he said Sri Lanka must prioritise disciplined macroeconomic management, structural reforms, and stronger institutional frameworks capable of surviving future shocks.
The speech also highlighted concerns over serious gaps in national economic data. Key poverty and living standard indicators still rely on statistics collected before both the COVID-19 pandemic and the 2022 economic crisis, limiting policymakers’ ability to accurately assess current conditions on the ground.
Despite those concerns, the Deputy Governor pointed to improvements in the Government’s fiscal position since the height of the crisis. He noted that authorities had shifted away from depending heavily on overdrafts from State-owned banks and were now maintaining surplus deposits within the banking system.
However, he cautioned that repeated external shocks—many outside the control of domestic policymakers would continue testing both the resilience of the economy and the endurance of ordinary citizens.
The Central Bank has also expanded supervision of financial institutions to address problematic lending and deposit-taking practices. Amarasekara said regulators were placing greater emphasis on financial literacy and inclusive finance in an effort to improve public confidence and strengthen household resilience.
The conference, organised to mark CEPA’s 25th anniversary, brought together economists, development experts, and policymakers to examine how multiple crises have reshaped poverty and economic vulnerability in Sri Lanka.
Speakers repeatedly stressed that recovery remains incomplete and uneven, warning that without deeper reforms and stronger protections for vulnerable communities, future shocks could once again reverse economic progress and push thousands more into hardship.