Sri Lanka’s National People’s Power (NPP) Government is facing growing pressure to demonstrate that economic recovery extends beyond stabilising public finances as the International Monetary Fund (IMF) increasingly shifts attention towards structural reforms designed to transform the country’s long-term growth prospects.
Policy experts argue that the current administration possesses a rare political opportunity to implement reforms that previous governments repeatedly delayed due to electoral pressures and resistance from vested interests.
Addressing CA Sri Lanka’s Annual Economic and Tax Symposium, Advocata Institute CEO Dhananath Fernando outlined six key reform priorities that closely reflect the IMF’s broader prescription for rebuilding Sri Lanka’s economy beyond the present bailout programme.
Foremost among these is restructuring State-Owned Enterprises (SOEs). Fernando said SOEs collectively control assets equivalent to nearly half of Sri Lanka’s Gross Domestic Product but generate relatively limited returns for taxpayers. He urged the Government to accelerate the proposed State-Owned Holding Company, allowing greater commercial discipline and improved management of public assets.
A second priority involves expanding industrial capacity by permitting privately developed industrial zones. Existing Government-managed industrial parks, he noted, already operate at over 90 per cent occupancy, leaving limited space to attract new investors. Expanding industrial infrastructure would become critical if Sri Lanka hopes to create the estimated one million private-sector jobs required over the coming years.
Fernando also advocated comprehensive Customs and trade reforms aimed at making Sri Lanka more competitive internationally. These include simplifying border procedures, reducing trade barriers and expanding the country’s network of Free Trade Agreements to improve export opportunities.
Land reform represents another major recommendation. Accelerating the Bim Saviya land title programme would provide clearer property ownership, allowing businesses and individuals to use land more effectively as collateral for investment while reducing legal uncertainty.
Labour market reforms also feature prominently in the proposed agenda. Modernising labour regulations could improve workforce flexibility while encouraging investment and employment creation in emerging industries.
Finally, Fernando called for rationalising Sri Lanka’s public holiday calendar to improve national productivity—one of the more politically sensitive proposals but one he believes would contribute to greater economic efficiency.
Together, these six reforms form the backbone of what many economists believe will determine whether Sri Lanka can move from economic stabilisation to sustained growth.
Fernando argued that tax increases and fiscal consolidation alone cannot deliver long-term prosperity. Instead, future growth must be driven by higher productivity, stronger exports, increased private investment and greater competitiveness.
He acknowledged that many of the proposed reforms would inevitably encounter political opposition, including from trade unions and interest groups. Nevertheless, he argued that the NPP Government’s strong parliamentary majority and broad public mandate provide a unique opportunity to overcome those obstacles.
With only about three years remaining before political attention shifts towards the next general election, economists believe the Government’s reform window may be limited.
The IMF’s message has become increasingly clear: the emergency phase of Sri Lanka’s recovery is gradually ending. The next and perhaps most decisive stage will depend on whether the Government can convert macroeconomic stability into lasting structural transformation through reforms capable of generating investment, employment and sustainable economic growth.