The inevitable lesson following an event as impactful as Sri Lanka’s economic crisis is that the country’s previous status quo was insufficient to maintain stability. As such, rebuilding the government to return to this precarious point is inadequate. Along with shoring up the vulnerabilities that led to economic upheaval, effort must be directed towards laying a more resilient foundation where growth is more sustainable and less prone to external shocks.

While the specifics of a crisis like the COVID-19 pandemic might have been impossible to foresee, the nation’s relative lack of resilience underscored the importance of identifying and addressing vulnerabilities in advance. Further, this is becoming increasingly necessary given the potential for events outside the country’s influence to impact its well-being, such as escalating wars, unstable leadership in powerful countries, disruptive technological leaps, and more.

The past few years have also demonstrated that political will and innovative governance can bring a country back from the brink. 2024 showed several positive signs: its new government committed to following the path laid out by the International Monetary Fund (IMF), the country’s GDP grew after contracting in the previous two years, the rupee stabilized (and briefly appreciated), consumers became more comfortable spending on non-essentials, Fitch Ratings upgraded Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to CCC+ from Restricted Default (RD), and so on.

However, much of this progress remains on shaky ground, and various factors may see the country return to another economic crisis. The government’s tax update, intended to provide relief to those most affected by financial instability, may instead limit its ability to invest in crucial projects. Tourism is seeing a return to form, but the effects of climate change and the shadow of overseas conflicts may make some travellers less keen to visit. Knowing the challenge is only half the battle, what follows next must be a carefully selected array of priorities that align the country’s limited resources with its best interests.

One way for the government to assess these priorities is to speak with the country’s top professionals, especially those whose positions afford them a broad perspective, whether through their role within an organization or their connections to key stakeholders. By tapping into their insights, experiences, and perceptions, Sri Lankans can uncover information about the country’s underlying strengths, challenges, and opportunities. In this series, we talk to some of Sri Lanka’s most experienced professionals, turning informed perspectives into actionable intelligence for sustainable, resilient growth.

Anushka S. Wijesinha is an economist with experience in the government, private sector, and think tanks. He co-founded the Centre for a Smart Future and has worked as an international consultant in several countries. He serves on various boards, including Fairfirst Insurance and Good Life X, and is involved in key national committees. Previously, he was Chief Economist at the Ceylon Chamber of Commerce and an advisor to the Minister of Development Strategies. Wijesinha holds a Master’s in Economics from the University of Leeds and is an alumnus of Harvard Kennedy School’s executive programme.

What are the top goals Sri Lanka should prioritize in 2025?

The priority should be continuing the progressive macroeconomic reforms underpinning the IMF agreement. The new government has instilled confidence among all parties that it remains committed to the task. A key milestone will be Budget 2025, expected in the first couple of months of the year. This will help us assess the government’s medium-term policy vision and understand its reform priorities.

The other priority is powering up economic growth sources. Now that the macroeconomic stabilization agenda is complete, it is time to focus on sustainable recovery and growth. We must aim to “build forward differently,” not simply “build back better.” Focusing on people and the environment is vital in this recovery and growth phase.

2026 will be too early to tell whether we have followed the right path or not — by 2027 or 2028, we may have a better sense of it. This is also when the IMF agreement is set to conclude, and Sri Lanka will enter a new phase of its post-restructuring pathway.

What is the most vital long-term goal we should set ourselves to transform the economy?

The most vital long-term goal should be to grow our economy sustainably, with people and nature as core considerations. Our post-war growth model was flawed. We relied on ‘sugar highs’ that gave short bursts of high growth from a narrow set of economic activities. This couldn’t be sustained. The missteps over a decade that laid the groundwork for the 2022 financial crisis should not be forgotten.

Ensuring that the sources of growth are strong and sustainable is essential and must now be a priority focus over the medium term. This includes creating decent jobs (emphasizing green jobs), doubling down on efforts to boost exports and foreign direct investment, and guarding against the tendency to reach for inward-looking trade policies. We should introduce pro-competition regulations and programmes that enhance productivity and innovation. We must prioritize these policies and strategies in this recovery and growth phase.

What is the biggest risk that Sri Lanka faces at this point?

It is hard to point to any single risk as ‘the biggest.’ There are many, both external and internal. Externally, the global economy is undergoing unprecedented shifts: tussles for global influence between traditional Western hegemons and new big powers, the alignment and realignment of power and allegiances among middle powers, and the risk that big power rivalry poses for smaller countries like Sri Lanka.

Due to more hawkish and conservative US and European leaders, we need to monitor the redrawing of global trade and investment policies. There is a heightened emphasis on sustainable supply chains and carbon emissions in products imported by our key trade partners. Geopolitical tensions in the Middle East can always threaten oil and commodity prices. These are just some of the risks Sri Lanka will have to watch on the external front.

Internally, the risks include policy inertia, where the growth-enhancing reforms I mentioned are not activated thoroughly and fast enough. There are also risks associated with the public’s impatience with the speed and extent of the anti-corruption and broader governance reform agenda that was widely promised during the elections in 2024. There are also some tail risks from the economic crisis and debt restructuring, where veering off course on macroeconomic targets could lead to a recurrence of financial distress.

For all of the above, external and internal anticipatory strategies and inclusive policymaking can be essential in mitigating their ill effects. It is anticipatory because Sri Lanka tends to take key decisions too late and assumes that things can be “shaped up.” Anticipatory strategies would have mechanisms to watch for the risks on the horizon, ways of alerting key decision-makers, and a method to implement timely risk mitigation actions. This is inclusive because many instances in the recent past have witnessed terrible missteps simply due to insular policymaking. Even as each new administration would have its own set of trusted advisors and confidants, it is essential to create opportunities to hear diverse voices, absorb inputs from different actors, synthesize the information, and decide on actions to take.