Despite the numerous setbacks suffered by Sri Lanka during the past few years, it was still making progress, compared to the world average, in achieving Sustainable Development Goals (SDGs), a report titled ‘Public Investment for Closing the SDG Financing Gap: Sri Lankan Perspective’ released by Institute of Policy Studies Of Sri Lanka (IPS) has said.

The report says Sri Lanka needs additional investment of around 1.4 trillion U.S dollars or 12 percentage points of GDP in 2030 to fulfil the SDGs.

The author of the publication Lakmini Fernando said that prior to the pandemic Sri Lanka recorded an above the world average rate for SDG progress on the SDG Index. The world average at that period was 0.69 points while Sri Lanka was progressing at 0.72 points yearly.

“The post-pandemic SDG progress is lower and progress on the SDG Index has stagnated. However, Sri Lanka has a comparatively higher progress rate of 0.16 points a year, while on average lower-middle and upper-middle income countries record a very low progress rate of 0.09 points a year,” the report said.

The SDG Index is an assessment of each country’s overall performance on the 17 SDGs, giving equal weight to each Goal. The score signifies a country’s position between the worst possible outcome (score of 0) and the target (score of 100).

The report states that Sri Lanka was keenly poised for growth at the time of independence in 1948 and again with the major policy shift in 1977 from an inward-oriented and import-substitution to being outward-oriented and export promotion-based economy.

“However, Sri Lanka’s high pre-pandemic growth declined to a historically low level of -3.6% (negative) in 2020 (Figure 5). The traditional agricultural economy has leapfrogged into a service-oriented economy without considerable developments in the industrial sector, a major hindrance to the productive capacity of the economy (Figure 6). Policy inconsistencies and delayed implementation of necessary structural reforms have further deteriorated the economy,” the report says.

Except for during 1992-2000, Sri Lanka continues to suffer balance of payment (BOP) crises, IPS said. The country had 16 arrangements with the IMF and although a certain degree of cushioning the economy is witnessed, the conditionalities on structural reforms have never been completed. After several discussion rounds, the 17th bailout package was granted in March 2023.

“Sri Lanka’s high public expenditure needs are characterised by an ageing demographic profile. Debt stabilisation through building a primary surplus, credible fiscal policy conduct and domestic revenue mobilisation is crucial in the consolidation process. This needs to be further supported with non-debt creating foreign currency inflows to ensure fiscal sustainability,” the report read.