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An alternative to inflation?

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By Usvatte-aratchi

There is much concern about and discussion over inflation. We all realise that the rapid rise in prices, unmatched by a similar rise in incomes in recent months, creates problems for most of us. On the one hand, that process cuts down our real incomes. My income is Rs.100 a day and the price of mangoes goes up from Rs.25 a piece to Rs.50 a piece; my income falls from four mangoes a day to two mangoes a day. In gross fashion, that is what people are complaining about. On the other hand, all cash holders become poorer as prices rise. I own Rs.1,000 and the price of mangoes is Rs.25 each. So I am 40 mangoes rich one day. The price of mangoes doubles the next day. At Rs.50 a piece I am only 20 mangoes rich the next day, no fault of mine. Inflation makes money holders poorer. That is the second common complaint. Some other strange things happen in inflationary processes but let us not complicate matters for now.

It is common to blame the central bank for ‘printing money’. It is even more fashionable to demand that the central bank should act independently of government. Much ire is expressed at the provision that the Secretary to the Ministry of Finance is a member of the Monetary Board which statutorily controls monetary policy and financial system stability. I want to articulate that these arguments are misguided and that when you consider an alternative to inflation, there is none in our specific circumstances.

Mandate from the electorate

In November 2005, Rajapakse was elected President of the Republic by a very small margin over Wickremasinghe. In 2004 political parties led by UNP leadership lost the majority in Parliament. The loss in 2004 was mostly because Prime Minister Wickremasinghe’s government had followed fiscal policies which did not greatly raise inflationary pressure. That administration did not raise government employment. They kept expenditure on the war under control after having signed a cease-fire agreement (CFA) with the terrorists in the north. In 2005 he lost to President Rajapaksa in that part of the island that mattered because he had signed the CFA and could not match President Rajapaksa in the promises held out for larger expenditure on a variety of programmes including subsidies to the poor. Candidate Wickremsinghe came on the band wagon later competing with Candidate Rajapaksa to raise government expenditure. However, Rajapaksa prevailed on both counts, although by a slim margin. In several districts, President Rajapaksa received close to 60 percent of the votes cast. In Hambantota, Matara and Galle that percentage was close to 70 percent. Among postal voters, mostly civil servants, close to 80 percent voted for Mr.Rajapaksa.

The mandates for President Rajapaksa and his administration were quite clear: they must increase government expenditure and they must prosecute a serious war against terrorists. Now, neither party had put forward proposals as to how this increased expenditure by government both for war and for other purposes was to be met. There was only one newspaper commentator who raised the question at all and nobody cared two hoots for him. No party or candidate raised questions about higher taxes or higher borrowing locally or overseas. All parties, the electorate and university men and women were utterly irresponsible when they failed to consider how these expenses were to be met. It appeared as if resources did not matter. All that was necessary was the will to raise government expenditure and to conduct war against terrorists. Candidate Wickremasinghe was vilified as someone who had sold himself to the ‘international community’ and the LTTE and was too beholden to the IMF and World Bank in matters of economic policy.

Choices available to government

Now the reality is a little bit different from the fancy imaginations of the electorate and the political parties. Government had somehow to get hold of resources to keep the promises made to the electorate. After all, they had been elected on that platform and to go back on them would be both immoral (not that that mattered to our silly politicians) and politically suicidal (that mattered). Government expenditure (in current prices) rose from roughly Rs.600,000 million in 2005 to Rs.900,000 million in 2007, about 50 percent, from 25 percent of GDP in 2005 to 28 percent in 2007. Interest payments rose by about 40 percent and expenditure on defence by about 67 percent between the two years. Salaries and wages bills rose by about 45 percent from 2005 to 2007. Net increase in employment was about 50,000, about 5 percent; most of the increase in expenditure was on higher wages. Subsidy and other benefit payments, in fact, fell by about 7 percent between the two years. President Rajapaksa kept his promise that he would both increase employment as well as prosecute the war with greater vigour. It is these measures that pushed him to seek more resources.

What did that ‘somehow’ comprise? First, government could raise tax revenue. But recall that government had made no such promise to the electorate nor had the electorate demanded such policy. Yet tax revenue was higher in 2006 than in 2005 and was probably higher in 2007 than in 2006. Why could the government not collect more revenue from taxes? Because higher taxes may mean more unemployment in the private sector and that is something the government did not want.

Second: Government could borrow in local and foreign markets. Total outstanding public sector debt rose from Rs. 2.2 billion at the end of 2004 to Rs. 2.7 billion at the end of 2006. Heavier, borrowing entailed higher debt servicing costs. Interest payments in 2007 were higher roughly by 40 percent over 2004. Interest payments on domestic debt in 2007 were higher by about 30 percent and on foreign debt by about 200 percent when compared to 2004. As government borrowed more in the domestic market, money became tight and interest rates climbed in the local market; interest rates on 91-day government bills rose from about 7 percent per year in 2004 to about 17 percent in 2007. Government borrowed heavily from the Central Bank which wanted to accommodate the government. Central Bank’s holdings of government obligations rose from Rs. 109 billion at end 2004 to Rs. 119 billion at end 2006.

Now imagine that the Central Bank did not accommodate the government at lower interest rates than would have prevailed in the market. Imagine further that if the Central Bank had not lent to government, market rates on government paper would have risen perhaps to 20 percent per year. Then loans to business may have hit 35-40 percent per year because of tight conditions in the bond market and the uncertainty that would have come with such interest rates. Two results would have followed: first, cost of government debt would have risen further and the screw on the government budget would have got tighter every year; second, economic activity would have collapsed with high-interest rates robbing much remunerative employment. Among other things, that would have negated the government’s promise to the electorate to raise employment. If government had borrowed overseas, interest payments cost in foreign exchange to government would have been lower. However, there would have been severe speculation against the rupee in foreign exchange markets bringing down the value of the rupee against foreign currencies. Without considering other complications of that result, the rupee cost of servicing the foreign debt perhaps would have been of the same order as if government had borrowed in local markets. That would have raised the volume of rupee resources government needed to service foreign debt. On a balance of considerations, it was prudent for the government to have financed expenditure by borrowing from the central bank, that is by printing money, as it did, causing inflation.

Expenditure without taxation?

What was imprudent was for the electorate to demand higher expenditure without agreeing to be taxed higher. Now, the opposition parties cannot go around the country proclaiming peoples’ sovereignty from one end of their mouth and from the other end demanding that the ruling government renege on the mandate given to them by that same sovereign people. They cannot have it both ways. MPs who crossed over to government do have it both ways: their party proclaims that the government is wrong but they implement that wrong policy and even speak eloquently for it.!

Thirdly, government could borrow from the Central Bank and cause inflation and that is what the government chose to do. Inflation is a form of gaining resources for government without formal taxing or borrowing. And the way government gets hold of those resources is by reducing the real value of cash and cash-like assets that the public hold.

According to my understanding, the Central Bank has no business thwarting a government from implementing a programme of action for which government had received repeated mandates, two years running. If the Central Bank stood in the way of government, the latter had every right to pass legislation to compel the Central Bank to let government have its way. There is no widespread protest against polices of government which have caused high inflation. One cannot protest against inflation without opposing government’s programmes. In my judgment, the Central Bank has acted responsibly.

‘Freedmanites’ may repeat ad nauseam that inflation is always and everywhere a monetary phenomenon. However, if they lift that veil of money they will read in shining bold letters in Chapter 21 of Keynes’ General Theory “When a further increase in the quantity of effective demand produces no further increase in output and entirely spends itself on an increase in the cost-unit fully proportionate to the increase in effective demand, we have reached a condition which might be appropriately designated as one of true inflation’. That increase in effective demand coming from a commitment by government to the public to spend more money is not sensitive to the rate of interest and the central bank loses its weapon to fight inflation.

Independence of the central bank

That lands me exactly in the line of fire from those who argue for a central bank independent of government. They would fire at me bullets made of the independence of central banks in many countries. In all these countries, central banks work as a bank to the banking system with the added responsibility of maintaining both price stability and system stability. The central banks’ main concern there is with financial markets: money markets, where banks and similar other organisations principally trade and money, debt and capital markets, where both financial and real sector operators trade. Governments happen to be one party in the debt market. Those who sell government paper in secondary markets and all who buy them have choices to deal with them as they fit government paper into their portfolios after taking into account the risks and returns from government obligations. Government paper is one of the assets available in the market. Contrast that with the situation in Colombo. There is no corporate debt market. The stock market is puny, thin and illiquid. The Central Bank of Sri Lanka has no modus operandi by which it can work in the money market, as in most other countries, to change prices in debt markets and eventually in capital markets and so influence real sector activity. In Colombo financial markets, there is only one boy in town: government. Total outstanding government debt in the domestic market at end 2006 was Rs. 1,500 billion and market capitalisation of the Colombo Stock Market at end 2006 was Rs.835 billion. He had better be accommodated in the best hotel in town. The Secretary to the Ministry of Finance had better have a seat on the Monetary Board.

Obligation to explain

Let us recall that central banks were not invented to discipline government fiscal policy. In contrast the Bank of England gained its special privileges from William and Mary in 1694 by accommodating their request for money. Central Banks were invented and work to discipline money and debt markets and indirectly capital markets. The discipline of government fiscal policy is the responsibility of elected representatives of the people. If the electorate puts in power a group of people with a mandate to spend without raising taxes, what can a government do but tax them with inflation? What right has a bunch of bureaucrats to stand in the way of a government implementing the mandate it was elected to implement? A central bank can advise but so can the Department of Economics of the University of Colombo or the Chamber of Commerce. And a government with a majority in Parliament is under no obligation to accept anybody’s advice, even if it understood it. Now, an economist may consider it imprudent, but what is an economist or the whole bunch of them counted against the people? Economists and other pundits may argue that the people were misguided or worse in giving that mandate. Then, it is their responsibility to have guided the people. Journalists, academics and economists all fail people when they do not explain these things to the public. Let’s try.



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Sri Lanka’s vanishing wetlands put elusive otter under growing threat

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International Eurasian Otter Workshop-Colchester, United Kingdom

The world marked World Otter Day 2026 recently. Conservationists are warning that Sri Lanka’s rapidly disappearing wetlands, polluted waterways and unplanned development are placing increasing pressure on one of the island’s most elusive freshwater predators, the Eurasian otter (Lutra lutra).

The species, locally known as “Diya Balla”, is the only otter found in Sri Lanka and is regarded as a key indicator of healthy freshwater ecosystems. Yet despite its ecological importance, experts say the animal remains poorly studied and largely overlooked in national conservation planning.

Naturalist and conservationist Chaminda Jayasekara, who has spent years documenting otters in Sri Lanka, said the species is facing mounting environmental pressures across the island.

Speaking to The Island, Jayasekara said habitat destruction, chemical pollution, road kills, sand mining, and increasing human disturbance are fragmenting the waterways on which otters depend.

“Otters are extremely sensitive animals. When wetlands are degraded or rivers become polluted, they disappear very quickly. Their survival is directly linked to the health of freshwater ecosystems,” he said.

Jayasekara, who specialised in MSc Environmental Management at the University of Hertfordshire, noted that while the species has been recorded across Sri Lanka’s wet zone, dry zone and coastal wetlands, scientific data on population numbers and distribution remain limited.

According to him, the decline of wetlands has become one of the most serious environmental issues facing Sri Lanka. Marshes, mangroves, irrigation tanks and riverine habitats are increasingly being altered by urban expansion, tourism infrastructure, encroachment and agricultural runoff.

He warns that the loss of these habitats not only threatens otters, but also weakens flood control systems, freshwater security and biodiversity resilience at a time when climate-related disasters are becoming more frequent.

Jayasekara said otters play a vital ecological role by helping maintain balanced fish populations and healthy aquatic ecosystems.

“When otters thrive, it tells us the river system is functioning properly. Their presence is a sign that water quality, fish diversity and habitat conditions remain healthy,” he explained.

One of the best-known locations for otter sightings in Sri Lanka is Aranga Pond, within the Horton Plains National Park, where the species has adapted to the island’s cold montane ecosystem.

However, conservationists stress that even protected areas are not immune to broader environmental degradation occurring outside park boundaries.

Jayasekara’s own work on otters gained prominence through long-term conservation efforts at Jetwing Vil Uyana, where a former degraded chena landscape was restored into a functioning wetland ecosystem.

The restored habitat eventually attracted Eurasian otters, fishing cats, grey slender lorises and numerous wetland bird species.

Over 14 years, Jayasekara carried out field observations, camera trapping and awareness programmes involving hotel staff, surrounding schools and local communities.

“What happened at Vil Uyana clearly showed that habitat restoration works. If degraded ecosystems are given time to recover, wildlife can return naturally,” he said.

He added that wetland restoration should become a central component of Sri Lanka’s environmental policy, particularly as climate change intensifies droughts, floods and biodiversity loss.

Chaminda collecting scat for research purposes in Sigiriya

He says wetlands are among the planet’s most productive ecosystems, functioning as natural water filters and carbon sinks while providing breeding grounds for fish, amphibians and aquatic mammals.

Yet globally, wetlands are disappearing at an alarming rate, and Sri Lanka is no exception.

Conservation groups have repeatedly warned that illegal waste disposal, pesticide contamination and poorly planned infrastructure projects are severely affecting freshwater ecosystems throughout the country.

Jayasekara also highlighted the importance of stronger environmental education and community participation in conservation.

“Awareness is still very limited. Many people living close to wetlands do not realise the ecological importance of otters or the threats they face,” he said.

According to him, involving local communities in conservation monitoring is essential if Sri Lanka hopes to safeguard the species in the long term.

He also pointed to the growing international interest in otter conservation.

In November 2025, Jayasekara represented Sri Lanka at the International Eurasian Otter Conservation Workshop held at Colchester Zoo and organised by the International Otter Survival Fund.

The workshop brought together nearly 100 researchers, conservationists and wildlife experts from 33 countries to discuss emerging threats facing Eurasian otter populations.

Jayasekara presented Sri Lanka’s experience under the theme Rewilding Through Hospitality, focusing on how habitat restoration and sustainable tourism practices at Vil Uyana contributed to otter conservation.

“The international response was extremely encouraging. Many delegates were surprised that a tourism property in Sri Lanka had quietly carried out wetland conservation work for more than a decade,” he said.

Discussions at the workshop also examined wider environmental concerns including river pollution, declining fish stocks, illegal killings and habitat fragmentation affecting otter populations across Europe and Asia.

New conservation technologies such as AI-assisted wildlife tracking and environmental DNA surveys were also highlighted as emerging tools for monitoring elusive species.

Jayasekara said Sri Lanka urgently requires more scientific surveys, stronger environmental law enforcement and greater investment in freshwater conservation research.

He warned that unless wetlands and waterways are protected, several lesser-known freshwater species could face severe decline in the coming decades.

Environmentalists say otter conservation should not be viewed in isolation but as part of a broader effort to protect entire freshwater ecosystems that millions of Sri Lankans depend on for drinking water, irrigation and livelihoods.

He further noted that healthy wetlands also strengthen climate resilience by absorbing floodwaters, reducing soil erosion and supporting groundwater recharge.

As Sri Lanka experiences increasingly erratic weather patterns linked to climate change, conservationists argue that protecting wetlands is becoming both an ecological and economic necessity.

Jayasekara believes Sri Lanka still has an opportunity to become a regional example in balancing tourism, biodiversity conservation and habitat restoration.

“The otter teaches us an important lesson,” he said. “If rivers are protected and wetlands are respected, nature has an incredible ability to recover.”

This year’s observance of World Otter Day 2026 is, therefore, serving not only as a celebration of one of the world’s most charismatic mammals, but also as a reminder of the urgent need to conserve the fragile freshwater ecosystems upon which both wildlife and human communities ultimately depend.

Eurasian otter

By Ifham Nizam

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Malaiyaha Tamil people: Healing the Oldest Wound of Independence

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Hands of a Maliayaha tea estate worker

In their Vesak messages this year, President Anura Kumara Dissanayake and Prime Minister Harini Amarasuriya highlighted the values of reconciliation, coexistence and justice as essential to Sri Lanka’s future. President Dissanayake emphasised that Buddhism’s teachings remain deeply relevant to contemporary society and described Vesak as a symbol of “mutual understanding, unity and coexistence among all communities” and of reconciliation itself. Prime Minister Amarasuriya similarly called for the building of a society in which justice is assured to all irrespective of caste, race or religion. These messages were not merely religious aspirations, they were a direct challenge to the most serious failures in Sri Lanka’s post-independence history. These include the three-decade-long war, its human rights violations and the inability to implement a political solution.

These have been and continue to be the challenges that have prevented Sri Lanka from reaching its full potential. Added to this have been the persistence of social and economic inequalities that continue to marginalise communities at the bottom of the social hierarchy. One of the most enduring examples of such injustice is the experience of the Malaiyaha Tamil community. The scale of the original exclusion is worth understanding clearly. According to the 1946 Census, the Malaiyaha Tamil community numbered approximately 780,600 persons and constituted 11.73 percent of the country’s population making them the second largest ethnic community, larger than the Sri Lankan Tamil community who numbered 733,700 or 11.02 percent of the population at the time

The denial of citizenship and voting rights to the Malaiyaha Tamil community was the first major injustice inflicted on an ethnic minority in post-independence Sri Lanka. The consequences were devastating and long-lasting. A community that had contributed enormously to the country’s economy through its labour on the plantations was excluded from political participation and denied basic rights. This was a political and moral failure that cast a long shadow over the country’s post-independence history. Responsibility for that injustice needs to be shared widely. Political leaders across ethnic lines failed to resist it. The result was the marginalisation of a community whose contribution to national prosperity far exceeded the recognition it received. Today, nearly eight decades later, Sri Lanka has an opportunity to correct that historic wrong but only if economic reform is matched by genuine social inclusion.

Longstanding Grievances

The NPP government has repeatedly acknowledged the need to address the longstanding grievances of the Malaiyaha Tamil people. In its election manifesto, the NPP pledged to improve living conditions in plantation areas, strengthen land and housing rights, ensure equal access to education and public services, and integrate plantation communities more fully into national development. The NPP’s Nuwara Eliya Declaration of 2023 similarly recognised that the plantation community had suffered generations of exclusion and promised measures to address disparities in housing, land ownership, infrastructure, education and economic opportunity. The need for such action is plain to see. While citizenship issues have largely been resolved over time, the socio-economic consequences of decades of exclusion remain deeply entrenched and continue to shape daily life in plantation communities.  A conference organised by the Institute of Social Development to mark International Tea Day on May 21 at the BMICH brought out this and many other salient issues.  Headed by P Muthulingam the organisation has advocated for the rights of the Malaiyaha Tamil people for the past 35 years to be equal citizens who enjoy social and economic justice.

The central problem facing many plantation workers is the low level of income they receive. Daily wages remain among the lowest in the country relative to the difficulty and intensity of the work. Plantation labour continues to depend heavily on methods that have changed little over generations. Productivity remains low compared to competing tea-producing countries — not because workers lack capability, but because sustained investment in their welfare, skills and economic mobility has been withheld. Workers consequently remain trapped in a cycle of low wages and limited economic mobility. Their housing situation compounds these difficulties. Many plantation families continue to live in housing owned either by plantation companies or the state. Lack of secure ownership limits their ability to accumulate assets, access credit or make independent decisions regarding their future. When Cyclone Ditwah damaged plantation housing, it exposed the inability of those living in that housing to access state compensation as they did not own the housing in which they lived.

The problems extend beyond the central highlands. Plantation workers living in private estates and smallholdings in other parts of the country face similar challenges. A recent Amnesty International report documented serious abuses affecting Malaiyaha Tamil workers in private tea estates in the Southern Province.  These include wage withholding, debt dependency, restrictions on movement and intimidation and practices the report argued correspond to internationally recognised indicators of forced labour. These findings are not peripheral. They reveal that the structural exclusion of the Malaiyaha Tamil community is not a relic of the past but an active, ongoing condition. Economic vulnerability and social marginalisation continue to leave many plantation workers without effective protection or access to justice. It is against this backdrop that the government’s recent plantation reform initiative assumes special significance.

Second Phase

The government has announced the second phase of a programme to make underutilised plantation lands and assets available for investment. The objective is to transform underperforming assets into productive enterprises capable of generating employment, attracting investment and revitalising regional economies. The programme seeks to modernise the plantation sector, improve productivity and create new opportunities in tourism, renewable energy and export-oriented industries. These objectives are necessary and welcome. However, economic reform alone will not be sufficient and Sri Lanka’s own history provides the warning. Previous rounds of plantation modernisation pursued productivity gains without addressing the structural disempowerment of the people at the centre of the industry. The result was investment that generated wealth without distributing it.  The workers who produced the wealth were once again treated as labour inputs rather than as beneficiaries. If the current reform follows the same logic, it risks reproducing the same failure.

For reform to succeed, plantation workers must be recognised not merely as a labour force but as stakeholders with rights, aspirations and a legitimate claim to share in the benefits of development. Housing ownership, secure land tenure, quality education, vocational training and entrepreneurship need to be built into the reform process from the outset. The government’s commitments to the Malaiyaha Tamil community therefore need to be incorporated into every stage of the reform process. On the contentious question of land, the government should consider establishing an independent national land commission. Such a body should include respected government officials, professionals and representatives from all ethnic and religious communities. It should review land policy comprehensively, develop transparent principles for allocation and use, ensure fairness in decision making and provide a trusted mechanism for resolving disputes. A credible land commission would help build public confidence that land reforms are being undertaken in the national interest rather than for the benefit of particular groups.

The correction of historic injustices should not be viewed as a concession to one community. It should be understood as an investment in national unity, because societies do not become stronger by maintaining the exclusion of those they have wronged.  On the contrary, they become stronger by ending it. The first great injustice committed against an ethnic minority after independence cannot be undone. But its consequences can be addressed, and doing so would strengthen reconciliation, enhance social cohesion and bring Sri Lanka closer to the vision of a country in which all communities live with equal dignity and equal hope. This is what the Vesak messages of the President and Prime Minister promised. The plantation reform now underway is the moment to make good on that promise not in words alone, but in sustained policy that endures beyond any single government and reaches the people who have waited longest for it.

by Jehan Perera

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IMF relief is not economic recovery: Sri Lanka’s real test begins now

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The IMF’s latest decision to release approximately US$695 million to Sri Lanka provides an important measure of financial relief, but it should not be mistaken for full economic recovery. While the approval reflects progress in stabilisation, fiscal discipline, and reform implementation, the country still faces deep structural weaknesses, social pressures, and external risks. The real test begins now: whether Sri Lanka can convert this temporary breathing space into lasting reform, productive growth, stronger institutions, and national resilience. This moment should not be used for political celebration, but for serious national reflection and responsible action. Sri Lanka must now resolve to support a clear policy direction, a practical reform programme, and a long-term national development path — not merely an individual, a party, or a political camp.

1. IMF Relief: A Necessary Step, but Not a Final Solution

The IMF Executive Board recently completed the combined Fifth and Sixth Reviews under Sri Lanka’s Extended Fund Facility, allowing the country immediate access to SDR 508 million, approximately US$695 million. This decision represents an important step in Sri Lanka’s ongoing economic recovery process following the severe crisis that led to sovereign debt default, shortages of essential goods, high inflation, and the collapse of foreign reserves in 2022.

However, this decision must be understood with great sensitivity. IMF relief is not the same as full economic recovery. It gives Sri Lanka temporary breathing space, helps rebuild a certain level of international confidence, and supports the continuation of the reform programme. However, this relief is not a magic solution that can automatically resolve the country’s deep-rooted economic problems. Fundamental challenges such as the debt burden, weak productive capacity, low export earnings, poor public revenue performance, weak fiscal management, excessive dependence on imports, corruption, and inefficient state-owned enterprises still remain unresolved. Addressing these challenges requires domestic reforms, disciplined policies, stronger production and export capacity, and a long-term national development programme. Therefore, the IMF decision should not be treated as a political victory or as proof of complete economic success. Rather, it should be seen as a reminder that Sri Lanka still has a long and difficult journey ahead.

2. Sri Lanka’s Progress Recognised by the IMF and Its Limits

The IMF’s approval indicates that Sri Lanka has made progress in several important areas. Inflation has been brought under control compared to the extreme levels experienced during the crisis. Foreign reserves have improved, the exchange rate has shown greater stability, and fiscal management has become more disciplined. The government has also continued to implement reforms in taxation, public finance, energy pricing, and debt restructuring.

According to the IMF assessment, performance under the programme has generally been strong. Several quantitative performance targets have been met, while many structural benchmarks have either been achieved or implemented with some delay. This shows that Sri Lanka has remained broadly committed to the reform path agreed under the IMF-supported programme.

Yet this progress remains fragile. Stability achieved through external support must now be converted into genuine economic strength.

3. Conditions and Responsibilities Attached to the IMF Programme

IMF support does not come merely as financial relief; it comes with a set of important reform conditions and responsibilities that Sri Lanka must fulfil. Key among them are maintaining fiscal discipline, improving government revenue, continuing cost-reflective pricing for fuel and electricity, strengthening public financial management, restructuring state-owned enterprises, protecting institutional independence, and preventing the accumulation of new external payment arrears.

The main objective of these conditions is to restore macroeconomic stability, strengthen fiscal credibility, and rebuild international confidence in Sri Lanka. However, these reforms also carry social and political consequences. Higher taxes, market-based utility pricing, and strict expenditure controls can place a heavy burden on ordinary citizens, especially low-income families, small businesses, pensioners, and salaried workers. Therefore, in implementing reforms, economic discipline alone is not enough. Fairness, transparency, and social sensitivity towards vulnerable groups must also be treated as essential priorities.

4.The Impact of IMF Conditions on People and the Economy

One major social consequence of the IMF programme is the increased pressure it can place on household incomes and living standards. When electricity, fuel, and other essential services are priced on a cost-recovery basis, people may have to face a higher cost of living. Although such reforms are necessary to reduce the losses of state-owned enterprises and maintain fiscal discipline, they can weaken the purchasing power of ordinary citizens if strong social protection programmes are not in place.

Another important consequence is the pressure placed on the operating costs and stability of small and medium-sized enterprises. Higher taxes, increased utility costs, fuel and electricity expenses, and the rising cost of borrowing can affect business survival, job creation, and new investment decisions. If reforms are implemented without sufficient attention to production, exports, and small businesses, the country may achieve short-term fiscal stability, but long-term economic growth could remain weak.

There is also a political risk that cannot be ignored. If people feel that the burden of reform is not being shared fairly, reform fatigue and public frustration may emerge. If ordinary citizens are expected to make sacrifices while corruption, waste, and political privileges continue, public confidence in the reform process will decline. Therefore, for IMF-supported reforms to succeed, fairness, transparency, and social sensitivity must be firmly ensured alongside economic discipline.

5. The Real Test Before Sri Lanka

Sri Lanka’s real test begins now. Beyond temporary financial relief, the country must now prove that it can build a strong economy that generates income and can withstand external shocks. Therefore, our objective should not be limited to securing the next IMF tranche. While an IMF tranche may provide short-term breathing space, it does not guarantee long-term economic independence or stability. The real objective should be to create an economy that does not have to return to the IMF repeatedly during every crisis, but can stand on its own productive strength, export earnings, and fiscal discipline.

This requires fiscal discipline. However, discipline alone is not enough; economic growth is also necessary. Taxation is necessary. But increasing taxes alone is not a solution; production, investment, and exports must also be expanded. Debt restructuring is necessary. But beyond reducing the debt burden, Sri Lanka must also build an economic foundation that does not depend excessively on borrowing in the future. Sacrifices may be asked of the people. But for those sacrifices to be fair, accountability, transparency, and exemplary conduct from leaders are also essential.

Economic recovery cannot be sustained in the long term through financial assistance alone. Such support can provide breathing space during a crisis, but a country is rebuilt on the strength of its own institutions, productive capacity, export competitiveness, and public trust. Therefore, what Sri Lanka needs today is strong institutions, income-generating industries, a broader export base, food security, energy security, and a system of governance that people can trust.

6. Policy Priorities for Sustainable Recovery

Sri Lanka must now move from crisis management to national transformation. First, fiscal discipline should continue, but it must be fair. Revenue mobilisation should not rely only on increasing taxes on the same groups of people. The tax base must be broadened, tax administration must be improved, and tax evasion must be reduced.

Second, social protection must be strengthened. The most vulnerable groups should be protected through well-targeted assistance. Reforms will be more acceptable if people feel that the poor, elderly, disabled, and low-income families are not abandoned.

Third, state-owned enterprise reform should be carried out with transparency and public accountability. The objective should not merely be privatisation, but efficiency, professionalism, financial discipline, and better service delivery.

Fourth, Sri Lanka must prioritise export-led growth. The country cannot build a stable future by depending mainly on borrowing, remittances, and consumption. Agriculture, tourism, manufacturing, IT services, logistics, education, and value-added exports must become central pillars of national development.

Fifth, governance reform is essential. Without reducing corruption, political interference, wasteful expenditure, and weak implementation, no IMF programme can create lasting recovery. Economic reform and governance reform must move together.

7. From Temporary Relief to Lasting Recovery

The IMF decision gives Sri Lanka an important opportunity. It provides the country with space to strengthen economic stability, rebuild international confidence, and move forward with essential reforms. However, it is not a guarantee of success. It is only a step that gives the country some breathing space. It is now Sri Lanka’s responsibility to use that space wisely, with discipline and accountability to the people.

The country must now decide whether it will continue the old cycle of crises, debt, temporary relief, and political blame, or whether it will build a new national programme based on discipline, productive capacity, fairness, and accountability.

At this moment, true success cannot be measured by the amount of money received. It must be measured by whether Sri Lanka can build an economy that produces more, exports more, saves more, is governed better, and protects its people more effectively. The real victory is not receiving IMF relief, but building a strong national economy that will not depend excessively on such relief in the future.

Public Appeal: Let Us Choose a Programme, Not a Personality

This US$695 million will not solve every problem in our country. It may provide temporary financial relief and support the continuation of reforms, but it cannot replace the hard work required to build a productive, disciplined, inclusive, and self-reliant economy.

Therefore, this is the right time for all Sri Lankans to rise above narrow political loyalties and support a clear policy direction, a practical reform programme, and a long-term national development agenda — not merely an individual, a party, or a political camp. What Sri Lanka needs today is not the victory of a personality, but the victory of a responsible national programme that can restore confidence, protect the vulnerable, promote production, strengthen exports, ensure accountability, and secure a better future for the next generation. The question before us is simple but decisive: are we ready to make that choice?

by Prof. Ranjith Bandara,
PhD (Qld.,)

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