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Dr. Nicholas advises Lanka against swallowing IMF dope
By Shyam Nuwan Ganewatta
The IMF in 2020 told nations around the world that they should maintain a budget deficit to tackle the effects of COVID-19, however, two years later, the IMF insists that this would lead to chaos, Dr. Howard Nicholas, senior lecturer at Erasmus University – Rotterdam, and International Institute of Social Studies – The Hague told The Island.
“Obviously, the IMF is playing a game here. If you look at the past, it is obvious that IMF recommendations have not helped countries like Sri Lanka,” Dr. Nicholas said, adding that Sri Lanka needed to seriously think about its future.
“Apart from privatising State Owned Enterprises (SOEs) the government is not doing anything. This has not helped the economic development of any country. The IMF says that Sri Lanka must reform its state administration, and there is some truth to this. However, this is no solution to the country’s economic problems,” Dr. Nicholas said.
Dr. Nicholas said that Sri Lanka must take a path of export-oriented industrialisation. He has been urging successive Sri Lankan governments to take this road for 35 years, Dr. Nicholas said.
“The main reason why Sri Lanka is in crisis is because of the chronic balance of payment issues. Import expenditure was higher than export earnings for 40 years. The trade deficit on average was about 10 percent of the Gross Domestic Product (GDP). The country scraped by with tourism earnings and remittances from workers. However, this wasn’t enough, and loans had to be drawn. As you know, whenever there is a global crisis, there is a drop in tourism and remittances,” he said.
Dr. Nicholas said Sri Lanka had been borrowing heavily from the International Sovereign Bond markets since 2007. The country borrowed over 14 billion dollars from the bond market between 2015 and 2019.
“This had a severe impact on debt sustainability, and then came COVID-19, and everything unraveled. But the root cause of the problem is trade deficits, which started 40 years ago. The problem remains,” he said.
The Gotabaya Rajapaksa administration in 2019 implemented a serious tax cut, and that was a disastrous move, Dr. Nicholas said. The Rajapaksa administration had also dramatically reduced interest rates and stopped the import of agrochemicals without a real plan to transform our agriculture, he said.
“His government made a lot of mistakes that led to the shrinking of Sri Lanka’s foreign reserves. The government, like everyone else before them, had no interest in boosting import revenue,” he said.
News
Sri Lanka, India caught in US-Iran ship crisis
By Shamindra Ferdinando
Iran has sought the Indian intervention, at the highest level, to provide lifesaving support to the crews of empty Iranian vessels stranded just outside Sri Lanka’s 12-nautical mile territorial waters off Galle.
Sources familiar with the issue said that Iran had brought the developing situation to the attention of New Delhi as the crews of almost 20 vessels, included Indian nationals. Sources stressed that the group of vessels that unloaded crude oil a couple of months back were now stranded within Sri Lanka’s Exclusive Economic Zone (EEZ).
The US Navy torpedoed an unarmed Iran frigate, returning from India, on 04 March, 2026, about 19 nautical miles off the Galle coast. The unprovoked attack killed nearly 100 Iranians.
The Iranian Embassy in Colombo has inquired from the Indian High Commission of their response to the situation, sources said. The US has issued a global warning against providing food, water, medicine and other services to the Iranian vessels. The outcome of Iran-India talks on the issue at hand was not known, though sources asserted India may not throw its weight behind Iranian efforts to address the issue.
Responding to The Island queries, sources said both Sri Lanka and India were in a dilemma due to the US warning. India couldn’t ignore the plight of the Indian crew members and the Iranian vessels in its backyard.
The Sri Lankan government remains tight-lipped about the vessels stranded in its EEZ. Our efforts to elicit a response from relevant authorities were in vain. In addition to Indians, there are Bangladeshis among the crew members. Iran has explicitly stated the responsibilities of the countries concerned to provide assistance in terms of international law.
The Iranian position was articulated by its Ambassador to Sri Lanka, Dr.Alireza Delkhosh, recently. In a special statement, Ambassador Delkhosh emphasised that in terms of the Convention on the Law of the Sea (Article 98) as well as SOLAS and SAR
Conventions, Sri Lanka couldn’t refrain from providing the needs of the Iranian vessels stranded in its EEZ.
SLMC leader Rauff Hakeem lambasted the NPP government in Parliament for failing to provide assistance to the Iranian ships. The former Minister alleged that the government was simply carrying out dictates of the US. He strongly criticised the way Foreign Minister Vijitha Herath was handling the issue.
News
Namal further remanded
MP Namal Rajapaksa, who is in remand custody over the controversial Airbus deal, was further remanded until October 27 by the Colombo Magistrate’s Court yesterday (13).
Colombo Chief Magistrate Asanga S. Bodaragama made the order after considering submissions by officers of the Commission to Investigate Allegations of Bribery or Corruption and lawyers representing Rajapaksa.
News
IMF projects Lankan economic growth to moderate amidst mounting global uncertainties
Sri Lanka’s economy is expected to sustain its recovery over the next two years, although growth is projected to moderate amid mounting global uncertainties, according to the International Monetary Fund’s (IMF) latest World Economic Outlook.
In its World Economic Outlook 2026: Resilience Under Strain, Urgent Choices, the IMF projects Sri Lanka’s economy to expand by 4% in 2026, slowing to 3.7% in 2027, following estimated growth of 5% in 2025.
Inflation, meanwhile, is forecast to rise to 5.3% in 2026 and 5.4% in 2027, reversing the average deflation rate of 0.5% recorded in 2025.
Unemployment is expected to remain steady at 3.9% throughout the forecast period.
The projections come amid growing pressure on the global economy from the ongoing conflict in the Middle East, elevated energy prices, geopolitical tensions and trade disruptions.
Sri Lanka’s external position is also expected to weaken, with the current account balance projected to shift from a surplus of 1.6% of gross domestic product (GDP) in 2025 to deficits of 0.5% in 2026 and 0.3% in 2027.
The IMF’s outlook points to continued economic expansion in Sri Lanka, but with slower growth, rising inflation and a narrowing external surplus giving way to current account deficits over the forecast period.
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