News
World Bank: Debt restructuring and implementation of deep reforms critical for Lanka’s economic stabilization
Sri Lanka’s economic crisis is deepening with unsustainable debt and a severe balance of payment crisis on top of lingering scars of the COVID-19 pandemic, the World Bank said on Thursday.Debt restructuring and the implementation of a deep reform program are critical for Sri Lanka’s economic stabilization, says the World Bank in its twice-a-year update, underscoring the need for Sri Lanka to build resilience.
Released today, the latest South Asia Economic Focus, Coping with Shocks: Migration and the Road to Resilience, projects regional growth to average 5.8 percent this year – a downward revision of 1 percentage point from the forecast made in June. This follows growth of 7.8 percent in 2021, when most countries were rebounding from the pandemic slump.
While economic distress is weighing down all South Asian countries, some are coping better than others.Exports and the services sector in India, the region’s largest economy, have recovered more strongly than the world average while its ample foreign reserves served as a buffer to external shocks.
The return of tourism is helping to drive growth in Maldives, and to a lesser extent in Nepal—both of which have dynamic services sectors.The combined effects of COVID-19 and the record-high commodity prices due to the war in Ukraine took a heavier toll on Sri Lanka, exacerbating its debt woes and depleting foreign reserves.Plunged into its worst-ever economic crisis, Sri Lanka’s real GDP is expected to fall by 9.2 percent this year and a further 4.2 percent in 2023.
High commodity prices also worsened Pakistan’s external imbalances, bringing down its reserves. After devastating climate-change-fueled floods submerged one-third of the country this year, its outlook remains subject to significant uncertainty.Also released today as a companion piece is the latest Sri Lanka Development Update, which highlights the poverty and welfare impacts of the crisis and the role of social protection in protecting the vulnerable populations.
“Protecting the vulnerable is critical as Sri Lanka fast tracks deep reforms to navigate the deepening economic crisis. The crisis calls for immediate action to protect the poorest and most in need while also focusing on strengthening the social protection system,” said Faris H. Hadad-Zervos, World Bank Country Director for Maldives, Nepal and Sri Lanka.
“In the face of the economic crisis, poverty estimates doubled to 25.6 percent between 2021 and 2022, increasing the number of people living in poverty by 2.7 million. Sri Lanka will need to expand employment in industry and services and recover real value of incomes to mitigate the impacts of the crisis, and build long-term resilience of its people. ” added Hadad-Zervos underscoring the need for a coordinated approach to support the poor and vulnerable.The South Asia Economic Focus also put a spotlight on Sri Lanka’s economic crisis, drawing lessons from the Asian Financial Crisis of 1997.
“As Sri Lanka goes through the historically largest contraction in its economy, looking at global experiences such as the crisis in Latin America in the 1980s and the Asian Financial Crisis of 1997 can help chart solutions,” said Hans Timmer, World Bank Chief Economist for South Asia. “The East and Southeast Asian countries regained momentum by implementing sound reforms, which provide lessons for Sri Lanka to build back better.”
To this end, the spotlight highlights two key experiences of the Asian financial crisis as lessons for Sri Lanka. Firstly, the short-term measures needed to address structural weaknesses, buffers to mitigate external shocks and build resilience to future shocks. Secondly, critical policies to promote future growth.
Prime Minister Dr. Harini Amarasuriya held a series of high-level bilateral meetings on Wednesday [January 21] on the sidelines of the World Economic Forum in Davos, Switzerland, engaging with representatives of the European Union, the United Nations Development Programme, and the global private sector.
The Prime Minister met with Hadja Lahbib, European Commissioner for Preparedness and Crisis Management. During the meeting, she expressed Sri Lanka’s appreciation for the support extended by the European Union and its member states following Cyclone Ditwa. The Prime Minister also briefed the Commissioner on the key findings of the World Bank’s GRADE report and requested continued EU support for Sri Lanka’s development and recovery efforts.
Prime Minister Amarasuriya also met with Alexander De Croo, representing the United Nations Development Programme. She expressed appreciation for the longstanding partnership between Sri Lanka and the United Nations and acknowledged the UN’s support in flood relief and livelihood assistance. The Prime Minister noted that, following the mandate received at the parliamentary election, the government is focused on meeting public expectations through national rebuilding grounded in public trust and good governance. She further reaffirmed the Government of Sri Lanka’s commitment to strengthening social protection systems and safeguarding vulnerable communities.
In addition, the Prime Minister met with Robert M. Uggla, Chairman of A.P. Moller Holding. The discussion focused on engagement with the private sector and potential areas of collaboration.
These meetings reflected Sri Lanka’s continued engagement with international partners and global stakeholders to support recovery, development, and long-term economic stability.
[Prime Minister’s Media Division]
… alleges Prez trying to control judiciary
Opposition grouping ‘Mahajana Handa’ has accused President Anura Kumara Dissanayake of trying to exercise control over the judiciary by appointing a sitting High Court judge as Additional Secretary to the Justice and National Integration Ministry.
Addressing the media at Dr. N. M. Perera Centre, Punchi Borella, on Tuesday (20) top Opposition spokesman and former External Affairs Minister Prof. G. L. Peiris warned the High Court judge D.M.D.C. Bandara’s appointment was nothing but a direct executive intervention in the judiciary.
Responding to The Island queries, Prof Peiris asked how the government could compel courts to deal with a sitting judge who functioned as Secretary to the Justice and National Integration Ministry.
Prof. Peiris explained that the latest move by the Executive should be examined taking into consideration the attacks on Attorney General Parinda Ranasinghe Jr, PC., the deliberate delaying of the appointment of Auditor General and the controversy over the process of promotions of Judicial Officers, Judges of the High Court and the Court of Appeal in Sri Lanka. Prof. Peiris pointed out that the Bar Association of Sri Lanka (BASL) had raised those controversial promotions with President Anura Kumara Dissanayake.
D.M.D.C. Bandara, Senior Assistant Secretary, Judicial Service Commission, was among altogether 18 High Court judges appointed by President Dissanayake in early Sept this year. The group consisted of 17 Special Class Judicial Officers and a Senior State Counsel serving in the Attorney General’s Department.
Referring to a recent meeting ‘Mahajana Handa’ representatives, including him had with the Mahanayake theras of the Asgiriya and Malwatta Chapters in Kandy, Prof. Peiris said that they had received the blessings of the Mahanayakes to go ahead with what he called a programme of action meant to address major issues.
Prof. Peiris said they would initiate talks with other like-minded political parties and groups in this regard soon. Referring a protest held at the Hulftsdorp on Wednesday (21) demanding the removal of the AG Ranasinghe, Prof. Peiris emphasized that the government’s hand in that demonstration was very clear. President Ranil Wickremesinghe appointed him as the AG in July 2024 with the unanimous backing of the Constitutional Council.
Prof. Peiris said that action was yet to be initiated to appoint new civil society representatives to the Constitutional Council. That issue hadn’t received sufficient public attention, Prof. Peiris said, urging President Dissanayake to come down from his high horse.
Asked whether the President could appoint a sitting judge as an Additional Secretary to a Ministry without consulting the Chief Justice and President of the High Court Judges Association, sources familiar with the issues at hand said that certain appointments could be made on secondment. However, that has to follow the proper procedure, sources said.
The Island sought a response from the Justice and National Integration Ministry to the accusations made by Prof. Peiris on behalf of ‘Mahajana Handa,’ but did not receive one until this edition went to press.
By Shamindra Ferdinando ✍️
The largest narcotics haul in Sri Lanka’s history was seized last year, according to Police Media Spokesperson and Assistant Superintendent of Police F.U. Wootler.
Addressing a media briefing at the Department of Government Information at Narahenpita on Wednesday (22), ASP Wootler said nationwide operations carried out under Operation Ratama Ekata had helped curb the spread of illicit drugs.
He said police taken into custory 10,871 kilos of heroin, cannabis, ice, hashish and cocaine in 2024, while seizures rose sharply to 23,692 kilograms and 307 grams in 2025.
by Norman Palihawadane ✍️
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