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Rising electricity tariffs: A national economic crisis beyond monthly bill

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Tariff Increase: Visible and Real Impact

The recent increase in electricity tariffs in Sri Lanka has created serious social and economic concerns. The increase applies especially to consumers who use more than 180 units of electricity. Their bills may rise by more than 18%.

At first, this may look like a decision that affects only “high electricity users.” But in reality, the impact is much wider. It affects households, businesses, industries, services, inflation, investment, and national competitiveness.

Sri Lanka is now facing a situation where electricity bills continue to rise again and again. This should not be seen as a one-time tariff revision. If the price of one unit of electricity keeps increasing, the deeper problem is not only household consumption. The real problem is the high cost of electricity generation. Therefore, the unit price of electricity cannot be reduced in a sustainable way unless the cost of generation is reduced first.

The main concern is that Sri Lanka still does not seem to have a clear, practical, and measurable long-term plan to reduce generation costs. What we often hear are political explanations, temporary promises, and hopeful statements. But hope alone cannot reduce electricity tariffs. What the country needs is a realistic national plan. It must focus on low-cost power generation, efficient management, renewable energy investment, and serious reforms in the electricity sector.

Electricity is a basic foundation of a modern economy. When its price increases, it affects the cost of living, business costs, production, and national competitiveness. According to the Public Utilities Commission of Sri Lanka (PUCSL) announcements, the May 2026 revision applies especially to domestic consumers above 180 units, government institutions, large industries, and several GP2 and GP3 categories.

Direct Impact: Pressure on the Middle Class

The tariff increase directly affects middle-class and upper-middle-class families that use more than 180 units of electricity. In urban and semi-urban life, many electrical appliances are now part of daily life. These include refrigerators, water pumps, computers, internet devices, washing machines, fans, rice cookers, and other household equipment.

Many families exceed 180 units not because they live luxuriously, but because modern life requires electricity. Therefore, it is not realistic to say that this decision affects only the rich. Children’s education, online learning, work from home, small home-based businesses, water supply, communication, and basic household safety all depend on electricity.

According to PUCSL examples, a household using 210 units may see its bill increase from Rs. 9,570 to Rs. 11,330. This is an increase of about Rs. 1,760 per month, or nearly Rs. 21,000 per year. For families whose incomes are not rising at the same pace, this is a serious burden. It reduces savings. It affects education, health, food, and daily consumption. When electricity bills, food prices, fuel prices, and loan costs rise together, middle-class confidence falls. Families begin to cut non-essential spending. This also reduces market demand. Therefore, the electricity tariff increase is not just another monthly bill. It is a deeper pressure on living standards, savings, and economic security.

Impact on the Business Sector

The wider impact of electricity tariff increases is seen most clearly in the business sector. Factories, hotels, restaurants, supermarkets, cold storage facilities, bakeries, printing businesses, IT firms, and small and medium enterprises all depend heavily on electricity.

When electricity costs rise, production and service costs also rise.

In 2024, the industrial sector alone used 4,622 GWh of electricity. This was 30.4% of total electricity sales. The General Purpose category used 3,472 GWh, or 22.9%. This shows that a large share of electricity consumption takes place in the production and service economy.

For large industries, electricity is essential for machinery, refrigeration, lighting, packaging, water pumping, and quality control. When the unit price of electricity rises, the cost of producing each item also rises. Businesses then have only a few choices. They can pass the cost to consumers. They can reduce their profit margins. Or they can reduce production.

For small and medium businesses, the pressure is even greater. Large companies may be able to invest in solar power, energy-efficient machinery, or special credit facilities. But small businesses have limited options. For a bakery, salon, grocery shop, or small restaurant, a higher electricity bill directly affects daily cash flow. In the end, these costs enter the prices of goods and services. The price of food at a restaurant, goods at a shop, products from a factory, and services at a hotel can all rise because of electricity costs.

In the long run, this can also affect employment, wage increases, business expansion, and overall economic activity.

Inflation and the Cost of Living

Higher electricity tariffs can create a risk of rising inflation. Electricity is not only a household bill. It is also a key cost in food production, storage, transport, industry, hotels, hospitals, schools, and many services.

When electricity costs rise, that cost gradually enters the prices of goods and services.

Sri Lanka’s recent experience shows how dangerous this can be. In September 2022, annual inflation based on the Colombo Consumer Price Index reached 69.8%. Food inflation reached 94.9%, while non-food inflation reached 57.6%. This shows how quickly living costs can rise when fuel, electricity, transport, and exchange rate pressures come together. In April 2026, CCPI-based annual inflation also increased from 2.2% in March to 5.4%. Non-food inflation rose from 2.9% to 6.8%. This is an important warning.

Under the CCPI base year 2021=100, the category “Housing, Water, Electricity, Gas and Other Fuels” carries a weight of about 31.6% in the consumer price index. Therefore, higher electricity and fuel costs can have a direct impact on inflation. The risk is that an electricity bill increase does not stop with the electricity bill. It can later spread into food prices, medicine prices, school services, hospital services, restaurant prices, and transport costs. This is known as a second-round effect.

When inflation remains high, real household income falls. Even if salaries remain the same in numbers, people can buy less with that salary. There is another danger. If people and businesses expect prices to keep rising, businesses may raise prices early. Workers may demand higher wages. Suppliers may sign contracts at higher prices. This can create a wage-price spiral. Therefore, the inflationary impact of electricity tariff increases should not be treated lightly. The country needs more than tariff increases to cover institutional losses. It needs a long-term plan to reduce the cost of electricity generation, diversify the energy mix, and protect the cost of living.

Coal, Oil, and the Cost of Power Generation

One major reason for rising electricity tariffs is the way electricity is generated. Consumers see only the final bill. But behind that bill are fuel choices, power plant efficiency, import costs, exchange rates, and weaknesses in energy planning.

A major part of Sri Lanka’s electricity generation still depends on coal and fuel oil. In 2024, total electricity generation was 16,802 GWh. Coal accounted for 32.6%. CEB oil-based generation accounted for 9.3%. IPP oil-based generation accounted for 4.6%. Together, coal and oil-based generation made up nearly 46% of total generation. This is very important for tariff decisions.

Coal power plants such as Norochcholai provide relatively low-cost base power. But when such plants face maintenance problems, technical failures, or unexpected shutdowns, the country loses low-cost electricity. It then has to use more expensive oil-based power plants.

According to CEB 2024 data, the fuel cost of one unit of electricity from Lakvijaya coal power was Rs. 17.96 per kWh. But some diesel and LAD power plants cost more than Rs. 40 to Rs. 100 per kWh. This clearly shows how the generation mix affects the unit price of electricity.

Coal and oil are also imported fuels. They depend on foreign exchange. When global fuel prices rise, when the rupee weakens, or when geopolitical risks increase, electricity generation costs also rise. Therefore, a real discussion on reducing electricity tariffs must begin with reducing generation costs. Sri Lanka needs a practical plan to move towards lower-cost, reliable, and locally available energy sources.

Inefficiency and Policy Weaknesses

Another major reason for repeated tariff increases is long-term inefficiency in the electricity sector. Old transmission systems, power losses, delayed projects, inefficient procurement, political interference, and the absence of a stable energy policy have weakened electricity planning.

An efficient electricity system needs timely investment in low-cost power plants. Existing plants must be properly maintained. Transmission and distribution systems must be modernized. Renewable energy projects must be connected to the grid without unnecessary delay. When these steps are not taken on time, the country becomes dependent on expensive emergency solutions. Sri Lanka has natural advantages in solar, wind, and small hydro power. But delays in approvals, limited grid capacity, legal uncertainty for investors, and frequent policy changes have prevented the country from using this potential fully. This is a lost economic opportunity.

Another weakness is that decisions in the electricity sector are often driven more by politics than by technical and economic logic. Tariff decisions, power plant selection, project approvals, and institutional reforms should be based on professional judgment. When decisions are made for short-term popularity, the long-term cost is paid by the public.

Therefore, a plan to reduce electricity tariffs cannot be only a tariff announcement. It must be a full reform programme. It must reduce generation costs, reduce dependence on imported fuel, strengthen the grid, speed up renewable energy, and reduce institutional inefficiency. Without such a plan, electricity bills will continue to remain a burden on the people.

Impact on National Competitiveness

High electricity costs do not affect households alone. They also affect production costs, export prices, investment decisions, tourism costs, and the service economy. Therefore, electricity tariffs are a key factor in national competitiveness.

When electricity costs rise, it becomes harder for exporters to compete on price. Sectors such as apparel, food processing, rubber, plastics, packaging, printing, and light manufacturing all depend on electricity. International buyers are highly price-sensitive. If Sri Lanka’s production costs rise, its export competitiveness weakens.

Tourism is also affected. Hotels, restaurants, guest houses, and villas need electricity for air conditioning, lighting, laundry, kitchens, water heating, and digital systems. When electricity bills rise, room rates and service charges may also rise. This can make Sri Lanka less attractive compared to regional competitors. The IT, BPO, software, and digital service sectors also need reliable and affordable electricity. Higher power costs and uncertainty about supply can reduce the confidence of foreign clients and investors.

Foreign investors consider energy costs when choosing a country. They also look at labour costs, tax policy, legal stability, market access, and infrastructure. If electricity is expensive, the system is inefficient, and policy is unstable, investors see the country as risky. In the long run, this can affect new investment, jobs, wage growth, and economic growth. Therefore, electricity tariff increases must also be seen as a national competitiveness issue. If Sri Lanka wants to expand exports, strengthen tourism, attract investment, and create jobs, it needs a reliable electricity system at a reasonable cost.

A Positive Side: An Opportunity for Energy Efficiency

This situation should not be seen only negatively. Higher electricity prices can also encourage people to think more seriously about energy efficiency.

According to CEB 2024 data, electricity exported to the grid through rooftop solar increased from 632 GWh in 2023 to 867 GWh in 2024. This is a 37% increase. The number of rooftop solar accounts increased from 39,827 to 73,050, an 83% increase. This is a positive sign. It shows that people are looking for energy alternatives. But this alone is not enough. Individual solar adoption is useful, but the country still needs a reliable, coordinated, and long-term national energy plan to reduce overall generation costs.

What Should Be Done?

Sri Lanka cannot depend only on short-term solutions. The country needs a national policy that builds long-term energy security and economic stability.

Renewable energy must be accelerated. Sri Lanka has strong natural advantages in solar, wind, and hydro power. But delays in projects, policy instability, and investment barriers have prevented the country from using this potential fully. Households and businesses should be encouraged to use solar power. This can be done through affordable loans, tax relief, and a clear legal framework. If people can produce part of their own electricity, pressure on the national grid will also reduce.

Efficiency, Transparency, and Public Responsibility

To solve this problem, inefficiency and waste in the electricity sector must be reduced. Transmission losses, delayed projects, weak management, and political interference must be addressed. Financial transparency and professional management in institutions such as the Ceylon Electricity Board are also essential. This can help rebuild public trust.

The public also has a role. People should use electricity responsibly. They should use energy-efficient appliances, reduce waste, and change consumption habits where possible. But public responsibility alone cannot solve the problem. Even if people save electricity, the unit price cannot fall if national generation costs remain high. Therefore, responsible consumption by the public and a serious government plan to reduce generation costs must go together.

Rising electricity tariffs are not only about a higher electricity bill. They affect the entire economy. They influence household living costs, business costs, inflation, investment, and national competitiveness. The long-term solution is not repeated tariff increases. It is an efficient, diversified, and sustainable energy policy. The price of one unit of electricity can be reduced only when the cost of producing that unit is reduced. Political hope is not enough. Sri Lanka needs a practical national programme with clear targets, a timeline, investment support, faster renewable energy development, and reforms to reduce inefficiency in the electricity sector. Without such a programme, promises to reduce electricity bills will sound to the public like another political explanation and another hopeful statement.

by Prof. Ranjith Bandara



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Opinion

Sri Lanka’s Food Safety Imperative

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safe food handling

From Burden to Solutions:

Every year on 07 June, the world pauses to reflect on a truth that is at once mundane and profound: the food on our plate should not make us sick. This year, the World Health Organization and the Food and Agriculture Organization of the United Nations have chosen a theme that is both a diagnosis and a directive “From burden to solutions – safe food everywhere.”

The framing is deliberate. For too long, conversations about food safety have been dominated by the language of loss counting the sick, tallying the dead, lamenting the economic damage. The 2026 theme demands that we harness that data not as an epitaph, but as a map that guides us toward targeted, evidence-based action.

Globally, foodborne diseases cause illness in at least 600 million people and claim an estimated 420,000 lives every year. These are not abstractions. They are children who did not return to school, breadwinners who could not return to work, and farmers whose produce never reached a market.

For Sri Lanka, the stakes are deeply personal. As a food scientist who has spent over a decade studying, teaching, and working across our food systems from university laboratories and hotel kitchens to dairy processing plants and international sporting events, I have witnessed both the fragility and the resilience of food safety in this country.

The burden is real. Foodborne infections from Campylobacter, Escherichia coli, Vibrio cholerae, and Hepatitis A continue to be recorded by the Epidemiology Unit. Pesticide residues in vegetables, aflatoxin in stored grains, and heavy metal contamination in seafood present chronic, low-visibility risks that rarely make headlines but accumulate silently in our bodies and in our healthcare bills. The unchecked proliferation of informal food establishments has widened the exposure surface significantly.

Sri Lanka’s food safety architecture rests primarily on the Food Act No. 26 of 1980. A legislation conceived in an era that could not have anticipated the complexity of today’s supply chains, the growth of modern retail, or the risks posed by climate-driven changes in microbial ecology. While amendments in 1991 and 2011 have partially modernised the framework, the foundational challenge of fragmented, multi-ministerial oversight remains unresolved. No single authority commands the end-to-end food chain from farm to fork.

The consequences are visible. Sri Lanka has repeatedly seen food export consignments rejected at international borders due to non-compliance with safety standards. A reputational and economic wound that strikes our tea, spices, fish, and fruit sectors. These rejections are not merely trade disputes; they are data points, signalling systemic gaps in Good Agricultural Practices, cold chain infrastructure, and laboratory testing capacity. The 2026 World Food Safety Day theme is therefore a clarion call to Sri Lanka’s policymakers, industry leaders, academics, and consumers alike. We have data. We have science. What we need is the collective will to act.

The solution begins with data.

The WHO’s landmark 2026 release of national-level foodborne disease burden estimates the first of their kind, covering the period 2000–2021 provides an unprecedented opportunity. For the first time, Sri Lanka will have access to country-specific data on the incidence, mortality, and disability-adjusted life years attributable to specific foodborne hazards. This is not merely an academic resource; it is a policy instrument. Ministries of Health, Agriculture, and Industries must treat it as such, using it to identify where risk is highest, which population groups are most vulnerable, and which interventions deliver the greatest return on public health investment.

Having served as a Food Safety Officer/Trainer and Trainer at the FIFA 2022 World Cup in Qatar, I observed first-hand how a structured, data-driven approach to food safety management grounded in HACCP principles and supported by rigorous real-time monitoring can successfully feed tens of thousands of people across dozens of venues without a single outbreak. The lesson for Sri Lanka is not that we must import foreign systems wholesale, but that the underlying principles of evidence, accountability, and prevention translate universally.

Education is the second pillar of transformation.

In my years of teaching food safety to university students, hotel management students, tourism professionals, and food industry workers, the most consistent finding is that unsafe food practices are rarely born of malice. They arise from ignorance of microbial growth temperatures, of cross-contamination pathways, of the invisible consequences of inadequate handwashing. Behaviour change at scale requires education that begins early. We must embed food safety literacy into our school curricula, not as an elective topic in home economics, but as a fundamental life skill taught alongside reading and arithmetic. Food safety must be as instinctive as looking before crossing a road. Industry bears its own responsibility. Food business operators from the multinational processor to the neighbourhood bakery must understand that food safety is not a compliance cost to be minimised. It is a brand asset, an ethical obligation, and ultimately, a business survival strategy. The investment in quality management systems, whether ISO 22000, FSSC 22000, or the foundational GMP and GHP frameworks, pays returns in consumer trust, export market access, and reduced liability. Safe food is not a luxury reserved for export markets or five-star hotels. It is a right that belongs equally to a schoolchild buying a kottu roti from a street cart and a tourist dining in a star hotel. The 2026 theme reminds us that the burden is well-documented. The solutions exist. The only thing left is the resolve to implement them everywhere, for everyone.

PRIORITY ACTIONS FOR SRI LANKA

= Enact a unified Food Safety Authority consolidating fragmented regulatory mandates under a single body

= Establish mandatory HACCP certification for food businesses beyond the large-scale sector

= Invest in regional food testing laboratories with accredited capacity (ISO/IEC 17025)

= Integrate food safety education into the national school curriculum from primary level

= Strengthen cold chain infrastructure, particularly for seafood and fresh produce destined for export

= Adopt the WHO 2026 national burden data to prioritise health spending on highest-risk hazards

= Empower Public Health Inspectors with digital reporting tools and updated training mandates

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“The path of freedom: Dismantling the imperialist debt trap

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I must first thank Gayantha Dehiwatte for inviting me this afternoon to the launch of his book, The Path of Freedom: Dismantling the Imperialist Debt Trap. The title itself suggests that Sri Lanka has yet to achieve genuine independence, particularly in the sphere of economic decision-making. In recent years, most economic decisions of major importance appear to have emanated from Washington. During the initial phase, these decisions reached Colombo in the form of International Monetary Fund- World bank conditionalities. In more recent years, however, many of these policies have been designed locally by the economists and bureaucrats in the Treasury and the Central Bank of Sri Lanka who are trained in western academic institutions. As a result, local and international experts have worked in synergy united by their adherence to what may be called the TINA (There Is No Alternative) doctrine.

According to Dehiwatte, ‘the current economic structure in Sri Lanka is guided by the principles of neo-liberal free-market economics. This economic theory has been steering the course of Sri Lankan economy since 1978’ (page iii). It was consistently claimed that the policy package introduced in 1978 would generate higher rates of growth, lower unemployment, poverty alleviation, reduced dependency and inequality transforming Sri Lanka into the Singapore or South Korea of the Indian ocean region.

In this talk, I would focus on three main points. My first thesis is that Sri Lanka is now facing a simultaneous presence of three crises namely, the structural, conjunctural and contingent crises, as a direct consequence of the neo-liberal economic policies introduced in 1977. Second, the decision to invite the IMF to play a central role in managing the 2022 debt crisis was a serious mistake. Third, although the de-dollarisation is an essential step towards resolving the crisis it is not by itself sufficient to transform the existing global economic architecture.

The performance of the Sri Lankan economy over the last 48 years (1978- 2026) does not support the contention that the adoption of neo-liberal economic policies as outlined in Washington Consensus would pave the way for sustained economic growth and development. Compared to the period from 1950- 77 period, there has been no significant improvement in either the rate of economic growth or in the level of employment. Dehiwatte reports: ‘As of 2024, approximately one-third of Sri Lankan population -around 7 million people – are living below the poverty line, with about 2.3 million children suffering from hunger due to inadequate access of food. That is, exactly half of the children are going hungry. The total number of families in Sri Lanka is about 5.7 million, of which 3.7 million seeking assistance to survive’ (p. 18). data on consumption patterns strongly corroborate these findings. The top 1% of the population accounts for 22% of GDP whereas the bottom 50% accounts for only about 14%. The crisis Sri Lanka has experienced over the last 48 years is an all-embracing structural crisis, the resolution of which requires far-reaching changes to the existing economic structure. Following Istvan Meszaros, four characteristics of the present crisis may be identified:

(1) It is not confined to a particular sector of the economy;

(2) It is global in scope, being closely linked to the process of globalization;

(3) Its temporal scale is continuous rather than limited and cyclical, making it difficult to identify a clear beginning or point;

(4) Its mode of unfolding is gradual and creeping rather than in contrast to sudden and explosive. (Beyond Capital. pp. 680- 81).

The structural crisis is the product of a conjunction of three interrelated developments: the absence of an independent macroeconomic policy framework, the nature of the bourgeoisie, and the nature of the state and its relationship to different social classes. Given the limited time available, I will not attempt a detailed analysis of these three dimensions. Nonetheless, two observations deserve emphasis. First, the average annual growth rate during the last 48 years has not been significantly higher than that achieved during the preceding period of the so-called dirigisme regime. Second, although Sri Lanka experienced two periods of relatively rapid growth (1978- 1982 and 2010- 2915), it failed to sustain the momentum generated during these periods. Consequently, these episodes were ultimately reduced to little more than infra-structure driven bubbles.

Cyclical fluctuations within a prolonged structural crisis are not uncommon in market economies. Sri Lanka is no exception. During the public debate surrounding the 2022 economic crisis, it was frequently argued that the crisis began in 2019 because of misguided economic policies. However, as data demonstrates, the current conjunctural crisis began not in 2019 but in 2016. The recession that started in 2016 culminated in negative growth in 2020. A modest recovery in 2021 was followed by a negative growth both in 2022 and 2023. The economy returned to a limited recovery in 2024, but by 2026 that recovery appears to have lost momentum. If one plots annual growth rates between 2026- 2026 a W-shaped cycle emerges, with its lowest point in 2022. The debt crisis in 2022 should therefore be viewed not as an isolated event, but as the trough of the 2016- 2025 cycle. Of course, the acceleration of the crisis in 2022 was triggered by excessive borrowing in the global capital market through ISDs (International Sovereign Bonds). Prof Prabath Patnaik depicts this specific phenomenon as a contingent crisis: a crisis that appears manageable until a sudden financial crunch exposes underlying vulnerabilities. The IMF’s own projection that annual growth will remain around 3 per cent in 1926 together with its assessment that debt sustainability remains fragile, suggests that Sri Lanka is once again approaching a tipping point.

Confronted with these three interrelated crises, the neoclassical economists, CBSL and Treasury officials and politicians representing bourgeoisie parties argued that seeking IMF support was the only available solution. According to this view, it was imperative to accept a comprehensive IMF program at any cost. The irony is that these same actors have failed to acknowledge that Sri Lanka has been operating under the IMF program for seven out of ten years under consideration. (2017- 2020 and 2022- 2026). A second group adopted a more critical position. While accepting the need for IMF engagement, they argued for greater local input, theoretical as well as practical, into the program and advocated modifications and incorporation of selected elements of the augmented-Washington consensus. Both groups, however justified IMF intervention on the grounds that the IMF is an international institution of which Sri Lanka is a member and that the country therefore has a legitimate right to seek assistance during a foreign exchange crisis.

This argument suffers from three fundamental defects. First, it overlooks that the IMF and the IBRD established in 1945 are very different institutions from those that emerged during the mid-1970s. The original purpose of the IMF and IBRD was to assist war-ravaged countries in Western Europe and Japan facing balance of payment difficulties and reconstruction needs. By the 1970s these tasks had largely been completed rendering the original mandate of the institutions increasingly redundant Following the quadrupling of oil prices and the accumulation of petro-dollars in the US banks, the IMF effectively assigned itself a new role: that of managing the interests international finance capital during the neo-liberalist phase of the capitalist development. Its primary responsibility thus shifted away from member states and towards the preservation and upholding of the interests of the global capital market and its institutions. (For a detailed discussion, see : Unholy Trinity: the IMF, World Bank and WTO by Richard Peet) 2003.

Second, the dominant approach is based on the presupposition that there is no alternative. Consequently. The magnitude of the crisis was exaggerated in order to ensure Sri Lanka’s continued integration into the global financial system and therefore its continued entrapment with a cycle of indebtedness. Third, the argument rests on a fundamental misunderstanding of the IMF’s mode of crisis management. When dealing with a crisis ridden country, the IMF typically intensifies the crisis by imposing deflationary policies designed to restore creditor confidence.

The Sri Lankan experience illustrates this pattern clearly. Although the economy achieved a modest but positive rate of growth in 2021, growth contracted sharply in 2022 and 2023 following the implementation of IMF-backed policies. Once an economy reaches the trough of the cycle, its internal dynamics tend to generate some degree of recovery because aggregate demand rarely falls to zero. Consequently, the stability achieved since 2024 should be understood as a low-level stability -an outcome of economic contraction and adjustment rather than genuine transformation.

Let me turn to my third thesis that Dehiwatte had raised in his proposal for de-dollarization. The book appears to suggest that de-dollarization is imperative if the imperialist debt trap is to be dismantled. In a different historical context, some French economists argued that replacing the franc with a currency based on labour value would provide a solution to balance-of-payments crises. Commenting on this view, Marx observed:

“In order to balance the decrease of domestic production by means of imports on the one side and the increase of industrial undertakings abroad on the other side, what would have been required were not symbols of circulation which facilitate the exchange of equivalents but the equivalents themselves, not money but capital” (Grundrisse, p. 121).

However, the context to which Gayantha Dehiwatte refers is substantially different. In 1944–45, when the advanced capitalist countries debated the design of the post-Second World War international financial architecture, they arrived at a consensus that it should be centred on the U.S. dollar. The principal reason for this decision was the overwhelming dominance and productive superiority of the U.S. economy.

By the early 1970s, however, this superiority had begun to erode. Nevertheless, as Costas Lapavitsas has argued, “dollar dominance persisted and deepened through structural dependence as global trade, finance and reserves remained locked into dollar circuits, sustained by military power and institutional inertia despite the declining share of the United States in the world economy.”

It is in this context that Gayantha Dehiwatte’s argument acquires its significance. For him, de-dollarization does not simply mean replacing the dollar with another international currency. Rather, it entails transforming the structures of power that underpin dollar hegemony and reproducing a global order based on dependence and financial subordination. In this sense, de-dollarization is not merely a monetary reform but part of a broader project of restructuring the international order itself.

Ultimately, the argument points toward the possibility of imagining a new world order founded on the principles of democracy, equality, and ecological sustainability.

The writer is a retired teacher at the University of Peradeniya

Email: sumane_l@yahoo.com

Revieved by Sumanasiri Liyanage
(Text of a recent speech.)

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Opinion

Is Sri Lanka on the wrong side of history?

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To say that the developing new world order is history in the making may not be an exaggeration, because the economic, military and hegemonic landscape of the world may be undergoing radical realignment in these troubled times.  Multipolarity and the emergence of the Global South’s economic and political clout may be the defining features of the new world order. There may be several evidential happenings around the world that give credence to the above observation. For instance, at the 61st Munich Security Conference, held in 2025, multipolarity was accepted as a historical inevitability and a reality. The Munich Security Report 2025, themed “Multi-polarization,” explicitly states that the world already lives in a multipolar order. The Munich Security Council, traditionally dominated by Europe and the US, saw 30 percent of its speakers, this time, representing the Global South, a testament to the world’s multipolar trajectory

The Munich Security Report 2025 highlights that BRICS nations contribute to approximately 40 percent of global trade, as well as crude oil production and exports. Further, according to the International Monetary Fund, the GDP of emerging markets and developing economies accounted for 58.9 percent of the global economy in 2023.

Countries in the Global South are asserting greater independence in global affairs. They have actively promoted greater democracy in international relations through platforms such as BRICS and the Shanghai Cooperation Organisation, injecting vital momentum into the world multi polarisation process.

Another clear indicator of this reality is the way the US failed to impose its will in the affairs of the Middle East. Significantly, it could not achieve its objectives in the war against Iran and, furthermore, its European allies refused to join, saying that it was not their war. The fact that the war, which the US and Israel expected to be a quick “strike and take over,” has ended up in a stalemate, with Iran holding all the cards, according to Prof Jeffrey Sachs, points to the changing balance of power in the world. Obviously, Iran was able to enhance its military capability due to the significant development of the multiple military power blocs.

In this regard it is interesting to see that most of the countries in Asia, Africa and Latin America, which have suffered due to western hegemony and economic exploitation, tariffs and sanctions and dollar weaponisation, are beginning to make moves towards realigning their relationship with world powers. Several African nations, Egypt, Ethiopia, Algeria, Kenya, Tanzania, are actively realigning toward the Global South, shifting away from Western-aligned partnerships to pursue multipolarity, resource sovereignty, and new economic ties with powers like China, Russia, and India.

In Asia, too, the trend is apparent; Malaysia has adopted an explicit Global South policy, focusing on outreach to the Middle East, Africa, and Latin America, as well as deepening ASEAN institutional ties. Indonesia focuses on inclusive multilateralism and critical balancing in global governance, ensuring the developing world’s economic needs are prioritised. Iran, Saudi Arabia, and the United Arab Emirates joined BRICS in 2023, reflecting a strategic shift to diversify their diplomatic and economic alliances away from purely Western orbits. There are several other countries that are emerging as economically independent and diplomatically articulative states, like Nigeria, Turkiye, and Mexico.

What is the position of Sri Lanka in this rapidly changing world order? Are we going to be left behind? Why aren’t there any signs that Sri Lanka is projecting itself as a willing partner of this journey in the South?  Why isn’t it attempting to break away from the neo-liberal grip that keeps it in poverty and turn to the South? Are there any tangible economic, political or geopolitically strategic projections, reaching out to the Global South, that Sri Lanka has launched, at present, like so many other countries are doing? Even when opportunities knock on its door, Sri Lanka doesn’t seem to be interested. A case in point is the BRICS meeting in 2024, held in Russia. Though Sri Lanka was invited, none of its state leaders attended the meeting, resulting in the loss of an opportunity to establish vital economic, political and cultural links and bonds with Global South countries.

What is restraining Sri Lanka? Is it its present economic vulnerabilities and dependence on the West? It is the Global North that controls the Sri Lankan economy at present. We are tied to the IMF and controlled by their conditions and the IMF is under the thumb of the West. Further 60 percent of our exports go to the Global North. It seems likely that our export oriented, debt-burdened economy cannot afford to turn towards the Global South because of our utter dependence on the West. We saw that there was no hesitation to slap tariffs on us though we show the least tendency to disobey. One could imagine what could happen if we turn southwards, even a little bit. This is the reason why Sri Lanka would dare not change direction the slightest.

Countries that turn southwards do so to escape from the hegemony, exploitation and coercive power of the West. Isn’t there a way out for Sri Lanka to get out of this vicious global economic system and become economically independent? We were bankrupt in 2022 and people rose up against the system and wanted a change. The present government rode that tide and came to power promising a change. But there was no change and not even an attempt to change. What needed a change was the economy in the main, which would be meaningless unless a break from the fetters of neo-liberalism was the aim. What did not change was exactly that, though there were attempts to change other less vital areas, such as going after the corrupt in the Opposition.

It must be said that the government had an excellent opportunity to correct decades long mistakes. The people were asking for a change which means they were prepared to participate and support the government if it wanted to go for that change. An attempt should have been made to gradually change the export-import-debt based economy and lessen the  dependence on the Global North and its economic system. A turn towards the Global South would have facilitated the desired change. The government was left-oriented, or so they said. But it appeared to be helpless to break away from the neo-liberal shackles, leave alone negotiating a better deal with the IMF.

True, we are not strong enough to go for such radical change but we could have made ourselves strong by achieving self-sufficiency, the only way to become economically independent. Such a move, no doubt, would initially result in hardship for the people, but eventually the country would come out of its poverty. Now they are condemned to eternal privation.

The government’s plan, if it wanted to go for the change, they promised, should have been to first launch a comprehensive programme to achieve self-sufficiency in our essential needs like food, cloth, medicine and green energy. The other critical move that Sri Lanka should have made was to join the Global South in its march towards a new world order. Such a strategy would have helped us to achieve a stronger and independent economy.

An important outcome of adopting such a policy would be that our economy would not be vulnerable to external shocks such as tariffs, drop in tourism, turmoil in the Middle East that disrupts fuel supply and migrant-remittances, and external trade vagaries. Further, when we are not dependent on our essentials, nobody would be able to dictate to us or interfere in our internal affairs.

 Another important factor in Sri Lanka’s favour is its strategic position in the Indian Ocean and the fact that due to this everybody needs it. India would like to have a firm grip on it, so does the US. China has invested heavily in it due to this reason.  However, Sri Lanka, at present, is not strong enough  to leverage this geographical strategic situation to its advantage because of its highly dependent and vulnerable status. As a consequence of this strategic situation could be exploited by powerful countries as is now happening.

What Sri Lanka could do in this regard is to develop its airports and harbours as a transit trade hub by leveraging its strategic geographical position in the Indian Ocean to serve as a central stopping point where cargo, vehicles, and raw materials are consolidated, temporarily stored, or re-exported, primarily connecting East Asia, the Middle East, Africa and the Indian subcontinent. This would facilitate trade among the Global South countries and enhance Sri Lanka’s role and image in the new world order. At present Sri Lanka’s true potential in this business has not been realised due to its vulnerabilities, but if it chooses to take the path outlined above it could succeed. For this to happen Global South assistance is vital. There is no choice for Sri Lanka but to grab this moment of history and join the journey towards the new world order before we are left behind.

by N. A. de S. Amaratunga

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