Last week, Sri Lanka concluded the much-awaited International Sovereign Bond (ISB) restructuring process sparking hopes about a more methodical, stable economic revival. The announcement of the important agreement was made by the Finance Ministry Secretary Mahinda Siriwardena who was retained from the former President Ranil Wickremesinghe administration, allowing the continued handling of the sensitive matter under the Anura Kumara Dissanayake Government by experienced hands. 

Siriwardena opined that Sri Lanka successfully concluded its international bond restructuring bringing closure to one of the most complex and challenging sovereign debt restructuring exercises in recent history, warning that the debt restructuring process provides the country with substantial debt relief which the country must use diligently to rebuild the country’s fiscal and external buffers and set the foundation for comic recovery and growth. The Governments of Wickremesinghe and the new administration of Dissanayake must be commended for reaching this agreement. With the ISB restructuring done, Sri Lanka stands at a fork in the road with some temporary relief. Depending on how this temporary relief is utilised, the country can either go back to how it has been handling the economy which will likely lead back to a default, or take a new path where this opportunity is utilised as a fresh beginning where the past mistakes relating to economic management are not repeated. The real challenge is to prevent another economic crisis as has been warned about by various parties, including experts both local and foreign. 

As the first step, it is important that the current administration keeps in mind that it must ensure debt sustainability in future loans because, whether we like it or not, the country will have to depend on new loans and investment for a considerable extent in the foreseeable future. That is, until the country manages to ensure enough revenue to support its economy without ‘printing money’. The abuse of money printing has burnt Sri Lankans significantly and should serve as a lesson learnt. 

The process of improving revenue is arduous. On the one hand, there is a pressing need to reduce and prevent unnecessary state expenses. Therefore, irrespective of ideological differences, since the current Government has not presented a viable alternative, it is crucial to deal with loss-making public institutions and enact the planned State sector reforms. Steps should be taken to continue scientific restructuring of State-owned Enterprises (SOEs), and when restructuring is not an option, to find other ways to reduce the cost of maintaining SOEs. For example, the health sector is not a sector that can be restructured from a financial standpoint, and in such cases, untapped partnerships, resources, and management methods should be explored.

National revenue also depends on another major factor, i.e. businesses. Instead of trying to directly control markets and businesses, the Government should prioritise creating favourable conditions for local and foreign businesses and investments. This is a pressing need, as many businesses have already left the country in the context of the economic crisis and many investors remain skeptical about coming to Sri Lanka. An urgent intervention in this regard is introducing single-window service systems for investors, which is a long felt need. With such steps, it is necessary to create more favourable conditions for the country’s workforce as well. While better working and living conditions are a need of the hour, to achieve that, the country should start with enacting better labour laws that encourage the existing workforce to stay in the country.

These efforts can have diverse impacts on various communities and sectors, who should be assisted to thrive or at least survive admits these reforms. However, there will be winners and losers. Further, it is correct that social safety programmes are not a permanent solution. But, in the current economic context, especially given the nature of the rigorous steps that the Government may have to take to prevent another economic collapse, vulnerable communities should be protected, and social safety programmes become a necessity. How Sri Lanka plans to handle these programmes is of great importance. It certainly cannot go back to the careless, unscientific manner in which these programmes were handled by successive governments merely to garner votes and to support their friends. Independent experts have put forward a number of recommendations to effectively and efficiently handle and rearrange the existing social safety programmes, and the Government should not turn a blind eye to them. After all, economic revival and development depend on scientific approaches.

With such urgent and necessary steps, Sri Lanka’s new journey should be marked with well-planned, sustainable, inclusive, and productivity-driven growth for all Sri Lankans, not for a select few. To achieve that, as a nation we have a lot to do, and these are merely several priorities among many which the Government will have to focus on. Achieving this agreement is an important milestone, for which both the Wickremesinghe administration and the subsequent Dissanayake administration should be commended. Regardless of who started this process, now, the responsibility for continuity lies primarily with the Dissanayake administration.