Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe has stated that strong, independent institutions are the foundation of sustainable, inclusive, and steady growth in the long run, and owing to the lack of strong institutions in Sri Lanka, the country has moved backwards in all forms of social indicators.

While what Dr. Weerasinghe has pointed out is a fundamental truth a debt-ridden country like Sri Lanka cannot ignore, this acknowledgement alone is not sufficient to change the status quo. In fact, what he acknowledged is a well-known reality, and that situation is one of the reasons for the ongoing discussions on public sector reforms – on which a great deal of the country’s economic revival depends.

What the country needs is action, which, for the most part, should come from the country’s political authority. However, some of the biggest threats to institutions, be they public or private, are also posed by the same political authority. The role of the political authority plays a crucial role in maintaining and strengthening and also rectifying the flaws of institutions, especially when it comes to public institutions.

Institutions, especially public institutions, should not be undermined by political authority. While looking at large-scale reforms such as restructuring public institutions and taking policy decisions that have an impact on institutions, politicians should not ignore the fact that those decisions have a direct impact on small- and medium-scale institutions that support the economy more than their larger counterparts in many aspects.

Politicians should understand that no amount of progressive and innovative decisions could support institutions unless and until those decisions are implemented and monitored properly. Among the challenges that stand in the way of the implementation of these decisions are corruption and irregularities, nepotism and short-sighted decisions. While some of the issues could be addressed through formal reforms, informal steps such as changing public attitudes are also necessary to address these issues. 

When it comes to private institutions, policy-related decisions, among others, have a direct and significant impact on these institutions. One of the best examples is the impact of the recent tax hikes on private institutions. Private institutions have found themselves in an extremely difficult situation where they are considering various steps, such as moving their operations to foreign countries, in response to those decisions. To address these issues, the functioning and stability of public and private institutions should be protected and improved. Most importantly, the Government’s plans aimed at economic recovery should involve not just institutions’ management-level reforms, but also institutions’ attitudes, practices, and efficiency-related issues. 

The prevailing situation shows the importance of decision-making based on economic factors also being based on practical factors and real-life situations. The fact that many Sri Lankans, including many in decision-making processes, believe that institution-based reforms amount to merely hiring or firing people, salary adjustments, and management-level changes, is unfortunate and should be changed. Genuine reforms are a collective endeavour, and they should be supported by those in power by creating a situation where institutions are not unnecessarily affected by political decisions and are supported through national-level policies. At the same time, the people should fulfil their important responsibility of being responsible citizens that do not hesitate to question the state of institutions, especially those of public institutions.