ECONOMYNEXT – A recovery framework for Sri Lanka will be launched by Advocata Institute, a Colombo-based think tank, backed by a panel of economists.
“There is no doubt that Sri Lanka is facing a severe economic crisis,” Advocata said. “The magnitude of which, based on our analysis, is far more severe than any economic crisis, experienced by Sri Lanka in its post-independent history.”
Sri Lanka now has interest rates incompatible with budget deficit widened by tax cuts in December 2019 and an ongoing recovery in private credit.
Sri Lanka is now facing a currency and debt crisis where a note-issue bank (the central bank) is injecting liquidity and boosting unsustainable credit which is hitting the balance of payments as soon as private credit recovers, analysts say.
When monetary policy turned sharply ctivist in 2015, analysts had warned that a peace time monetary crises would happen which would spill-over into a government debt crisis.
The liquidity injections and forex shortages makes it impossible for the government to collect dollars to repay debt, a situation that also arose in 2015, 2016, 2018 as well as 2020 and 2021, leading to a rapid escalation of foreign debt above the annual foreign financed deficit, a run down of forex reserves or both.
The central bank in 2021 had run out of reserves and its reserve liabilities are climbing up, losing its traditional function as a ‘sinking fund’ for sovereign foreign debt.
The report “A Framework for Sri Lanka’s Economic Recovery,” is is authored by Advocata’s Senior Research fellow Roshan Perera and Advocata’s research team.
Members of the public can join on the following social media channels.
Key speakers include;Advocata Academic Chair, Sarath Rajapatirana, Advocata Chairperson, Murtaza Jafferjee,.Dhananath Fernando (COO Advocata Institute) and key advisors, Rohan Samarajiva ( Chairperson, LIRNEasia), Suri Ratnapala ( Professor of Law, University of Queensland), Anarkali Moonesinghe (Board Member Lankan Angel Network), Sujata Gamage, (Senior Research Fellow, LIRNEasia) and Prema-Chandra Athokorala (Emeritus Professor of Economics, ANU).
The virtual press event which is also open to the public via social media will take place on the 14th of September 2021 at 3.30 PM.