No Room for Complacency in Economic Recovery; Dr. Coomaraswamy

COLOMBO (News 1st); Dr. Indrajit Coomaraswamy, the former Governor of the Central Bank of Sri Lanka, pointed out that while the country has made significant progress, there is no room for complacency.

"We are still closer to the beginning rather than the end of reaching our economic goals. Notably, across three presidencies, we have maintained consistency in our policy framework."

"We've navigated the (IMF) program very successfully so far, and the debt restructuring is nearly complete. Many do not realize the complexity involved in this process," Dr. Coomaraswamy stated. 

Dr. Coomaraswamy pointed out that Sri Lanka has undergone 17 IMF programs, reflecting the persistent macroeconomic stress. He attributed this stress to the government's budgetary outcomes, driven by a combination of populist policies and an entrenched entitlement culture. 

"This toxic combination has created a negative feedback loop, dragging the country down repeatedly. Each time we engage in an IMF program, we make some progress, but it often gets reversed during election periods," he explained, citing Lee Kuan Yew's observation that elections in Sri Lanka are "auctions of non-existent resources."

He stressed the importance of macroeconomic management, noting that when it fails, everyone suffers. "The public sector, private sector, and civil society all feel the impact. If fiscal rules are loosened or diluted, the entire country should raise their voices because these rules are critical."

Dr. Coomaraswamy also addressed the lack of progress in implementing necessary reforms. 

He identified two main causes: the long gestation period for reforms, often exceeding one electoral cycle, and the resistance from powerful groups who stand to lose from these changes. 

"While these reforms create many winners, they also result in a few powerful losers, such as businesses and trade unions, who resist change. Hopefully, the current government, with fewer connections that could undermine reform, will have greater space to implement these changes. However, it is still too early to tell," he added.