Navigating Challenges: The Path to Economic Recovery

A Long and Rocky Road to Economic Recovery



  • The International Monetary Fund has approved a $3 billion package for Sri Lanka. When the government implements the conditions stipulated by the Fund, it is Sri Lanka’s poor who will bear the brunt, reports Meera Srinivasan from Colombo

Points to ponder:

  • The IMF has approved a $3 billion loan package for Sri Lanka to restore economic stability and growth after the collapse of its debt-ridden economy last year.
  • The loan comes with conditions, including the implementation of anti-corruption measures.
  • The Sri Lankan government hopes to tap more rapid credit from other multilateral agencies such as the World Bank and the Asian Development Bank.
  • Sri Lanka’s political parties and civil society organizations mostly believe that an IMF program is the “only way out” of the crisis.
  • However, evidence from the developing world shows that IMF loans are no “bailout,” and its “structural adjustment” programs rarely see countries decisively exit debt traps.
  • Critics accuse the IMF of facilitating more external borrowing in already heavily indebted countries and of punishing developing countries with surcharges and high-interest rates.
  • Sri Lankans have already been facing acute shortages of essentials, long power cuts, and staggering food inflation for months, and the economy contracted about 8% in 2022.
  • The economic crisis has pushed poor citizens into existential agony, and depending on supplies available, families carefully choose what to eat and how much.
  • While poverty is hard to miss, inequality is convenient to ignore, and some citizens may feel the pain of the IMF program much more than others.
  • Sri Lanka has a deepening disparity, with affluent residents comfortably footing big bills at upmarket restaurants and bars while many families are skipping meals, pawning jewelry, or taking loans just for daily survival.

Way Forward:

  • Engagement: India has a lot to gain by engaging constructively with Sri Lanka. Sri Lanka is one of the fastest-growing economies in Asia and has a lot of growth potential. By building stronger economic ties with Sri Lanka, India can benefit from this growth and enhance its economic prospects.
  • Equitable distribution of developmental programs: If India is going to invest in Sri Lanka’s development, it is essential to ensure that the benefits are distributed equitably. The Northern and Eastern Provinces of Sri Lanka are home to Tamil and Muslim minorities and have historically been neglected. India can play a crucial role in ensuring that these regions receive the attention they deserve.
  • Special attention to Tamil and Muslim ethnic minorities: The Tamil and Muslim ethnic minorities in Sri Lanka have traditionally been marginalized and face a range of socio-economic challenges. If India wants to build a strong and stable partnership with Sri Lanka, it must address these issues and ensure that the Tamil and Muslim communities are fully included in the development process.
  • Stability: A stable and prosperous Sri Lanka is in India’s interest. Instability in Sri Lanka could spill over into India, particularly in Tamil Nadu, which shares a long maritime boundary with Sri Lanka. By working to promote stability and economic growth in Sri Lanka, India can help to prevent conflicts and other problems that could harm its interests.

Source The Hindu