Uncertain growth path amidst external shocks

Though Sri Lanka is on its path towards gaining economic recovery, its main external sources of income – tourism and exports – are under threat due to external shocks, in addition to its debt repayment obligations in 2028, thereby making its growth after recovery story uncertain at present, Centre for a Smart Future Co-founder and Director Anushka Wijesinha recently said on the Janashakthi Group podcast.

“In some ways we are also still vulnerable and perhaps even more vulnerable because this time the shocks are external, there is very little within our control. That unpredictability is really hitting us on key sectors that matter for us, whether it’s on tourism, remittances, or on our exports,” Wijesinha stated, during the discussion on Sri Lanka’s economic recovery trajectory.

“There is a point in time in the next couple of years where because of these macro-linked bonds, the repayment pathway decision happens. Is it on a higher growth repayment pathway or a lower growth trajectory repayment pathway? What we’re seeing now will determine what that repayment pathway will be. What’s the growth trajectory that is being anticipated?,” Wijesinha raised.

Sri Lanka is projected to grow between 3.1-5% this year, lowered from its growth levels recorded in 2025. Though the average daily tourist arrivals have been steadily slowening since the intensification of the geopolitical conflict, and have shown a marginal year-on-year contraction in the first week of May, the season is typically considered an off-peak season.

Further, though export momentum was steady in January with a 13.71% surge in growth, the sector did experience a period of moderation in March, as global trade and shipping have since been facing a period of turbulence due to the conflict in the Middle East.

“The authorities are having discussions with the IMF to figure out what might need to change with targets, what might need to change with the programme. The good thing is that the Government authorities and the IMF are looking at it together, which then gives confidence to investors that there’s no renegade policy changes that will happen. Having said all that, ultimately we have to really think beyond the stability mindset. We’ve hard won stability now, but growth has to come from different sectors. That’s how we ultimately repay our debt. Where is the growth coming from? Where is export earnings coming from? It’s still unfinished business,” Wijesinha said.

Source: The morning