I fully understand and recognise that everyone has a right to develop their own perceptions on why the Sri Lankan economy is in the current predicament in mid-2026, again heading towards potentially another major monetary and fiscal crisis just as in 2022.
While we all have the right to have our opinions, we also have our own faculties to look at the facts and if necessary change our perceptions and opinions, no matter how hard it is. It may be more difficult to some whose entire life is spent in their own political echo chambers who have pointed to some ‘other’ as a simplistic ‘root cause of all evil’ – JR, Ranil, Mahinda/Rajapaksas, Free Market Economy, IMF, Capitalism, Free Education, Language policy, Trade Unions, ISBs, USA, India, China, to name a few .They might be thinking that punishing or at least venting their anger those they have ‘arrears’ with as mentioned above, will resurrect the Sri Lankan economy magically, though the truth and reality may be far from it.
I can see a fair bit of IMF bashing, ISBs bashing, Ranil bashing, Rajapaksa bashing as the “root cause’ of the currently brewing economic crisis in Sri Lanka in mid-2026 among some professionals, intellectuals, academia, media and general public whose economic analysis and deductions are based on strong pre-conceived notions and ideologies they honestly believe in good faith.
But .. is it ?
IMF’s role
The IMF has a clear mandate – to assist countries that are at the risk of or already facing an issue of sovereign bankruptcy due to significant balance of payment issues – Sri Lanka belongs to the latter group in 2022. IMF since 2022, facilitated Sri Lanka to negotiate debt rescheduling, and agree for a revised debt servicing schedule for mostly bilateral loans and ISBs, that gives Sri Lanka a breathing space of not servicing most external debt for a few years, to build a substantial war chest of official USD reserves and re-commence all external debt servicing in 2028.
IMF’s role here was to be the ‘guarantor’ for Sri Lanka when Sri Lanka negotiates with those countries and ISB holders – without which Sri Lanka would not even be given an opportunity to talk to and end up being isolated and left out of international trade, where businesses were not even allowed to open a L/C (Letter of Credit) – if someone thinks ‘well we can still export…’ the reality is every export is intertwined with multiple imports – no imports, no exports. In addition, the IMF did provide Sri Lanka a financial relief package of $ 2.9 billion over 8 installments as an EFF (Extended Fund Facility).
As a part of these negotiations, Sri Lanka had to demonstrate that they can govern the country in a fiscally responsible manner, and the Government spends what they actually have, not what they ‘think’ they can have in future. Sri Lanka meeting those fiscal management benchmarks – such as official USD reserves, GDP growth rate, debt/GDP ratio, USD:Rupee exchange rate, Government tax revenue, current account balance, domestic debt, rate of inflation, etc – would show it can resume debt servicing in 2028.
The ISBs, China, India, Paris Club, Japan were all part of this process facilitated by the IMF to support Sri Lanka come out of bankruptcy, via an agreed plan where the IMF will continue to be the guarantor for Sri Lanka.
While the IMF laid out some broad parameters, it does not micromanage the Sri Lankan Government to decide how these parameters are met. It requires the Sri Lankan Government to take some strong unpopular decisions and implement them. These measures can most likely be very uncomfortable and painful to all Sri Lankan individuals and businesses – in the short term, it may create economic slowdowns, reduced public services, higher unemployment, some businesses going bankrupt, etc – but mid to long term, as a nation, Sri Lankan economy will first stabilise and then grow – hard times will be over mid to long term. Recovery for a country out of bankruptcy is not a bed of roses.
Clearly, Sri Lanka managed the stabilisation exceedingly well and overperformed the IMF targets under President Ranil and managed to come out of bankruptcy essentially during his tenure of just 2 years, though Ranil lost election in September 2024 – President Anura Kumara Dissanayake upon winning the election in September 2024 and elected President promptly confirmed that he too will follow the same IMF program and will adhere to the agreed parameters that by then, has enabled Sri Lanka out of bankruptcy, and even hailed as a ‘great economic turnaround success story’ by some bureaucrats such as Donald Lu, US Assistant Secretary of State for South and Central Asia in February 2024.
Next was for Sri Lanka to enter into the rapid growth phase in 2025 immediately, and continue the growth till 2028.
Yet, here we are in mid-2026, where the Sri Lankan economy is sliding backwards towards 2022 and not progressing towards 2028 targets. Why ?
I know that some would point out that external matters beyond the Sri Lankan Government’s control is the sole ‘root cause’ such as US Tariffs, Cyclones, Iran War, etc, though one cannot totally ignore the fact that there is an element of failure in Government policy planning, policy implementation mechanism and risk assessment/response process that has contributed to this situation and outcome.
Any Government needs to realise that as the Government, punishing their adversaries and running a slogan of ‘catching thieves’ and ‘eliminating corruption’ is only a very small part of a Government’s mandate, not the entire scope of things they have to do as a Government
Governance dynamics
Firstly, any Government needs to realise that these types of global/regional issues always prevail, that are beyond the Sri Lankan Government’s control, at all times. (even during President Ranil’s tenure 2022-2024, there was Ukraine War, Red Sea blockade due to Houthi Rebels, Israel-Hamaz conflict, Drought in Europe/China/Panama Canal, Southeast Asian floods, Post-Covid19 economic friction/commodity price escalation, etc )
Secondly, any Government needs to realise that as the Government, they should be proactive and look for options when they can foresee economic headwinds (due to possible regional/global crisis) or in the immediate aftermath of natural disasters. If a Government is caught flatfooted being unable to read these situations and respond in advance, it is their inability. Unfortunately, a Government cannot seek “excuses” as the public and their stakeholders expect them to deliver results under any condition, since they are entrusted with the nation’s people and wealth for their tenure.
Government needs to realise that as the Government, they cannot make their way out of an economic crisis by partisan rhetoric, massive media coverage and an enormous volume of social media posts – a Government has a real job to do, and it is very different from seeking publicity and popularity
Thirdly, any Government needs to realise that as the Government, punishing their adversaries and running a slogan of ‘catching thieves’ and ‘eliminating corruption’ is only a very small part of a Government’s mandate, not the entire scope of things they have to do as a Government.
Fourthly, any Government needs to realise that as the Government, they cannot make their way out of an economic crisis by partisan rhetoric, massive media coverage and an enormous volume of social media posts – a Government has a real job to do, and it is very different from seeking publicity and popularity.
At the end of the day, even if they are novices and new to the difficult, complex and often unforgiving business of governance of a country, any elected Government should at least pinch themselves and realise that they are the party controlling the Government of Sri Lanka. Once they are the Government, the buck stops there with respect to the well-being of the country’s economy and people, they can no longer afford to act as an opposition party with just few MPs in parliament – they need to perform as a Government to drastically reduce rhetorical propaganda, punishing adversaries/opposition and increasingly invest their energy to deliver actual results for Sri Lanka pragmatically !
If the any Government feels and/or believes that it cannot do that and are truly a novice Government still woefully incapable to make a confession and do a necessary course corrections, then the time has come for them to throw in the towel and handover the Government to someone else, who can at least try and do something (like President Ranil did 2022-2024 after taking over Sri Lanka from President Gotabhaya) – before it is too late.