A Framework for Economic Recovery

Launched at a webinar on 14 September 2021 — a full year before Sri Lanka’s sovereign default — this event unveiled Advocata’s “Framework for Economic Recovery” report, authored by Senior Research Fellow Dr. Roshan Perera, laying out a detailed three-pillar economic recovery plan for the country while there was arguably still time to act pre-emptively. The first pillar addressed macroeconomic imbalances directly: debt restructuring, revenue-centred fiscal consolidation, public finance management and public sector reform, SOE reform, and improving monetary policy effectiveness while maintaining exchange rate flexibility. The second pillar focused on structural reforms — improving the ease of doing business, unlocking land supply, creating more flexible labour markets and raising female labour force participation, building human capital, and closing the infrastructure gap. The third pillar was about building resilience buffers, particularly strengthening the social safety net for vulnerable households. At the launch, Perera delivered what would prove to be a strikingly accurate warning: with the fiscal deficit already exceeding 10% of GDP in 2020 and likely to worsen in 2021, and with domestic savings insufficient to finance the economy, Sri Lanka would have no choice but to depend increasingly on foreign borrowing to bridge the gap — and she explicitly flagged that debt restructuring “is not an easy task,” recommending that the government look seriously at resuming an IMF programme, months before this became the only viable path forward.