Sri Lanka Faces Diverse Economic Challenges

W.A. Wijewardena retired from the Central Bank of Sri Lanka as its Deputy Governor in 2009. He has been working as an independent economist since then.

This interview has been edited lightly.

Would you talk about a few of the economic challenges that Sri Lanka is facing?

The present economic challenges faced by Sri Lanka are multifarious. Slowing economic growth, public debt overhang, debt repayment difficulties, a widening budget deficit, a deficit in balance of payments and pressure for the exchange rate to depreciate are the most pressing ones. These issues have been exacerbated by the country’s inability to read correctly the emerging global developments in the production model due to artificial intelligence, machine learning, automation and robotization. For instance, Sri Lanka’s lifeline, the apparel industry, is being challenged today by the growing tendency to set up manufacturing facilities in major markets in Europe and North America, called reshoring or onshoring as against offshoring, and the establishment of these factories close to markets called nearshoring. The likely outcome is that Sri Lanka would lose the competitive edge in its apparel industry in about 5 years.

The only promising points are the deceleration of the inflation rate to about 2% nationwide and the recent…