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Sri Lanka's sovereign debt default in April 2022 triggered a paralyzing economic crisis. Steep inflation and widespread financial uncertainty hampered any efforts at recovery. The economy is now showing signs of stabilization. Internally focused government policies, foreign investment, aid from development partners like India and the U.S., and the IMF’s recovery program have set Sri Lanka on the path to recovery and, hopefully, eventual economic success.
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A decade after its launch, China’s Belt and Road Initiative has slowed down in South Asia, the result of poorly conceived projects, and irresponsible behavior from borrower and lender alike.
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Sri Lanka’s sovereign debt default in 2022 triggered the worst economic crisis in the country’s post-independence history. By mid-2024, the economy started showing signs of recovery, with a performance higher than other debt-defaulting nations and exceeded IMF expectations. The current stable path, however, is not enough. Sri Lanka needs to shift its economic trajectory from one of debt distress to sustained growth over the next few years.
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Asian nations like Sri Lanka have seen a rush of Russian and Ukrainian tourists over the last two years. They discover salubrious climes and overstay their visas to start small businesses. It has helped Sri Lanka boost tourism after its 2022 debt default but also created economic problems for locals. It is necessary to identify trade-offs between economic benefits and security threats associated with extended-stay tourism.
Courtesy: Business Standard
In April 2022, Sri Lanka defaulted on its foreign debts kicking off its worst economic downturn in over 70 years. In a paper for the Institute of South Asian Studies, Ganeshan Wignaraja examines key policy, the benefits of IMF support, and the role that Indian aid has played in Sri Lanka’s recovery while emphasising potential risks of its upcoming presidential and parliamentary elections.
Courtesy: Hindustan Times
South Asia requires resilient and cost-effective regional supply chains. This can be achieved through Indian investment, fostering local linkages while reducing dependency on Chinese financing of regional partners. A new approach enhances India's regional influence, creating a win-win scenario for the entire South Asian neighbourhood in a changing global landscape.
Courtesy: VivaLanka
At the COP28, Sri Lanka’s President Ranil Wickremesinghe stated the need for $12 billion in FDI for renewable energy sources by 2030 to fulfill the country’s climate commitment. For that funding to yield benefits and translate into long-term growth, Sri Lanka must now work hard to enhance its overall business environment and revisit its foreign investment strategy to focus on renewable energy and manufacturing.
Courtesy: Verité Research
The Sri Lankan economic crisis was the result of years of weak fiscal performance and lack of consistent development strategies. While economic recovery has picked up pace, addressing macroeconomics issues and implementing structural reforms to promote inclusive and sustainable growth is the key to its success
Courtesy: The Wire
India and Sri Lanka recently signed six energy agreements, including plans for an oil pipeline from India to Sri Lanka, electricity grid connectivity, and cooperation in renewable energy. Sri Lanka can benefit from India's cost-effective oil sourcing and processing and pay for it in rupees, easing its balance of payments crisis. Its wider use of the Rupee fulfills a long term objective for Indian policymakers.
Courtesy: The Times of India
On July 21, Sri Lankan President Ranil Wickremesinghe is set to visit for the first time since taking office. India has already provided $5 billion in economic assistance to Sri Lanka, and is now looking to expand its investment in the nation. Sri Lanka is also seeing interest from Indian private investment. The visit presents an opportunity for the two countries extend this relationship in new areas of cooperation, especially energy, infrastructure, and tourism.