Sri Lanka’s President Anura Kumara Dissanayake on Monday vowed to proceed with unpopular economic reforms, including the closure of loss-making state institutions and cutbacks to the country’s extensive public service.
His commitment comes as official data indicates a slowdown in the nation’s economic expansion.
Addressing an IMF-backed review of Sri Lanka’s recovery from its unprecedented 2022 economic meltdown, President Dissanayake, a leftist, declared the 1.5 million-strong public service unsustainable.
He confirmed that his administration has already identified several state institutions for closure, though he did not name them.
Dissanayake explained that these institutions were created for “a bygone era” and are “no longer relevant,” while assuring that the government would retain control over the “sensitive” energy and financial sectors.
His remarks followed the census department’s report that the country’s economy grew by 4.8 per cent in the first quarter of this year, a decrease from 5.4 per cent in the previous quarter and 5.3 per cent a year ago.
Sri Lanka experienced its worst economic performance in 2022, when its GDP shrank by 7.3 per cent due to a severe foreign exchange shortage that crippled essential imports. After two consecutive years of decline, the economy recorded positive growth of 5.0 per cent in 2024, signalling a recovery from its worst crisis.
The economic turmoil of 2022 led to widespread street protests that ultimately forced then-president Gotabaya Rajapaksa to resign. His successor, Ranil Wickremesinghe, secured a $2.9 billion, four-year bailout loan from the IMF. However, Wickremesinghe lost the September elections to Dissanayake, who, despite earlier campaign pledges to renegotiate the bailout terms, has maintained austerity measures.
Dissanayake reiterated his commitment to IMF prescriptions, hoping this would be the island’s final bailout, noting it is Sri Lanka’s 17th.
He expressed an aspiration to “build a stable economy with sufficient growth to service our debt independently by the year 2028.”
Dissanayake has also approved a controversial debt restructuring plan agreed upon by his predecessor with both bilateral and private creditors.
