📈 SL Trade & Digital Reform Warning: Inequality Risk

UNDP Country Economist Dr. Vagisha Gunasekara warns that Sri Lanka's current approach to Digital Public Infrastructure (DPI) and rapid trade liberalisation risks reinforcing inequality unless foundational gaps are addressed upfront. • Digital Divide: Only 37% of adults are online, and 39% of households lack internet access. The divide is acute for women (1/3 less likely to use internet) and persons with disabilities (7% use vs 24% general pop). • DPI Risk: Unless DPI is specifically designed for low-bandwidth, mobile-first, rural users, gains from AI and high-productivity jobs—e.g., in ICT/BPM, apparel, logistics, tourism—will concentrate among a small, urban, digitally ready minority. The Government aims to grow the digital economy to US$ 15 Bn. • Trade Reform Sequencing: Rapid para-tariff cuts risk destabilizing industries and exerting pressure on the rupee. The gains from trade are nullified if workers cannot move into growing sectors due to mobility frictions (e.g., lack of affordable housing, poor transport) and skills gaps. • Recommended Prioritisation: Reforms must be sequenced: 1. Fix non-tariff trade costs (logistics, customs automation, digital trade systems for SMEs). 2. Invest in skills, reskilling, and labour mobility enablers. 3. Then implement gradual, predictable tariff reforms, starting with intermediate inputs. The economist stressed that failing to front-load DPI and labour market investments will deepen economic divides. The 2026 Budget Speech announced a gradual phase-out of para-tariffs to boost competitiveness.