Urgent Need for 'Big Bang' Reforms to Secure Sri Lanka's Recovery 📈

• Strategic Shift Required: Dr. Ganeshan Wignaraja (ODI Senior Fellow) warns that gradual, incremental reforms are insufficient. A "big bang" reform agenda is essential to transition from cyclical stabilization to durable, investment-led growth. • Economic Vulnerabilities: While the 2023 IMF-led recovery is credible, the economy remains exposed to debt distress and external shocks. Current progress is often "two steps backward and one step forward" due to systemic inertia. • Impact of Cyclone Ditwah: • Damage estimated at US$ 4.1 Bn (approx. 4% of GDP). • Unlike the tsunami, this disaster affected a larger geographical area, highlighting critical gaps in national preparedness and coordination. • Priority Reform Areas: • Regulatory Environment: Eliminating 20 years of "red tape" that strangles businesses. • Energy & Productivity: Addressing high factor costs and labor skills shortages to attract foreign investment. • Global Integration: Deepening links with global supply chains to move beyond debt-driven cycles. • Fiscal Outlook: Recommendations include mobilizing domestic resources and engaging the IMF for limited fiscal flexibility to manage rising poverty levels post-disaster. • National Context: Stabilization has opened a narrow "reform window." Decisive action on energy costs and productivity is required to reassure markets and prevent a return to debt distress.