News Today: Treasury Secretary Discusses Sri Lanka’s Preventable Economic Crisis

Sri Lanka’s economic crisis was a man-made disaster that could have been avoided, according to Treasury Secretary Mahinda Siriwardena. In a recent statement posted on X, Siriwardena stressed that the crisis might have been mitigated if early warning signs were addressed and decisive policy measures, including engagement with the International Monetary Fund (IMF), were implemented in time.

This commentary followed Fitch Ratings’ decision to upgrade Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘RD’ (Restricted Default) to ‘CCC+’. Siriwardena hailed this milestone as a turning point, acknowledging it as a fresh start for Sri Lanka on its journey toward economic prosperity. He also emphasized the collective effort required from every citizen to rebuild the nation’s economy.

Reflecting on past challenges, Siriwardena cautioned that Sri Lanka has often repeated cycles of economic instability due to unsustainable fiscal and monetary policies implemented to spur growth after periods of stabilization. He stated, “The result is a rapid return to instability which has characterized several stop-go cycles in Sri Lanka’s post-independence economic history.”

While celebrating the upgrade, Siriwardena highlighted the sacrifices made by the Sri Lankan people and the collaborative efforts of key stakeholders. He thanked the Ministry of Finance, Central Bank, political leadership, and advisors like Lazard and Clifford Chance for their role in achieving this progress. Additionally, he recognized the critical support of international institutions, particularly the IMF, alongside foreign governments and creditors.

Siriwardena urged Sri Lankans to consider two important points:

1. Policy errors can quickly spiral into deep crises, as evidenced by the devastating impact of the 2022 economic collapse on the nation’s 22 million citizens.
2. Although macroeconomic stability and debt restructuring have shown positive outcomes, the lingering effects of the crisis continue to burden the population.

He concluded by reiterating the importance of avoiding past mistakes and working together to ensure a stable and prosperous future for Sri Lanka.