Analysis: Shocks and missteps: how Sri Lanka’s economy ended in crisis

  • Sri Lanka is in economic crisis, some analysts say
  • Debts have spiralled, reserves are low and growth has lagged
  • Island heavily reliant on tourism, devastated by pandemic
  • Central bank says situation is stable, no need for IMF help
  • Former officials, economists question government policies

COLOMBO, Feb 25 (Reuters) – In late November 2019, after winning Sri Lanka’s presidential election and months ahead of a parliamentary ballot that would again test his popularity, Gotabaya Rajapaksa gathered his cabinet and made good on a campaign promise to slash taxes.

The move, which included a near-halving of value added tax, blindsided some top central bank executives.

“The tax cuts just after the elections came as a surprise,” P. Nandalal Weerasinghe, the Central Bank of Sri Lanka’s (CBSL) Senior Deputy Governor until September 2020, recalled.

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“There was not any kind of a consultative process,” added…

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