Economy

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

February 25, 2022

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.