Ranil Wickremesinghe – who on July 20, 2022, was voted in by lawmakers to replace fleeing former president Gotabaya Rajapaksa – and his appointed premier Dinesh Gunawardena inherit an economy grappling with record inflation as high as 59%, a currency that has lost almost half its value since March 2022 and severe shortages of daily necessities such as food and fuel. Nearly all economic activity in the country has ground to a halt.
The government’s deficit is so large it can’t afford to pay public workers, and the central bank has almost no foreign currency – needed to finance imports and pay back foreign debt.
In short, Sri Lanka is facing an unprecedented economic crisis, placing tremendous pressure on the new leaders to act fast to fix things.
As an economist and former official at the Central Bank of Sri Lanka, I believe the path forward will be difficult. The country will need to break with past policies and practices that put it in a financial hole while putting in place reforms to get the economy back on track. In particular, there are four key economic challenges the new government will have to address, though they’re all interconnected.
Addressing Sri Lankans’ immediate needs
To avoid the fate of his now exiled predecessor Gotabaya Rajapaksa, President Wickremesinghe will have to address the immediate needs of his people.
After being sworn in, Wickremesinghe said his priority was to ensure that people are able to eat three meals a day.