Sri Lanka cannot mistake calm for economic strength: CBSL cautions

By Shabiya Ali Ahlam

Dr. Chandranath Amarasekara Pic by Pradeep Pathirana

Sri Lanka cannot afford to treat the absence of a crisis as a sign of strength, a top Central Bank official warned yesterday, as repeated global and domestic shocks are likely to continue testing the country’s economic resilience even as macroeconomic stability gradually returns.

According to Central Bank Deputy Governor Dr. Chandranath Amarasekara, policymakers must remain focused on building buffers, strengthening institutions and improving productivity as the global environment becomes increasingly volatile and unforgiving.

“Looking ahead, Sri Lanka faces a difficult, yet unavoidable path. A key lesson from our experience is that domestic vulnerabilities and global pressures amplify each other. The absence of crisis is not proof of strength. Often, it is merely a grace period,” Amarasekara said.

He shared his views while delivering the keynote speech at the International Conference on Poverty and Development in Times of Crisis organised by the Centre for Poverty Analysis (CEPA).

“The global environment today is less forgiving; Monetary conditions tighten rapidly and synchronously; Capital markets reprice risk abruptly; Supply-side shocks are more frequent; and geopolitical fragmentation constrains policy choices,” he added.

Sri Lanka continues its fragile recovery from the worst economic crisis in decades, while also attempting to navigate external pressures stemming from geopolitical tensions, tightening financial conditions and global trade fragmentation.

Dr. Amarasekara said the policy space created following Sri Lanka’s economic stabilisation efforts had helped cushion the impact of recent shocks, including spillovers from the ongoing Middle East conflict and extreme weather events. However, he stressed that policymakers “can never be complacent” in strengthening economic resilience through diversification, productivity and efficiency improvements.

He also asserted the need to strengthen the resilience of poor and vulnerable communities alongside rebuilding national economic buffers, noting that the Central Bank was increasingly focusing on financial literacy, inclusive finance and market conduct supervision.

Looking ahead, Sri Lanka faces a difficult, yet unavoidable path. A key lesson from our experience is that domestic vulnerabilities and global pressures amplify each other. The absence of crisis is not proof of strength. Often, it is merely a grace period

“I must emphasise here, that the responsibility of helping the poor and the vulnerable lies particularly and heavily with the government, which, together with the private sector, must work towards creating productive jobs and a business friendly environment,” Amarasekara said.

“National policies, such as the introduction of a nationwide contributory pension and social security system and the promotion of insurance, would be essential to support the poor and the vulnerable, reduce the interest dependence of an ageing population, and protect the informal sector workers on daily wages who are the most vulnerable when disasters hit the economy and activity comes to standstill,” he added.

The Deputy Governor further argued that Sri Lanka’s next phase of growth must come from stronger institutions and deep structural reforms rather than short-term fiscal or monetary stimulus, while warning that delays in policymaking often become “the most expensive” decisions.

Amarasekara also highlighted significant gaps in poverty-related data, pointing out that some of Sri Lanka’s key poverty and living standards indicators still predate both the COVID-19 pandemic and the economic crisis, limiting policymakers’ ability to accurately assess the current condition of households.