Sri Lanka cannot prosecute its way to prosperity

“Accountability, while necessary, is not a development strategy. And it is certainly not a substitute for reform.”

“What distinguishes successful economies is not the absence of corruption alone, but the presence of strong institutions, credible macroeconomic management, and an economic structure that rewards productivity rather than proximity to power.”

“Even if every corrupt official were removed tomorrow, Sri Lanka would still face the same fundamental questions... These are not legal questions. They are structural ones.”

“The foundation was an economy and a state that consistently consumed more than it produced... A nation can prosecute wrongdoing. It cannot prosecute its way to prosperity.”

The demand for accountability has become one of the defining features of post-crisis Sri Lanka. In the aftermath of the 2022 economic collapse, there is a strong and understandable belief that corruption, political patronage, and mismanagement were the primary drivers of national failure. 

Citizens who endured shortages, inflation, currency depreciation, and a collapse in living standards are right to demand answers—and, in many cases, punishment. 

Politicians have therefore become the central focus of public anger. Not without reason. Successive governments contributed to the conditions that led to the crisis. Corruption existed. Patronage existed. Policy mistakes were made. Public resources were often misused. Those entrusted with public office must be held accountable. 

But accountability, while necessary, is not a development strategy. 

And it is certainly not a substitute for reform. 

Sri Lanka risks believing that it can rebuild itself simply by prosecuting the failures of its past. It cannot. 

Because the roots of the crisis run far deeper than the misconduct of individuals. They lie in the structure of the post-independence state and the cumulative weight of history since 1948.

A Country Shaped by Shocks and Strain

Since independence, Sri Lanka has lived through repeated political instability, two southern insurgencies, nearly three decades of separatist war, the devastation of the 2004 tsunami, the Easter Sunday attacks, and the unprecedented shock of COVID-19. 

Each of these events placed extraordinary pressure on the state—on its finances, institutions, and capacity to plan for the long term. None of them alone caused the economic crisis. But together they narrowed fiscal space, weakened buffers, and repeatedly disrupted development trajectories. 

Against this backdrop, successive governments—across political divides—continued to expand the role of the state in the economy. 

The Expansion of the State and the Logic of Dependency 

Over time, the state became not only regulator but employer, producer, distributor, and allocator of opportunity. 

Public employment expanded steadily. The state became the employer of first and last resort. State-owned enterprises multiplied, many becoming persistent fiscal burdens. Subsidy systems widened. Welfare commitments increased. Political competition increasingly revolved around who could promise more from the state. 

For decades, Sri Lanka lived beyond its means. 

When revenue was insufficient, borrowing filled the gap. When borrowing became constrained, reforms were postponed. Short-term political survival consistently outweighed long-term economic adjustment. 

The result was a slow accumulation of vulnerabilities that remained hidden until a moment of systemic stress. Eventually, the arithmetic caught up. 

The economy simply did not generate enough productivity, exports, or investment to sustain the obligations accumulated over time.

Corruption: Cause, Symptom, and Consequence 

It is important to be clear: corruption contributed to this trajectory. But it did not define it. 

Many countries with higher perceived levels of corruption than Sri Lanka have continued to grow, attract investment, and reduce poverty. What distinguishes successful economies is not the absence of corruption alone, but the presence of strong institutions, credible macroeconomic management, and an economic structure that rewards productivity rather than proximity to power. 

Corruption becomes most damaging when it is embedded in a system where the state controls a large share of economic opportunity. 

In Sri Lanka, that condition existed. 

Employment, contracts, land, licences, permits, and access to state resources were heavily mediated by political authority. In such a system, political influence inevitably acquires economic value. 

Patronage becomes embedded in governance. 

Corruption follows as a systemic outcome. This does not excuse it. It explains why it became persistent. 

The Limits of the Anti-Corruption Moment 

There is today strong public support for investigations and prosecutions. After years of hardship, this sentiment is entirely understandable. Across history, societies under economic stress often channel frustration toward political elites. 

But there is a deeper risk that must be acknowledged. 

Sri Lanka’s political culture has long been shaped by the expectation that the state must solve every major problem—employment, welfare, subsidies, opportunity, and crisis response. Political competition evolved around promises of ever greater state intervention. 

When that model collapsed in 2022, the expectation that the state must solve everything did not disappear. 

It simply changed form. 

Today, many believe that if enough politicians are prosecuted, the country will recover. 

This is a misconception. 

Economic crises also tend to blur important distinctions. Citizens under severe financial pressure naturally scrutinise public expenditure more closely than before. Spending that may once have been viewed as legitimate, necessary, or merely inefficient can come to be seen through the lens of corruption. This reaction is understandable. However, corruption, waste, poor judgment, and unsustainable policy are not always the same thing. A country that fails to distinguish between them risks misdiagnosing the causes of its difficulties and prescribing the wrong remedies. 

Politicians are elected representatives, and over time they respond to the incentives created within the political system. In a society where voters understandably valued employment, subsidies, and state protection, political competition increasingly revolved around the expansion of the state. In that sense, patronage was not only imposed from above; it was also reinforced by expectations from below. This mutual reinforcement helped entrench a model that eventually became unsustainable. 

Even if every corrupt official were removed tomorrow, Sri Lanka would still face the same fundamental questions: 
How large should the state be? 

How many state-owned enterprises can realistically be sustained? 

How much public employment can the economy afford? 

How can exports be expanded and diversified? 

How can productivity be improved across sectors? 

How can investment—domestic and foreign—be increased and protected? 

How can Sri Lanka compete in a global economy that rewards efficiency and scale? 

These are not legal questions. They are structural ones. And they will determine the country’s future far more than any set of prosecutions. 

The Risk of Administrative Paralysis 

There is another consequence of excessive politicisation of accountability that deserves attention. 

In highly polarised environments, extensive reliance on anti-corruption enforcement can produce unintended behavioural changes within the state. 

Public officials, regulators, and administrators may become increasingly reluctant to take decisions if they fear that future political transitions could reinterpret those decisions as wrongdoing. 

The result is a culture of caution that gradually becomes a culture of inaction. 

Approvals slow. Projects stall. Decisions are delayed. Responsibility is avoided. 

What begins as accountability can evolve into administrative paralysis. 

This matters because economic recovery depends on the state’s ability to act. Investors require predictability. Infrastructure requires execution. Reforms require implementation. A state that cannot act cannot enable growth. 

Accountability Without Fear 

None of this is an argument against accountability. 

Sri Lanka needs strong mechanisms to investigate wrongdoing and enforce the law without fear or favour. 

But accountability must strengthen institutions—not weaken them. It must build confidence in governance, not erode it. And it must never become a substitute for the deeper reform agenda. Because the uncomfortable truth is this: Sri Lanka’s crisis was not merely a crisis of corruption or mismanagement. It was a crisis of the post-independence state. 

The Structural Problem We Avoid Talking About 

For decades, successive governments promised more than the economy could sustainably deliver. Borrowing filled the gap. Patronage became the mechanism for distributing opportunity. Political incentives rewarded short-term expansion of state responsibilities while postponing reform. 

Over time, the state became larger, more expensive, and less efficient. This model reached its limits. Not because any one government failed. But because the underlying structure was unsustainable. Corruption was part of this story—but not its foundation. The foundation was an economy and a state that consistently consumed more than it produced. 

What Real Reform Requires 

If Sri Lanka is serious about avoiding a repetition of its crisis, it must move beyond the politics of blame and toward the economics of reform. That means: A state that focuses on core public goods rather than economic dominance. 

Serious restructuring of loss-making state enterprises. A professional, merit-based public service insulated from political cycles. Greater space for the private sector to drive employment and innovation. 

A growth model anchored in productivity, exports, and competitiveness rather than redistribution. 

And a recognition that sustainable development requires living within means—not periodically exceeding them until crisis forces adjustment. 

These are not ideological prescriptions. They are practical necessities for a country with limited fiscal space and high development ambitions. 

Conclusion: The Lesson of the Crisis 

Sri Lanka’s tragedy is not simply that corruption existed. Corruption exists in many societies. 

The tragedy is that for decades, the country built a state that promised more than it could deliver, borrowed to bridge the gap, and repeatedly postponed reform when it became politically inconvenient. 

Today, there is a belief that accountability alone will resolve this. 

It will not. 

Accountability is essential. But unless Sri Lanka also addresses the structure of the state, the incentives within the economy, and the long-standing culture of dependency that has shaped political life since independence, the cycle will repeat—regardless of who is in power.

One set of leaders will replace another. And the underlying constraints will remain. The question before Sri Lanka is therefore not simply who should be punished for the past. It is whether the country is prepared to build a different future. 

A nation can prosecute wrongdoing. It cannot prosecute its way to prosperity.

(Milinda Moragoda is the founder of the Pathfinder Foundation, and can be contacted via [email protected])