Former Finance Minister and Presidential National Organiser Ravi Karunanayake has underscored that Sri Lanka is on a path to economic recovery and transitioning from brain drain to brain gain. He emphasized the importance of leveraging the potential of the nearly 3 million Sri Lankans living abroad, many of whom are excelling in various fields.
To harness this potential, Karunanayake proposed strategies to attract expatriates back to Sri Lanka. This includes offering attractive incentives, encouraging periodic returns, and facilitating financial investments. Expatriates can play a crucial role by leading multinational corporations’ Sri Lankan branches, driving technological innovation, and enhancing the country’s global competitiveness. Their international experience and networks can attract investment, raise global awareness, and bridge skill gaps.
Karunanayake stressed that the knowledge and investments of expatriates are essential for Sri Lanka’s advancement. Expatriates trained in advanced economies can spur innovation and growth, while their savings and networks can provide vital investments and market access. Potential growth areas include capital markets, venture capital, private equity, outsourcing, and education. Attracting international students and developing natural resources through strategic marketing could further boost the economy.
He also suggested offering tax and citizenship benefits to the second-generation diaspora to enhance investments in manufacturing and export industries. Additionally, appealing to the senior diaspora with high-quality caregiving options could provide another influx of resources.
To compete globally, Sri Lankan companies must produce world-class products and embrace global marketing. Karunanayake noted that while some Sri Lankan companies have excelled in branding, many have not achieved global recognition. He highlighted the need to bridge the gap between educational theory and practical skills to create equal opportunities.
In the first quarter of 2024, 75,175 Sri Lankans left for foreign employment, averaging 25,058 per month. In 2022, over 1.1 million departed, primarily for education, and in 2023, 297,656 left for foreign employment, averaging 24,805 per month. Worker remittances averaged $541 million per month in the fourth quarter of 2023, up from $507 million in the third quarter.
Sri Lanka’s economic recovery is closely tied to the successful implementation of policies agreed upon with the International Monetary Fund (IMF). Under President Ranil Wickremesinghe, significant reforms have been enacted, including tax increases, government spending cuts, and state enterprise restructuring. These measures aim to stabilize inflation and restore economic stability. Deviating from these policies could risk a return to previous economic crises.
The IMF-backed reforms have yielded positive outcomes: the Sri Lankan rupee has strengthened, inflation has decreased, tax revenues have risen, and state enterprises have reduced their losses. Interest rates have dropped, contributing to overall economic growth. In 2023, the country achieved a primary surplus, a significant milestone. Despite these improvements, opposition parties are advocating for revisions to some IMF conditions, particularly related to higher taxes.
Karunanayake noted that while the IMF’s core objectives of fiscal consolidation, revenue enhancement, and financial stability remain unchanged, the methods to achieve them can be adjusted. External factors such as global economic shifts and geopolitical tensions could influence Sri Lanka’s recovery. A major challenge is ensuring consistent policy implementation across different administrations to sustain long-term economic stability.
For 2024, Sri Lanka’s economy is projected to grow by 2.2%, recovering from the downturn experienced in 2022. However, persistent issues such as high poverty rates, income inequality, and labour market difficulties continue to challenge the nation. Sri Lanka’s economy has shown resilience by outperforming expectations in the first quarter of the year. The Asian Development Bank (ADB) has highlighted that future uncertainty remains, especially due to the upcoming election cycle in 2024 and 2025. Policy reforms and continuity will be critical concerns as the nation prepares for these elections.