Getting back on one track and off another

Since the adoption of the 2030 Agenda for Sustainable Development in 2015, successive Sri Lankan administrations have taken steps to accomplish the 17 goals known as SDGs and its 169 objectives. Before COVID-19, Sri Lanka made significant progress toward numerous SDG objectives, including eradicating poverty and hunger, expanding access to health and education, promoting gender equality and decent employment, and decreasing disparities.

However, the epidemic reversed these gains, notably on the SDGs linked to poverty, inequality and decent employment. Similarly, the economic crisis is anticipated to have a negative impact on SDG development and provide significant additional hurdles to achieving them by 2030. The COVID-19 pandemic has had an influence on several of the 17 SDGs, with some, such as SDG 1 on poverty, reversing previous gains. As with other nations, Sri Lanka experienced significant negative consequences of the epidemic on the lives and livelihoods of its people, particularly the poor and vulnerable. 

While the pandemic has had an influence on many SDGs and all three pillars of sustainable development – economic, social and environmental – the negative consequences on specific SDGs, particularly those relating to poverty, food security, health, education and employment, have been more visible.

The economic crisis was caused by a number of factors, including a lack of foreign reserves, disruptions to the tourism industry beginning with the Easter Sunday attacks in 2019 and the pandemic in 2020, tax cuts that resulted in a significant decrease in government revenue, and rising crude oil prices, which were partly caused by the Russia-Ukraine War and associated sanctions. 

While the economic crisis has touched the whole population in some manner, the poor and ‘near poor’ have been hammered the hardest. With soaring inflation, food and other necessities shortages, and job losses, the economic crisis is likely to halt progress on the SDGs. Following Sri Lanka’s inability to access international bond markets following the selective default of foreign debt payments in April 2022, financing has grown further tighter. All of these concerns have worsened the funding gap for achieving the SDGs. Given the complexity of the SDGs and the significant hurdles to fulfilling them, it is preferable to prioritise the most critical objectives. 

Prioritisation must be based on the demands of the country’s development and the trade-offs between the aims. Given the huge budgetary restrictions and negative consequences of the economic crisis, it is critical to prioritise SDGs relating to poverty and inequality (SDGs 1 and 10), food security (SDG 2), economic growth and decent employment (SDG 8), education (SDG 4), and energy (SDG 7).

The Central Bank of Sri Lanka (CBSL) produced the Roadmap for Sustainable Finance in Sri Lanka, which emphasises various non-traditional SDG financing tools. Green bonds are bonds that are specialised to development initiatives focused on environmental conservation and climate change. Capital markets have lately emerged as a driving factor in the pursuit of a more sustainable future. 

Environmental, Social, and Governance (ESG) bonds are available to Sri Lankan enterprises. Green bonds and ESG finance, on the other hand, are concerned with the environment. It would be critical to strengthening international and bilateral cooperation, especially given the paucity of fiscal headroom. Domestic resource mobilisation is critical for Sri Lanka’s SDG success. Traditional SDG finance often involves Government funding as well as ODA from foreign nations. In Sri Lanka, ODA has likewise been falling as the country’s income has risen, but foreign aid increasingly prioritises meeting people’s basic needs (e.g., food security, social safety, healthcare and power/fuel).

However, in the medium-term, more attention should be placed on financing other SDGs, particularly those linked to education, employment, industry, innovation, and infrastructure. Attracting private investment to the SDGs will also be critical.