Sunday Jul 05, 2026
Sunday Jul 05, 2026
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As calls grow from Opposition lawmakers for Sri Lanka to secure a successor International Monetary Fund (IMF) program before the current Extended Fund Facility (EFF) expires next year, Advocata Institute CEO Dhananath Fernando yesterday argued that another bailout need not become inevitable if the Government uses its political mandate to implement long-delayed structural reforms now.
Delivering the keynote address at CA Sri Lanka’s 5th Annual Economic and Tax Symposium, Fernando said Sri Lanka had regained macroeconomic stability through painful adjustment measures, but warned that returning to another IMF program would simply defer the country’s underlying economic weaknesses unless successive governments tackle the politically difficult reforms required to lift productivity, expand private sector investment, and create jobs.
“My view is, since we have to do it at any point, better to do it now,” Fernando said. “We can go to another IMF program. But it will be kicking the can down the road.”
Fernando stressed that he was not criticising the IMF itself. “It doesn’t mean that the IMF is a bad thing,” he said.
Instead, he argued that Sri Lanka should use the breathing space created by the current program to complete reforms domestically, reducing the need for repeated IMF-supported adjustment cycles.
“Ultimately, whatever happens in the global environment, the solution lies within our own territory. It is what we do that defines how we face external shocks,” he said.
His remarks come as the debate over Sri Lanka’s post-program strategy gathers momentum. Several Opposition legislators have urged the Government to begin negotiations for a follow-on IMF arrangement before the current four-year program concludes next year, arguing that continued Fund engagement would reinforce investor confidence and policy discipline.
At the same time, IMF officials have repeatedly indicated that the program’s later reviews will increasingly focus on structural reforms capable of generating sustained private sector-led growth rather than macroeconomic stabilisation alone.
Fernando argued that the present administration is uniquely positioned to undertake those reforms because it enjoys an “unprecedented mandate.”
“The President has an unprecedented mandate. He has three more years,” he said.
He noted that the Government’s two-thirds parliamentary majority and comparatively favourable political environment provide a rare opportunity to push through reforms that previous administrations struggled to implement.
Even trade unions, traditionally among the strongest opponents of market-oriented reforms, could be managed under the current political conditions, he argued.
“The difficult parties can also be managed,” he said.
While acknowledging concerns over the State’s implementation capacity, Fernando maintained that the Government should move quickly before political priorities inevitably shift towards the next election cycle.
“The last part of the term will be about elections,” he said.
Against that backdrop, Fernando outlined six reforms he described as critical to sustaining Sri Lanka’s recovery.
He called for accelerated restructuring of State-owned enterprises (SOEs) through the proposed State-Owned Holding Company, arguing that SOEs collectively hold assets equivalent to around 50% of GDP while contributing relatively little to public finances.
He also urged the Government to permit privately developed industrial zones, noting that existing zones are operating at more than 90% occupancy and cannot accommodate the investment required to create the estimated 1 million private sector jobs Sri Lanka will need over the coming years.
Fernando further called for deeper Customs and trade reforms, including expanding Sri Lanka’s network of free trade agreements, accelerating the Bim Saviya land title program to unlock investment, reforming labour regulations, and rationalising the public holiday calendar to improve productivity.
He acknowledged that several of these proposals would be politically unpopular but argued that postponing them would only weaken Sri Lanka’s long-term growth prospects.
“If we are really serious about improving productivity, those reforms have to happen,” he said.
Fernando argued that the country has already restored fiscal stability and repaired much of the macroeconomic damage caused by the crisis, but warned that sustainable growth cannot be achieved through tax increases alone.
Instead, he said, Sri Lanka’s next phase of recovery must be driven by higher productivity, stronger exports, and a more competitive private sector capable of generating employment and sustaining debt repayment without repeated external rescues.
“The opportunities can only be created by doing reforms,” he said. “And we have to do it now.”
