Borrowed credibility is a bridge, not a destination

• Practical measures aimed at ensuring reforms take root as durable administrative practices, rather than remaining tied to particular political moments

Over the past few weeks, a familiar question has resurfaced: is Sri Lanka once again drifting towards an economic crisis? At the same time, there is a clear recognition that the country has made visible progress in advancing recovery measures following the economic and political shocks of 2022, particularly through reforms under the current IMF program. Legislative and policy changes relating to anti-corruption, public financial management, central bank independence, revenue mobilisation, beneficial ownership transparency, and the governance of state institutions have moved forward over the past two years. Yet, despite this progress, questions remain about the ability of state institutions to carry these reforms forward in a consistent, efficient, and sustainable manner.

Recent IMF assessments have described program performance as strong, but there remains a clear emphasis on sustaining reform momentum and completing key initiatives that are still underway. Transparency International Sri Lanka’s Government Action Plan Tracker has highlighted delays, transparency gaps, and implementation challenges in certain reform commitments, underscoring the importance of sustained monitoring and follow-through. The IMF’s Fifth and Sixth Review notes generally strong program performance while observing that some structural benchmarks were implemented with delays and that further efforts are required to complete important reform measures.

These observations raise a broader question, one that goes beyond legislation or policy announcements. Sri Lanka’s long-term recovery will depend not simply on adopting reforms, but on whether those reforms become part of the day-to-day functioning of public institutions. Without stronger, homegrown systems of governance and improved institutional productivity, there is a risk of repeating a familiar cycle. Reforms are introduced in response to crisis, citizens bear the immediate costs, and the promise of long-term resilience gradually fades. This article examines a set of practical measures aimed at ensuring that reforms take root as durable administrative practices, rather than remaining tied to particular political moments.

Sustained economic growth cannot rely indefinitely on externally driven reform agendas. State institutions and administrative systems must develop the ability to identify weaknesses, implement corrective measures, and maintain reform momentum without constant dependence on external partners

The current reform phase presents a rare opportunity not only to stabilise the economy, but also to strengthen and modernise the institutional foundations of the State. Reform programs supported by external partners, including the IMF, can play an important role in restoring confidence in the aftermath of a crisis. They provide reassurance to investors, creditors, and development partners at a time when trust is fragile. However, such confidence is ultimately contingent on a country’s own commitment to reform. External support can create space for recovery, but it cannot substitute for strong domestic institutions and effective implementation. As the IMF has repeatedly emphasised, durable economic recovery depends on sustained domestic ownership of reforms and continued efforts to address governance weaknesses and corruption vulnerabilities. Long-term economic resilience is therefore built at home through deep structural reforms, strong and independent institutions, effective public administration, and a sustained commitment to transparency and accountability.

For Sri Lanka, this raises a practical challenge. Sustained economic growth cannot rely indefinitely on externally driven reform agendas. State institutions and administrative systems must develop the ability to identify weaknesses, implement corrective measures, and maintain reform momentum without constant dependence on external partners. The country is currently on its 17th IMF program since independence. This alone suggests that if government institutions had been able to convert external support into lasting stability, repeated recourse to the Fund would not have been necessary.

The issue is therefore no longer one of identifying what needs to be done. Many of the reform priorities are already well understood. While these priorities are not new, the difficulty in Sri Lanka has consistently been one of implementation rather than design. The more difficult task is ensuring that these measures outlast political cycles and become part of the normal functioning of the State. Across countries, reform efforts tend to stall not because proposals are lacking, but because institutions struggle to implement them consistently over time. Sri Lanka’s own experience reflects this pattern. Several previous IMF-supported programs were not completed, often because reform momentum weakened once immediate economic pressures eased. As former IMF First Deputy Managing Director Gita Gopinath warned, nearly half of Sri Lanka’s previous IMF-supported programs ended prematurely, often as reform fatigue set in and hard-earned gains were reversed. The broader lesson is that recovery programs are more likely to endure when they are embedded within national systems rather than treated as externally imposed obligations.

Strengthening institutional capacity

In this context, strengthening institutional capacity should be seen as a form of crisis prevention. Public sector reform is not a secondary administrative concern detached from economic reform. It sits at the centre of economic recovery. Weak coordination, limited technical expertise, politicisation, and lack of continuity within the public service can all undermine otherwise well-designed reforms. Stronger institutions, by contrast, improve policy credibility, reinforce fiscal discipline, and create a more predictable regulatory environment. These are essential conditions for rebuilding investor confidence and supporting long-term growth.

Political commitment, while necessary, is not sufficient on its own. Sustainable reform depends on a capable and professional administrative system that can carry policies forward across changes in government. This places particular importance on the continuity and expertise of the civil service. Governments change through electoral cycles, but reform implementation relies on institutions that retain memory, discipline, and long-term direction. In economic literature, this is often described as state capacity. Political scientist Francis Fukuyama defines it as the ability of governments to design and implement policies effectively while maintaining control over corruption. It is widely regarded as a key condition for sustained economic development. 

Sri Lanka’s long-term recovery will depend not simply on adopting reforms, but on whether those reforms become part of the day-to-day functioning of public institutions. Without stronger, homegrown systems of governance and improved institutional productivity, there is a risk of repeating a familiar cycle

In Sri Lanka’s case, this issue is especially significant given the size and structure of the public sector, which is frequently criticised for inefficiency and overstaffing. This concern is not new. As far back as 1996, public administration reform efforts identified recurring structural weaknesses, including fragmented policy coordination, blurred lines between policy and service delivery, misaligned institutional structures, the absence of performance-based management, and limited capacity to support a competitive economic environment. Nearly three decades later, many of these observations still hold relevance.

Research and policy reports examining measures to accelerate Sri Lanka’s economic growth emphasise the importance of maintaining a “laser-like focus on structural reforms”, including factor market reforms, SOE reforms, improvements to the investment climate, trade policy, and education and skills development. Sri Lanka has long-established institutions responsible for implementing these policy measures. However, the implementation of these reforms has often fallen short of expectations.

The IMF Governance Diagnostic Assessment identified corruption vulnerabilities in revenue administration arising from weaknesses in accountability mechanisms, integrity controls, tax administration practices and the management of tax expenditures. The US State Department’s 2025 Investment Climate Statement on Sri Lanka highlighted regulatory unpredictability, bureaucratic hurdles, and selective transparency as continuing obstacles to broader participation in the economy. The government’s capacity to maintain an open and predictable investment environment remains limited despite positive policy rhetoric. Investors continue to report difficulties in doing business, frequently citing project reversals, regulatory shifts, slow decision-making, and inadequate support for established businesses.

Moreover, Transparency International Sri Lanka’s 2025 civil society parallel report on UNCAC implementation identified a persistent gap between legal reforms and their effective implementation. While Sri Lanka has made progress in developing anti-corruption laws and policies, institutional weaknesses, limited enforcement and transparency gaps continue to hinder the implementation of key provisions. The country’s public sector has historically struggled with overstaffing, political patronage, and inadequate technological modernisation. Introducing legislations without establishing robust implementation frameworks may therefore limit the benefits expected from such reforms. These observations suggest that addressing the structural inefficiencies and low productivity of Sri Lanka’s large state sector is one of the most important components of building long-term state capacity. The next section outlines a set of practical measures aimed at strengthening institutional capacity and improving administrative performance, with the broader objective of transforming the state sector into a more effective driver of economic development.

Digitalising public service delivery

One of the persistent sources of inefficiency and, at times, corruption in developing bureaucracies is the continued reliance on manual, paper-based processes. These systems tend to be slow, opaque, and prone to discretion at multiple points. A gradual shift towards digital governance, built around a unified National Digital Identity framework, offers a practical way to reduce this friction. This approach is broadly aligned with the idea of Digital Public infrastructure promoted by organisations such as the World Bank, which emphasises interoperable platforms that allow public services to be delivered more efficiently and at scale.

Moving essential services such as vehicle registration, tax filing, and welfare delivery onto online platforms can significantly reduce the need for face-to-face interactions and manual handling. In turn, this helps limit opportunities for informal payments and procedural delays. Estonia is often cited in this regard: over the past two decades, it has moved almost all government services online, showing how digital systems can improve efficiency and transparency. India’s Aadhaar program offers a useful comparison, showing how digital identity can support more direct delivery of welfare benefits. For Sri Lanka, similar reforms could lower transaction costs and, create a clearer and more transparent record of how public services are delivered.

The long-term success of the reform program will be judged less by the number of laws enacted or benchmarks formally completed, and more by whether the country succeeds in building institutions that can function effectively, transparently, and consistently beyond the lifespan of the program itself. If Sri Lanka fails to build robust, independent, and effiecient institutions capable of sustaining stability on their own, the end of externally driven reform programs may simply mark the beginning of the countdown to the next crisis

Rationalising the civil service and reducing political patronage

Sri Lanka’s relatively large public sector is not simply an administrative issue; it also reflects a long-standing practice of using state employment as a means of addressing unemployment and, at times, rewarding political loyalty. This has important implications for both fiscal sustainability and institutional effectiveness. As Francis Fukuyama argues in State-Building: Governance and World Order in the 21st Century, sustainable development depends less on the size of the state than on the strength and effectiveness of its institutions. Where recruitment is shaped more by political considerations than by actual needs and competence, productivity tends to suffer, making it increasingly difficult to justify the use of public funds. A more sustainable approach would involve setting realistic limits on new recruitment, alongside a comprehensive audit of existing roles and functions. Singapore, in the decades following independence, built a public administration that is both relatively lean and highly capable by emphasising merit-based recruitment and limiting the scope for patronage. It is important to understand that institutional strength depends on professionalism, not numbers alone.

Institutionalising performance management through mandatory KPIs

In many parts of the public sector, career progression continues to be tied more closely to seniority than to demonstrable performance. Over time, this can weaken incentives for innovation and reduce the responsiveness of public institutions. The New Public Management approach, associated with scholars such as Christopher Hood, emphasises clearer accountability and greater attention to measurable outcomes in public administration. Introducing well-defined Key Performance Indicators across ministries and agencies is one way of moving in this direction. The objective is to create a clearer link between responsibilities and results rather than impose rigid targets. Promotions, salary increments, and leadership roles could then be tied more closely to performance, rather than length of service alone. Reforms in New Zealand during the 1980s and 1990s show how this approach can strengthen accountability, particularly when senior officials are held responsible for clearly defined outcomes.

Strategic upskilling and workforce redeployment

Another challenge within Sri Lanka’s public sector lies in the uneven distribution of skills. Some departments have a surplus of routine administrative staff, while others struggle to find personnel with expertise in areas such as data analysis, public financial management, or project delivery. Such imbalances underscore the importance of a more deliberate approach to workforce planning.

Rather than focusing solely on recruitment, greater emphasis should be placed on developing the skills of those already in service. Targeted training programs, particularly in areas such as digital literacy, project management, and data analysis would allow underutilised staff to move into roles where demand is higher. Institutions such as the Sri Lanka Institute of Development Administration are CBSL are well placed to support this process. Over time, a combination of retraining and redeployment could help address capacity gaps in sectors such as healthcare, education, and regional development, without placing additional pressure on public finances.

Corporate governance and professional management for State institutions

A recurring concern in many state institutions is the lack of clear and consistent accountability frameworks. Where oversight is weak, organisations can become vulnerable to political interference and operational inefficiency. Strengthening corporate governance is therefore an important part of any broader reform effort. In simple terms, this involves clarifying roles, improving transparency, and ensuring that day-to-day management is guided by professional rather than political considerations.

This idea draws, in part, on agency theory, which highlights the importance of separating ownership from management in order to reduce conflicts of interest. One practical step would be to appoint suitably qualified professionals to senior management roles, with clear responsibilities and performance expectations. This approach will ensure that operational decisions are taken on the basis of expertise and institutional priorities. Over time, such an approach can help build greater confidence in public institutions and improve the overall quality of service delivery. These measures have already been identified under various policy reform strategies. However, Sri Lanka has now reached a stage where there is an economic imperative to accelerate the implementation of these policy measures.

The role of civil society

Civil society and the wider public can also play an important role in holding governments and state institutions accountable for delivering promised reforms and development strategies. Civic organisations can press for the publication of accountability dashboards by relevant institutions and ministries to show progress in implementing reform measures. India’s social audit mechanism offers a useful point of comparison. Under the Mahatma Gandhi National Rural Employment Guarantee Act, communities are involved in reviewing records and assessing implementation on the ground. Independent media, for its part, should take a more constructive and evidence-based approach when analysing these reports, rather than contributing to confusion or misinformation. Think tanks can help bridge this gap by interpreting reform data and institutional performance in a way that allows ordinary citizens to assess whether development efforts remain on track. Tools such as the Right to Information Act can also be used more actively to strengthen transparency and accountability within the public sector. However, it is important to ensure that hard-earned reform gains are preserved by all stakeholders in society. Public debate and scrutiny of national institutions are essential in a democracy. At the same time, unsubstantiated claims or misinformation concerning key institutions, such as the Central Bank, can undermine confidence and divert attention from efforts to sustain reform momentum and economic stability.

Sri Lanka’s present moment should therefore be seen not simply as another phase of IMF-supported reform, but as an opportunity to rebuild institutional credibility and state capacity after a period of significant economic and governance stress. The long-term success of the reform program will be judged less by the number of laws enacted or benchmarks formally completed, and more by whether the country succeeds in building institutions that can function effectively, transparently, and consistently beyond the lifespan of the program itself. If Sri Lanka fails to build robust, independent, and effiecient institutions capable of sustaining stability on their own, the end of externally driven reform programs may simply mark the beginning of the countdown to the next crisis.

As Lee Kuan Yew once observed, “The world does not owe us a living. We cannot live by the begging bowl.” Aid can help only those who are willing to help themselves and who possess the discipline and institutional capacity to translate external support into lasting self-reliance.

(The author is an Attorney-at-Law. Views expressed in this article are entirely personal and do not represent the views of any organisation or institution with which the author is associated)