Sri Lanka worst affected by geopolitical fragmentations: CBSL Governor

By Sanath Nanayakkare

Sri Lanka’s has been worst affected by ongoing geopolitical fragmentations, Dr. Nandalal Weerasinghe, the Governor of the Central Bank of Sri Lanka said recently. He said so addressing the ‘South Asia’s Path to Resilient Growth’ conference on January 6, in New Delhi.

The conference hosted by the IMF provided an opportunity to discuss how South Asia can build on its development success in the aftermath of the COVID-19 pandemic and geopolitical tensions to achieve its potential. The conference focused on areas that were viewed as key to sustaining high-quality growth over the medium term. It included a discussion on ways to accelerate the income convergence process in the region, leveraging on the still large potential demographic dividend in most countries, reform priorities, including climate-friendly policies for sustainable growth, and ways to cope with heightened vulnerabilities through macro-financial management. The conference brought together high-level participants from the South Asia region.

Governor Nandalal Weerasinghe said,” In my view, Sri Lanka has been worst affected by global fragmentations in addition to its internal policies. Look at Russia-Ukraine war. We know that India, China and many European countries import oil from Russia. But we can’t do that. As a consequence, we have to pay a lot more money for oil imports. Unlike the advanced economies, we are severely affected by this fragmentation. The consequences of such situations, affect countries like Sri Lanka in an unprecedented way. Similarly, the internal policies also have affected the country equally. Sri Lanka was the first country in the region to open its economy in 1977 where we were able to capture trade internationally and regionally. But policies based on nationalism took us from a small open economy to a highly protective closed economy where our trade implications were reversed. It turned out to be a major factor for our current crisis. Unsuitable internal policies pushed us backward. That mismatch was also a reason for the current issues. Although we can’t control external headwinds, we could have controlled our internal policies. All such factors have pushed us backward by a number of decades. Another main reason for this was the lack of strong, independent institutions in Sri Lanka,” he said.

-A transcript of an electronic media report