By special correspondent
Sri Lanka’s economic recovery remains fragile and could easily unravel without decisive structural reforms, ODI Senior Fellow Dr. Ganeshan Wignaraja warned at the Asia Securities Investor Conference 2026.
Speaking to regional and international investors, Dr. Wignaraja said that although the country has made credible progress since its 2022 default, the rebound is largely cyclical and does not yet rest on strong productivity or investment fundamentals.
He argued that Sri Lanka’s long-standing preference for gradual reform has left the economy exposed to repeated shocks. “Slow reform has been the norm, but it has not delivered resilience,” he said, advocating a comprehensive reform push that addresses deep-rooted inefficiencies across the economy.
Dr. Wignaraja placed Sri Lanka’s experience within a broader trend affecting many developing nations, where high debt levels and external shocks have triggered prolonged economic setbacks. These challenges, he added, are likely to intensify as climate-related events become more frequent and severe.
He noted that the IMF-supported programme initiated in early 2023, combined with emergency funding from multilateral partners and strong action by the Central Bank, helped stabilise the economy and avoid a full-blown financial crisis. For investors, he said, the credibility of a country’s crisis response is a key determinant of confidence.
Turning to the impact of Cyclone Ditwah, Dr. Wignaraja described the disaster as a stark reminder of Sri Lanka’s vulnerability to climate shocks. The cyclone caused damage equivalent to nearly 4% of GDP, affecting a wide geographic area and placing additional strain on public finances.
He said the response to the disaster revealed persistent weaknesses in coordination, planning, and institutional capacity. Recovery efforts, he argued, must be aligned with longer-term reform objectives rather than treated as isolated interventions.
Based on research conducted jointly by ODI and the Centre for Poverty Analysis, Dr. Wignaraja identified several priorities for rebuilding after the cyclone. These include establishing a transparent and credible reconstruction framework, strengthening domestic revenue generation, and engaging constructively with the IMF to create limited fiscal space for social protection as poverty pressures increase.
Beyond disaster recovery, he emphasised the need for sweeping reforms to improve the business climate. Excessive red tape, high energy prices, low labour productivity, and skills mismatches continue to undermine competitiveness and discourage investment.
Dr. Wignaraja warned that without bold action, Sri Lanka could once again find itself trapped in cycles of debt distress and slow growth. Sustaining the recovery, he said, will require strong political leadership and a durable policy consensus that reassures investors of long-term stability and reform commitment.