By Asoka S. Seneviratne –

Preventing Another Collapse: The Root Causes of 2022 have been addressed

Across Sri Lanka today, Opposition Leader Sajith Premadasa is on the move—holding small gatherings, issuing stark warnings, and painting a grim picture of what lies ahead. He warns that if the government fails to meet its debt obligations, the economy will once again teeter on the brink of collapse, risking another Aragalaya by 2028. He accuses the government of lacking a coherent economic plan, failing to deliver on promises—such as reducing electricity tariffs by one-third—and warns that he may mobilize public protests to demand accountability.

These warnings, though politically charged, touch a nerve that runs deep in the public consciousness. The economic collapse of 2022 remains a painful memory — a stark reminder of how quickly mismanagement, corruption, and poor planning can push a nation from stability to chaos. It was not a single event, but the inevitable result of years of fiscal irresponsibility, policy blunders, and systemic decay.

The collapse stemmed from five fundamental failures:

1. Unsustainable debt and fiscal mismanagement

2. Collapse of foreign reserves and a balance of payments crisis

3. Policy mistakes and poor economic governance

4. Corruption, nepotism, and politicized administration

5. External shocks and global volatility

Yet, under the leadership of President Anura Kumara Dissanayake, this paper argues that these five fault lines are now being systematically repaired and managed with unprecedented discipline and transparency. The government’s reform agenda is not merely about recovery — it is about rebuilding the foundations of economic sovereignty and public trust. By addressing the very causes of the 2022 collapse, this paper argues that the administration seeks to ensure that Sri Lanka never again returns to the brink and instead advances toward the shared national vision of “A Thriving Nation and a Beautiful Life.”

Unsustainable Debt and Fiscal Mismanagement Will Never Occur

Under the leadership of President Anura Kumara Dissanayake (AKD), Sri Lanka has taken decisive and disciplined steps to ensure that the era of reckless borrowing and fiscal indiscipline will never return. The administration recognizes that unsustainable debt was the root cause of the 2022 collapse, where successive governments borrowed excessively—often for politically motivated or low-return projects—without a clear repayment plan or productive outcome. Today, that model has been decisively rejected.

President Dissanayake’s government is pursuing a new fiscal philosophy grounded in transparency, accountability, and long-term sustainability. Borrowing is now tied strictly to productive investment, particularly in export-oriented and value-adding sectors that can generate foreign exchange and employment. Every loan—whether domestic or external—is subject to rigorous cost–benefit analysis, and all public debt operations are brought under a medium-term debt management framework to prevent future imbalances.

Equally important, the government has prioritized revenue-based fiscal consolidation rather than borrowing-based expansion. The recent tax reforms, including progressive income and corporate tax structures, have significantly broadened the revenue base. The introduction of digital tax administration and the reduction of leakages have improved compliance and transparency. At the same time, wasteful expenditure, political perks, and redundant subsidies are being phased out, redirecting resources toward essential social protection, education, and healthcare.

The Treasury and Central Bank now work in close coordination to ensure monetary–fiscal policy harmony, eliminating the reckless money printing and off-budget financing that once drove inflation and currency depreciation. Sri Lanka’s return to disciplined budgeting—backed by open reporting and parliamentary oversight—marks a historic shift from secrecy to accountability.

In essence, the AKD administration is building a culture of fiscal responsibility that ensures future generations will not inherit the burdens of past mismanagement. By aligning borrowing with productivity, taxation with fairness, and expenditure with national priorities, the government is laying the foundation for a stable, debt-sustainable economy—a promise kept in the spirit of “A Thriving Nation and a Beautiful Life.”

Collapse of Foreign Reserves and Balance of Payments Crisis Will Never Reoccur

One of the most painful lessons of the 2022 economic collapse was the near-complete depletion of Sri Lanka’s foreign reserves, which brought the nation to a standstill. The inability to pay for fuel, medicine, and food was not a mere accident — it was the direct consequence of decades of import dependency, weak export diversification, and poor foreign reserve management. Under President Anura Kumara Dissanayake, this pattern has been decisively broken. The administration’s policies are now designed to ensure that Sri Lanka will never again face a balance of payments crisis or be forced to queue for essentials.

The government has implemented a comprehensive external sector reform strategy that focuses on three pillars: export expansion, import rationalization, and reserve accumulation. First, export diversification is being actively pursued through targeted incentives in agriculture, manufacturing, IT services, and renewable energy. Strategic trade partnerships within South and East Asia, including RCEP and BIMSTEC frameworks, are being used to open new markets for Sri Lankan products and services.

Second, the government is advancing a realistic import substitution policy, not by isolationism, but by promoting domestic production of key commodities such as dairy, pharmaceuticals, and fertilizers. These initiatives reduce the outflow of foreign exchange and stimulate local industry. Moreover, the state’s procurement systems are being modernized to prioritize domestic suppliers, creating circular flows of income within the economy.

Third, and most critically, the Central Bank of Sri Lanka now operates under an independent, rules-based framework for reserve management. Foreign reserves are being rebuilt through disciplined current account management, improved remittance channels, and tourism revival strategies. The government has also strengthened relations with friendly nations and multilateral agencies to secure buffer arrangements—including swap lines and stabilization facilities—to prevent liquidity shocks.

Importantly, the AKD administration has rejected the culture of artificial currency defense that once drained reserves. Instead, the rupee now floats under managed flexibility, supported by real economic fundamentals rather than political optics.

Together, these reforms ensure that foreign reserve adequacy is permanently institutionalized, not politically manipulated. By stabilizing external accounts, broadening exports, and strengthening reserve buffers, the government is building a resilient, self-reliant economy—one that will never again be held hostage by external shocks or balance of payments crises.

Policy Mistakes and Poor Economic Governance Will Never Be Repeated

The 2022 crisis exposed how a series of ill-conceived and uncoordinated policy decisions—from reckless tax cuts to abrupt import bans—can devastate an entire economy. These errors were not simply administrative oversights; they reflected a deep failure of governance, institutional coordination, and evidence-based policymaking. Under the leadership of President Anura Kumara Dissanayake (AKD), the government has taken a firm stand to ensure that such costly policy missteps will never be repeated.

At the heart of this transformation is the establishment of a Professional Policy Council (PPC)—a body comprising economists, technocrats, and independent experts who rigorously evaluate all major policy proposals before Cabinet approval. This ensures that every policy decision is data-driven, fiscally sound, and socially balanced. The era when policies were designed to please political constituencies rather than serve national priorities is now decisively over.

Furthermore, inter-ministerial coordination has been institutionalized through an integrated National Economic Management System (NEMS) that aligns fiscal, monetary, trade, and social policies under one coherent framework. This prevents the kind of fragmented decision-making that once led to conflicting objectives—such as printing money to fund deficits while trying to stabilize inflation. The result is a unified policy architecture that promotes macroeconomic stability and predictability.

Equally vital is the government’s commitment to transparency and public accountability. All major economic policies are now published, debated, and reviewed through open consultations, ensuring that the people and the business community are fully informed of the rationale and implications. This participatory governance model strengthens both policy credibility and investor confidence.

Under AKD’s leadership, Sri Lanka is also building institutional memory—a culture where lessons from the past are formally documented, evaluated, and embedded into future policymaking. Regular policy audits, independent evaluations, and impact assessments now ensure that course corrections are made early, before damage occurs.

In essence, President Dissanayake’s administration is transforming economic governance from a system of political reaction to one of professional anticipation. Decisions are made not for short-term popularity but for long-term prosperity. Through institutional reform, evidence-based policymaking, and disciplined coordination, the government is ensuring that policy mistakes of the past will never again derail Sri Lanka’s progress toward “A Thriving Nation and a Beautiful Life.”

Corruption, Nepotism, and Politicized Administration Will Never Be Tolerated

Suppose there is one lesson the people of Sri Lanka have learned from the collapse of 2022. In that case, it is that corruption and political favoritism can destroy a nation faster than any economic crisis. For decades, corruption became institutionalized — public resources were looted under the guise of development, appointments were made based on loyalty rather than merit, and the machinery of the state served political dynasties instead of the people. The result was a hollowed-out administration incapable of delivering justice, efficiency, or trust. Under President Anura Kumara Dissanayake (AKD), that era is being brought to a permanent end.

From the first day in office, President Dissanayake has set a zero-tolerance policy toward corruption and nepotism. A new National Integrity and Accountability Commission (NIAC) has been established, combining investigative, prosecutorial, and preventive powers under one independent body. The NIAC operates with full transparency, empowered to investigate all public officials — regardless of political rank or position — and to publish its findings publicly. For the first time in Sri Lanka’s history, corruption is being treated not as a political issue but as a national security threat to the economy and public welfare.

Simultaneously, the public service is undergoing a structural transformation toward professionalism and meritocracy. The long-standing culture of political appointments and interference is being dismantled. Recruitment, promotion, and transfer decisions are now determined through transparent, competency-based systems, ensuring that public servants are accountable to policy outcomes, not political masters. This politicization of the bureaucracy has restored morale, efficiency, and public trust in state institutions.

In addition, the government has strengthened asset declaration laws, introduced real-time digital procurement systems, and mandated open budget reporting, allowing citizens to track how public funds are used. These reforms have dramatically reduced leakages, inflated contracts, and hidden commissions that once flourished under opaque practices.

Crucially, AKD’s leadership style sets the moral standard. By refusing privileges, limiting political extravagance, and demanding accountability from his Cabinet, he has redefined what ethical governance means in practice. His message is clear: no individual, however powerful, is above the law.

Through these bold measures, Sri Lanka is shifting from a system of patronage politics to one of principled governance. Corruption, nepotism, and politicized administration are no longer tolerated but addressed directly — ensuring that moral decay never again erodes the nation’s institutions or hampers its economic future. This forms the foundation of the government’s pledge to realize the vision of “A Thriving Nation and a Beautiful Life.”

External Shocks and Global Volatility Will Never Undermine Sri Lanka Again

The 2022 collapse revealed just how dangerously exposed Sri Lanka was to external shocks. A single global disruption — whether a pandemic, a war, or a supply chain breakdown — was enough to push the country into paralysis. The overreliance on imports, narrow export base, dependence on volatile tourism revenue, and lack of contingency planning left the economy vulnerable and reactive. Under President Anura Kumara Dissanayake (AKD), that fragility is being replaced with a resilient and self-sustaining economic architecture that shields the nation from global volatility while embracing the opportunities of a connected world.

At the heart of this transformation lies a commitment to economic diversification and resilience-building. The government’s long-term strategy focuses on strengthening domestic production capacity, expanding export diversification, and ensuring energy and food security. Sri Lanka is rapidly developing its renewable energy sector — particularly solar and wind — to reduce dependence on imported fossil fuels. Simultaneously, the nation’s agricultural policy has been restructured to prioritize sustainable, high-yield, and export-oriented farming, supported by modern technology and local innovation.

In trade and external relations, Sri Lanka is pursuing a balanced and pragmatic diplomacy, moving away from dependency on a few partners toward broad-based regional engagement. Membership in RCEP, enhanced cooperation with India, China, ASEAN, and the EU, and the revitalization of the Indian Ocean Economic Cooperation Zone are all designed to expand markets, secure supply chains, and cushion the economy against global fluctuations.

The government is also establishing a National Risk and Resilience Council (NRRC) to conduct ongoing assessments of external vulnerabilities — from climate shocks to commodity price fluctuations — and to develop quick response strategies. This proactive risk management system ensures that Sri Lanka is never again caught unprepared by global disruptions.

Additionally, a foreign reserve buffer policy has been established, setting a minimum reserve adequacy ratio and asset diversification to protect the country’s external stability. Along with careful debt restructuring and the promotion of diaspora bonds and sovereign investment instruments, these actions reinforce the balance of payments against potential future challenges.

Equally significant is the emphasis on regional self-reliance — nurturing local industries, encouraging innovation, and empowering small and medium enterprises (SMEs) to produce what Sri Lanka once imported. This approach not only builds economic independence but also deepens national confidence.

Under President Dissanayake’s leadership, Sri Lanka is no longer at the mercy of external events but is positioned as a resilient, adaptable, and forward-moving nation. The lessons of 2022 have been incorporated into policy, planning, and national awareness. Never again will external shocks determine the fate of the Sri Lankan people. The new direction guarantees that the island’s progress remains steady — firmly guided by the national vision of “A Thriving Nation and a Beautiful Life.”

Conclusion: A New Era of Discipline, Integrity, and Confidence

The collapse of 2022 stands as one of the darkest chapters in Sri Lanka’s post-independence history — a collapse not merely of finances, but of trust, governance, and direction. Yet, from that devastation has emerged a rare opportunity: the chance to rebuild the nation on the firm foundations of discipline, integrity, and accountability. Under the leadership of President Anura Kumara Dissanayake (AKD), Sri Lanka is now charting a deliberate path to ensure that the mistakes of the past will never be repeated. The opposition leader must face reality instead of creating meaningless noise. The people see through their theatrics. When the opposition leader shouts and rallies empty slogans, the public does not respond—because they understand the truth on the ground. There is no support for a leader disconnected from reality; protests and demonstrations only occur when genuine leadership inspires, not when hollow words echo in vain. The people will never rally behind the opposition—they have already chosen clarity, stability, and real action over empty rhetoric.

Each of the five areas that once caused the downfall has been addressed with unprecedented rigor and foresight:

1. Fiscal sustainability is now secured through responsible borrowing, transparent budgeting, and revenue-based consolidation.

2. Foreign reserves and external stability are safeguarded through export diversification, import rationalization, and prudent reserve management.

3. Policy coordination and governance are guided by evidence-based decision-making and institutional professionalism.

4. Corruption and politicization are being eradicated through transparency, independent oversight, and ethical leadership.

5. External resilience is strengthened through domestic capacity building, renewable energy independence, and strategic global partnerships.

These measures collectively mark the beginning of a new era of governance—one in which every rupee is accounted for, every decision is informed by evidence, and every institution is aligned with the public interest. The transformation underway is not cosmetic; it is structural and values-driven. It aims to create a state that earns the trust of its citizens and the respect of the international community.

However, while progress is clear, the journey toward sustained recovery demands constant vigilance and long-term commitment. Policy success must not depend on the will of individuals but on the strength of institutions. For that reason, several key recommendations merit continuous attention:

Policy Recommendations

1. Institutionalize Fiscal Rules: Enact a Fiscal Responsibility Act 2.0 to legally limit deficits and borrowing, ensuring that fiscal prudence becomes a permanent national norm.

2. Expand the Export Base: Continue to diversify exports beyond garments and tea—toward IT, agro-industrial, and renewable energy sectors—to reduce vulnerability to global price shifts.

3. Strengthen Anti-Corruption Enforcement: Empower the National Integrity and Accountability Commission with prosecutorial independence and direct access to Parliament.

4. Promote Digital Governance: Adopt e-governance platforms for all procurement, licensing, and financial transactions to minimize corruption and improve efficiency.

5. Develop a National Resilience Fund: Establish a contingency reserve to manage external shocks—funded by windfall revenues, remittances, and sovereign investments.

In conclusion, Sri Lanka’s recovery is not merely economic; it is moral and institutional. By learning from the painful lessons of 2022 and embedding reform into the DNA of governance, the nation can move from fragility to strength, from dependency to self-reliance.

Under President Anura Kumara Dissanayake’s visionary leadership, Sri Lanka is laying the groundwork for a truly resilient, equitable, and sovereign economy—a living embodiment of the nation’s enduring aspiration:

“A Thriving Nation and a Beautiful Life.”

*The writer, among many, served as the Special Adviser to the President of Namibia from 2006 to 2012 and was a Senior Consultant with the UNDP for 20 years. He was a Senior Economist with the Central Bank of Sri Lanka (1972-1993). He can be reached at asoka.seneviratne@gmail.com