By Asoka S. Seneviratne –

Introduction: Understanding the IMF Program without Blaming  (Beyond Bailouts: How Sri Lanka Can Break Free from IMF Dependency – Policy Lessons from Malaysia, Bolivia, Botswana, and Vietnam)

More people in Sri Lanka believe that the IMF’s bailout has caused more hardship than it has provided help. For many, particularly working-class and lower-income groups, everyday life has become increasingly challenging due to higher taxes, job insecurity, rising living costs, and cuts to essential public services. Only a small number seem shielded from this suffering.

However, we must be clear-eyed about one critical fact: the IMF did not impose itself on Sri Lanka. The government invited the IMF in 2022 because the country was in the midst of a historic economic collapse, having defaulted on its debt for the first time in history, with foreign reserves nearing zero and inflation spiraling out of control.

The IMF, as the lender of last resort, provides emergency financial support—but with strings attached. It does not give away its own money. It lends funds entrusted by other member countries and must ensure those loans are repaid with interest. That’s why IMF loans always come with conditions—fiscal discipline, structural reforms, and strict policy measures—to safeguard repayment and prevent further collapse.

And that’s where the real problem lies: the conditions imposed to stabilize the economy often end up hurting the very people they are meant to help. The pain of reform—higher VAT, electricity price hikes, cuts in subsidies, privatization—falls not on the elite or the corrupt, but on the everyday citizen.

Still, blaming the IMF misses the bigger truth. The IMF didn’t create Sri Lanka’s crisis. Decades of poor governance, corruption, over-borrowing, and short-term populist policies did. The Fund only stepped in after every other option had been exhausted. And when it did, it demanded assurance that its money would be used responsibly—and returned. This is the point Sri Lanka is struggling or unhappy.

1. Recurring Reliance of the IMF

Given the above, we need to change the conversation. This isn’t about whether the IMF is good or bad. It’s about how we, as a country, negotiate, implement, and take responsibility for the recovery process. If we want fairness and shared sacrifice, it’s up to our government to protect the most vulnerable while implementing necessary reforms. As a country, we must stop blaming doctors for illnesses. The IMF is treating symptoms of a crisis we created. Proper recovery depends not just on loans or reforms, but on leadership that is transparent, accountable, and committed to justice for all. For this reason, leadership must be supported by policymakers and bureaucrats because a leader only leads; managers have to manage.

Sri Lanka’s repeated reliance on the International Monetary Fund (IMF)—with 17 agreements (Note: President Anura Kumara Dissanayake is determined not to seek an IMF bailout again), since 1965—indicates not only financial instability but also a deeper failure to implement structural reforms. I wrote “Financial Instability and Structural Reforms” because the IMF’s policy recommendations are broadly based on these issues. I will not provide details of the above because the purpose of this article is to explore whether Sri Lanka can reject or outgrow IMF austerity through bold, internally driven strategies. Regarding this, if Sri Lanka is to achieve long-term fiscal sovereignty, it must look to countries like Malaysia, Bolivia, Botswana, and Vietnam, which have either rejected or outgrown IMF austerity.

2. Fiscal Discipline With Social Vision (Botswana Model)

Fiscal Discipline with Social Vision: Lessons from Botswana

Botswana stands out among developing nations for practicing long-term fiscal discipline while safeguarding its social contract. During economic booms, especially from diamond exports, the government saved rather than overspent, building robust foreign reserves. It consistently maintained budget surpluses, resisting the temptation to increase unsustainable public spending or borrow excessively. Importantly, Botswana’s fiscal discipline was never achieved at the expense of its people; it continued investing in health, education, and infrastructure.

Spending decisions were based on clear national priorities, focusing on value for money and efficiency. Transparent public financial management and low corruption levels strengthened public trust and policy credibility. Instead of reacting to crises, Botswana planned, creating buffers that allowed it to absorb external shocks without relying on IMF bailouts. The country’s debt-to-GDP ratio stayed low, enabling it to maintain policy independence and avoid dependency traps. Botswana demonstrates that fiscal discipline and social development can be mutually reinforcing when driven by a clear vision and a commitment to responsibility. Sri Lanka must understand that proper stability involves not only cutting costs but also managing public resources with purpose and foresight.

What can Sri Lanka learn from Botswana to break its dependency?

Sri Lanka’s recurring reliance on IMF bailouts is not a result of bad luck—it reflects a deeper failure to manage public finances with long-term discipline. To break this cycle, the country must adopt a forward-looking fiscal framework rooted in responsibility, resilience, and reform.

First, Sri Lanka can adopt a fiscal rule that requires saving during revenue booms, like during tourism surges or remittance spikes. Similar to Botswana, surplus revenues should be directed to a stabilization fund to create buffers for future crises. Second, public spending needs to be restructured, focusing on health, education, and social protection instead of excessive military budgets and prestige infrastructure projects that yield poor returns. Third, a legally binding medium-term budget framework (I mentioned this in my article on “An Analysis of Fiscal Strategy Statement with CT”, such as the proposed Public Finance Management Act (2024), can establish fiscal discipline that extends beyond political cycles and short-term populism.

Together, these reforms would not only prevent future crises but restore investor confidence and policy sovereignty. By institutionalizing fiscal prudence with a social conscience, Sri Lanka can move beyond bailout economics and toward sustainable, people-centered development.

3. Diversify External Financing (Bolivia & Malaysia Models)

Reducing Dependency: A New Sovereign Strategy for Sri Lanka

Several emerging economies have successfully avoided IMF dependence—not by rejecting global finance, but by strategically reshaping how they mobilize resources and handle external pressures. Countries like Malaysia and Indonesia turned inward during past crises, (a) leveraging domestic assets, (b) regional cooperation, and (c) capital safeguards to regain control of their economic future. Sri Lanka needs to do the same.

A strong starting point is to establish sovereign wealth funds (SWFs) funded by strategic revenue sources such as mineral sands royalties, tourism levies, and proceeds from green transition bonds. These funds can (i) stabilize public finances, (ii) support development, and (iii) serve as buffers in economic downturns. At the same time, Sri Lanka should strengthen its financial relationships with regional lenders, like the Asian Infrastructure Investment Bank (AIIB) and the SAARC Development Fund, to access more flexible and regionally aligned financing options.

Crucially, during periods of volatility, the government must be empowered to introduce temporary capital flow management tools, such as transaction taxes or exit levies, to prevent damaging capital flight and currency shocks. These are not protectionist moves—they are legitimate tools recognized as best practices under international standards.

Together, these measures will reduce Sri Lanka’s overreliance on Western-led multilateral lenders, restore financial sovereignty, and enable economic policy to be shaped by national priorities rather than external conditionality.

4. Invest in Productive Sectors (Vietnam Model)

From Aid Dependency to Export Strength: A Self-Reliant Path for Sri Lanka

Vietnam exemplifies how a country can shift from aid dependence to lively, export-driven growth. By adopting a disciplined macroeconomic approach and consistently investing in education, manufacturing, and agriculture, Vietnam developed a strong economy that now holds notable influence in global trade. Sri Lanka should follow a similar route—focusing on increasing productivity instead of relying on dependency.

A top priority must be the modernization of agriculture through industrial value chains. Sectors such as dairy, fisheries, and spices have untapped export potential. With targeted technology upgrades, processing infrastructure, and cooperative-based production, these industries can become engines of rural income and foreign exchange. This must be coupled with a strict rule that concessional and low-interest foreign loans are used only for productive public investment, not for recurrent spending or political consumption.

To sustain this transformation, Sri Lanka must rapidly expand vocational education and skills development in sectors such as ICT, tourism, logistics, and advanced agriculture—areas aligned with both domestic needs and global demand. A skilled workforce is the foundation of a competitive, export-driven economy.

By shifting focus toward value-creating industries and investing in human capital, Sri Lanka can eliminate structural trade deficits, generate surpluses, and break free from the cycle of bailouts. Self-reliance isn’t just a slogan; it is a strategic choice supported by wise policy decisions. In this respect, the role and responsibility of policymakers are crucially important.

5. Building Political Will for Sovereignty: Lessons from Bolivia and India

The experiences of Bolivia under Evo Morales and post-1991 India demonstrate a vital truth: countries can reduce their dependence on the IMF by building broad-based domestic consensus around national reform and institutional integrity. Neither nation rejected economic reform, but they took ownership of it, grounded in political legitimacy and social trust.

Sri Lanka must take a similar turn. Public accountability must become the foundation of reform, not an afterthought. Introducing citizen budgets that openly communicate how public funds are raised and spent, along with a transparent procurement system, can rebuild trust in state institutions. Simultaneously, revenue generation must be depoliticized. An empowered, independent revenue authority—free from political interference—can improve tax compliance, efficiency, and fairness.

To ensure long-term credibility, Sri Lanka should create an Economic Sovereignty Council: a nonpartisan, expert body tasked with auditing public debt, designing crisis buffers, and enforcing fiscal discipline regardless of election cycles. This institutional mechanism will prevent fiscal drift and ensure that economic strategies serve national interests, not partisan ones.

Ultimately, earning the trust of the people builds trust with the markets. When reforms are perceived as fair, transparent, and nationally supported, Sri Lanka can regain its economic independence, not through isolation but through credible governance. Political will is not just about leadership; it’s about legitimacy. President Anura Kumara Dissanayake is determined not to seek an IMF bailout again, so the reasons for this decision are clarified.

6. Legislate Stability: Binding Reform for a Post-IMF Future

No country has managed to break free from recurring IMF bailouts without embedding legal safeguards for fiscal discipline and policy continuity. Political will alone is insufficient (also, it requires support from policymakers and bureaucrats). Structural independence must be protected by law, not left to the shifting winds of electoral cycles or short-term populism.

Sri Lanka should pass a Debt Responsibility and Fiscal Accountability Act that sets strict limits on unsustainable foreign borrowing. According to this law, new international loans would only be approved if linked to verifiable export-driven projects or productive investments. This would stop debt-driven spending sprees and ensure fiscal space is kept for development rather than debt repayment.

In parallel, the country needs a National Wealth Charter—a binding constitutional or legislative commitment that requires all future governments to preserve national assets, prevent privatization without public scrutiny, and ban the accumulation of hidden off-balance-sheet liabilities (I have written an article on this topic for publication). Sovereign guarantees, leasebacks, and unsolicited infrastructure deals must be brought under strict disclosure rules.

Together, these two reforms would (i) restore long-term investor confidence, (ii) improve intergenerational equity, and (iii) build fiscal sovereignty from within. The message is clear: Sri Lanka will not be stable unless its core economic decisions are legally shielded from political expediency. Stability isn’t about trust—it’s about law. This is the only way I can see a prosperous Sri Lanka.

7.  CONCLUSION: The IMF Is a Bandage, Not a Cure — Moving Toward Lasting Solutions

President Anura Kumara Dissanayake has decided not to seek an IMF bailout again, so the way forward is now clear. Sri Lanka must face a harsh reality: while the IMF may provide temporary relief, it is not a long-term solution for prosperity. It acts as a bandage during moments of crisis, not a cure for the deeper structural problems that have troubled the country for decades. Simply “exiting” the current IMF program by 2027 is not enough. The real goal should be to build the capacity never to have to rely on such measures again. This is what President Anura Kumara Dissanayake is committed to.

The Global South offers valuable lessons. Malaysia, after the 1997 crisis, implemented strict capital controls and charted its way to recovery. Botswana utilized commodity booms to accumulate savings rather than incurring debt. Vietnam shifted from aid dependency to export strength through consistent investment in human capital. Bolivia mobilized its political will to reform from within or its own austerity measures, rather than relying on outside pressure. These nations share one trait: they replaced dependency with deliberate resilience.

Sri Lanka must now do the same by institutionalizing fiscal responsibility, (ii) accelerating economic diversification-growth, (iii) asserting strategic financial sovereignty, and (iv) nurturing broad-based political legitimacy. This means passing laws that (i) outlast leaders, (ii) prioritize people over patronage, and (iii) treat public wealth as a trust for future generations. Strictly adhering to the above will ensure the determination of President Anura Kumara Dissanayake not to go to the IMF for the 18^th time. We don’t need perpetual bailouts. We need permanent solutions. The path to sovereignty is not closed—it is waiting for the courage to walk it.

*The writer, among many, served as the Special Advisor 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), asoka.seneviratne@gmail.com