Why Sri Lanka economics failed so miserably?

Here is view of a Sri Lankan friend who has given us a run down on why Sri Lankan economy failed so miserably despite having strong tourism numbers in 2019.

sri lanka economy

Besides the political mismanagement, nepotism and corruption, the root causes of economic downfall were in our economic policies.

Unsustainable welfare state

We have been living on too much government subsidies even from 1 950’S. Food, Fuel, Electricity and many more has subsidies and still do. Government had to pay for them by taking loans over and over again. Hence, debt rose throughout the years finally crashing in 2021-2022.

No party took power preferred to cut the subsidies since they would definitely lose the next election.People love free stuff way too much over here.

sri lanka economy

Massive and inefficient government sector

Out of 22 Million total population, there are more than 1 Million government sector workers. More than half of these doesn’t do much for productivity and mostly got the job by political appointments. Almost all the government corporations runs with massive losses which are in return paid by the treasury.

Lack of freedom for free market economy

It’s required to obtain licenses to import or export or even sell some well profitable goods like rice, tea, alcohol, gas, oil, flour etc. These licenses are exclusively offered to the henchmen of the politicians who has political influence. As a result there is simply no competition and those people sell stuff for any price they wish. No need to mention the consequences of such mafias and their ill effect on Sr Lankan economy.

Huge investments on infrastructure with little to no returns at all

Sri Lanka has been spending too much money on infrastructure, that too with loans. Yes, we do believe some projects would have indeed boosted the economy, for instance, Hambantota port, Colombo port city, expressway projects but most were totally useless white elephants. This includes Mattala airport, Lotus tower, Convention centers, jogging tracks and many more.

Maintaining a flag carrier airline was a bad decision. This airline had to bear massive losses. Yes, I’m talking about Sri Lankan Airlines. This is something we can’t afford yet our government did it. We’re literally paying money for other people to take rides.

Now you know why Sri Lanka’s economy failed so miserably.