Knowledge Articles

The Ceylon Electricity Board (CEB) in July sought an increase in tariffs from the Public Utilities Commission of Sri Lanka (PUCSL), proposing a regressive scheme of tariffs that will see the lowest consumers burdened with the highest increases in rates. The rationale for this revision is that the CEB (excluding LECO costs) requires an 82.4% increase in revenue to meet their forecasted costs for 2022. The proposed raise is likely to increase energy poverty among a population that is already burdened by inflation with a Consumer Price Index (CPI) that is nearly at 60%. Domestic consumers who use fewer than 30 units of electricity per month will have their bills increase by 835% to Rs. 507.65 from the current Rs. 54.27. Overall, it has been identified that 50% of domestic electricity consumers in Sri Lanka – 3.14 million households who use fewer than 60 units a month – will face the greatest increase in electricity bills due to the proposed increase in tariffs.  Women who already perform the majority of housework will bear the brunt of the planned price increase. The gendered impacts of energy poverty will constrain a generation of women and girls, stripping them of time and inhibiting their access to education and the workforce. In a deteriorating economy that places a massive and disproportionate burden on the urban poor, these tariff hikes represent an additional cost that will increase energy poverty and even threaten access to the grid. The tariff hikes are insensitive to the changing consumption patterns of electricity among residents in urban areas, as well as to the significant debt that many households have already fallen into. Beyond the tariff hikes, any policy recommendations regarding support to families during this crisis period must be mindful of these diverse consumption patterns.

While steady growth in exports was recorded in the year 2021, Sri Lanka’s deepening economic crisis runs the serious risk of impacting the export recovery achieved to date. In March 2022, merchandise exports, consisting largely of industrial and agricultural exports, recorded a decline of 3.4% in earnings, compared to the previous year, due to a reduction in both volume and prices of exports. In addition to this, industry representatives predict a decline of about 20% - 30% in total exports as a result of the current crisis, with tea exports being among the lowest it has been in 23 years, and the apparel sector expecting a 20% - 25% drop in output by August 2022. Latest figures for June indicate that apparel sector has exceeded expectations and pre-Covid export numbers. In the context of the economic crisis, escalating now to a de facto lockdown across the country, understanding the challenges posed to the country’s external sector performance, one of Sri Lanka’s main sources of foreign exchange, is crucial. At present, exports of goods and services, which account for 17.7% of GDP as of 2021, have been adversely affected by several factors including most significantly, the worsening fuel and energy crisis.

Low-income settlements in Colombo experienced greater food insecurity even before the pandemic, with 72% of households being food insecure. Conditions are going from bad to worse due to the current economic crisis. In this article, researchers from the Colombo Urban Lab detail the food insecurity and precarity of urban poor households through COVID-19 lockdowns and the current economic crisis and presents research driven, evidence based recommendations for immediate term support that the State must provide in order to ensure some relief for households. They argue that the proposed measures should be universal to every household below a particular income or need threshold, and not targeted as that would only exacerbate existing divisions in communities.

Sri Lanka is in the throes of its worst economic crisis in post-independence history. While some reform areas have gained more traction than others (for instance, the debt restructuring), the critical state that the education sector is in has received relatively less attention; and this risks Sri Lanka’s future growth prospects. The government must strive to formulate a comprehensive action plan that is student-centric, in order to revive Sri Lanka’s education system and help students and teachers manage the current crisis. If the government does not address the concerns of its students, and provide immediate solutions to their needs, the country will not only see an entire generation of young people affected by lower educational attainment in crucial development years, but also experience a severe brain drain in the years ahead. While the country tackles macroeconomic stabilisation measures, it is vital to tackle the education crisis as well.

Sri Lanka is facing unprecedented political turmoil, and with the economy in a tailspin it is in its weakest state in decades. The country is staring down the barrel of a sovereign debt default and is exposed to external shocks. As the country embarks on IMF bailout discussions, the main emerging risk facing Sri Lanka is the fallout of the current political instability on macroeconomic stabilisation efforts. Facing the prospect of a disorderly default, Sri Lankan officials have a decision to make — will they kow-tow to narrow political compulsions, or come together to agree on a common programme that steers the economy out of the current crisis and towards macroeconomic stability? Perhaps the current turmoil in parliament and the public’s growing recognition of the cause of the crisis will be what catalyses a political consensus for reform that has eluded Sri Lanka for so long.

For Sri Lankan youth entering the workforce over the next decade, there lies a critical window of opportunity to get equipped for jobs in the digital economy. Rapidly advancing the technical and soft skills training for the technology sector across the country is vital to avoid reinforcing and reproducing existing regional and gender disparities into the emerging digital economy. Sri Lanka needs to focus on enhancing technology access, usage, and literacy across the board, to help workers be better prepared for jobs in the technology sector.

Since the first lockdown in March 2020, most conversations we have had with working class poor communities in Colombo have been dominated by one topic – budgets and listening to families talk about how they prioritise their expenditure based on their needs and their income. How do we take the everyday struggles of people to get by or get the job done, only to be faced with a state institution also struggling for resources and turn it into an experience where people’s needs can be met with well-funded and equipped institutions?

One of the biggest lessons from this COVID period has been that our house is the safest place to be in and that our surroundings, even the ability to see trees or grow something in a small garden, for a woman to go out for a walk feeling safe or for children to play freely are all things that everyone should be entitled to. In our advocacy and the way we frame our arguments we have to find ways to use data and various intersections to make our points clear, even in a court room. Some things can’t be quantified nor are they tangible – so how do we translate that into a language that policy makers can understand?

Sri Lanka’s apparel industry – a significant export revenue earner and employer – was substantially hit by the pandemic. Aside from the short-term supply and demand shocks, the pandemic accelerated trends that were in motion prior to the crisis, and these provide signals of change and point to the direction in which the Sri Lankan apparel industry needs to head in. Moving from recovery to resilience and a new wave of growth will be shaped by three emerging trends - attracting new investment that drives innovation (in business models and products) and plugs into new supply chains and on focussing on meeting more stringent sustainability and other compliance requirements of buyers and preferences of consumers.

Sri Lanka's tax ratio hit an all time low in 2020, with revenue losses caused by the pandemic and steep tax cuts in 2019. The budget deficit reached double digits due to high pandemic related expenditure and fall in revenue. Attempting to revive growth through public investment will be constrained by low tax revenue, and progressive tax reforms are a must to avoid further macroeconomic stress.