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Sri Lanka’s Macroeconomic Challenges: A Tale of Two Deficits

Dushni Weerakoon, Utsav Kumar () and Roselle Dime

Working Papers from eSocialSciences

Abstract: The paper provides a narrative of Sri Lanka’s history of twin deficits, examines macroeconomic performance from the lens of twin deficits, and discusses the policies adopted to address macroeconomic imbalances. Recent efforts toward a revenue-based fiscal consolidation have started yielding improvements in the ratio of tax revenue to gross domestic product, and show promise in repairing the fiscal accounts. However, fiscal policy efforts need to be supported by reforms to generate nondebt-creating foreign currency inflows to stabilize the external sector and assist in building up a buffer stock of official foreign exchange reserves.

Keywords: eSS; macroeconomics; deficits; macroeconomic performance; fiscal; tax revenue; gross domestic product; foreign currency; external sector; foreign exchange. (search for similar items in EconPapers)
Date: 2019-03
Note: Institutional Papers
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