Fiscal Policy for Growth: Sustainable Financing for Development

Abstract

Sri Lank's public fiances are at a perilous state. Already weakened by years of low revenue growth and high external debt to fund a public investment-led growth process, systemic weaknesses coalesced in 2015 to put the country on the cusp of falling into a public debt triggered economic crisis. A ballooning fiscal deficit and excessive public debt accumulation has resulted in a rising debt service burden; the conduct of monetary policy and exchange rate management has been compromised in attempts to deal with the fallout of funding the fiscal deficit gap.